By Dr. Lloyd A. Prince, ContributorJAMAICA IS presently served by three companies within the communications industry for cellular technology. In recent months, the market has been characterised by intense competition to gain market share as both market leaders now use the GSM network. The competition is primarily biased towards price competition, instead of non -price competition.
Price competition can be very dangerous, not only to the industry itself, but also to the wider Jamaican economy. In fact, price-cutting is the most difficult form of attack to counter, due to its rapid effects on profitability, and the risk of irreversible downward price spiral on every firm within the industry. Once price-cutting gets "out of hand", it will be very difficult to control within the industry.
In the short-run, the losers could tend to be:
The workers Since these groups of persons are subject to employment redundancies resulting from reduced profitability within the industry.
The Government Fallout within the industry can lead to unprofitable businesses and thus reduced corporate income tax, and other statutory deductions. These can eventually lead to budgetary shortfalls and the consequences of reduced government expenditures that are necessary for economic growth and development of the Jamaican economy.
The telecommunications industry itself an unprofitable industry will have difficulties attracting investors, and by so doing such an industry could lag in terms of technological innovation and sustained development.
Before non-price strategies can be developed as a means of gaining competitive advantage within the telecommunications industry, it is necessary to examine the nature of the cellular technology industry at this time. This is an emerging industry, and as such, is demonstrated by the following features:
Technological uncertainty. The industry has evolved from "analogue" technology to "digital" technology, and no one is certain what production technology will be available in the next year or what production technology will prove to be the most efficient in the next year.
Strategic uncertainty No right strategy is yet formulated, and there is usually poor information with respect to competition, or even the characteristics of customers, or would be customers.
High initial cost, but step cost reduction Within a typical emerging industry, there is usually high initial start up cost. This is one of the reasons why excessive price war can destroy the firms within the industry, and ultimately industry viability, and this is one of the main reasons why a note of caution is made at this time, about the present price war.
First time buyers Usually the primary buyer profile are "Innovators" and "Early Adopters" and by nature, these buyers have little or no allegiance to this product, or service, except to move to the next new line or range of invented products or services.
Instead of the ongoing excessive price competition that is now facing the industry, there are several available non-price competitive strategies that can be used to gain and maintain market dominance within the telecommunication industry. These include:
Cost Leadership The companies within the industry can strive to become low cost producers by the use of the gains realised from the learning curve effects, the experience cure effects, as well as the gains made from the benefits from economies of scale.
Having a focused direction. By having a focused direction, the firms within the industry can select key segments, and thereby service these segments effectively and well, and by so doing, gain market allegiance.
Having a systematic and sustained strategic planning process This could be implemented as a means of creating and maintaining clear competitive advantage, irrespective of the state of the economic well being of Jamaica.
Increase buyer value Once the perceived and intrinsic values are created in the minds of the consumers, there will be a tendency for those consumers to remain loyal to the particular company. As such, firms within the telecommunications industry in Jamaica could direct their strategies by not only increasing their switching costs as a strategy, but also increasing buyer value to their customers.
Finally, the firms within the industry could attempt to increase competitive advantage by:
1. Absorbing demand fluctuations.
2. Increase motivation at all levels, including at the channels of distribution, backed by effective "push" and "pull " strategies.
STRATEGIC BENEFITS
OF COMPETITION
Within the telecommunications industry in Jamaica, competition should be encouraged, and as a society, we should not attempt to destroy effective competition, and by so doing create monopolies. Competition has several advantages, these include:
Encouraging innovativeness, and entrepreneurship. Jamaica needs them.
Encouraging efficiencies and effectiveness in service delivery.
Finding innovative ways to satisfy the customers, so that the customers will ultimately benefit.
STRIVING TO BECOME
GOOD COMPETITORS
Those companies within the telecommunications industry in Jamaica who wish to be become "industry leaders" or "owners for the yard" should strive to become good competitors by challenging the firms within the industry not to become complacent in terms of service delivery and product quality, but a competitor, which will allow the industry to achieve stability, profitability and growth and without seeking protracted welfare for the industry in terms of "bail-outs" from the Government.
As a note of caution, one should remember that years ago, one of the reasons for the almost collapse of the commercial and near-banking sectors in Jamaica was the excessive price competition (war) within the sectors. Banks and near-banks were outdoing each other by paying excessively higher rates of interest for deposits. As such, "interest expense" was greater than "interest income". Ultimately there was the virtual collapse of the banking community. We do not wish to see the telecommunications industry destroy itself; Jamaicans will have nothing to gain from this action.
Those trying to be industry leader within the telecommunications industry should motivate the telecommunications industry to strive for:
Cost reductions for service and service delivery through innovations, and improved efficiencies and effectiveness. The consumers, the companies and the industry will all benefit from these strategic actions.
Increased produce/service differentiation.This will facilitate choice to the consuming public, and thus increased volume sale for the firm itself, as well as industry growth.
The firms within the industry should not over-rate their own capabilities to the point of triggering a battle within the industry, and even more, so at the expense of destroying the industry and industry profitability.
Finally the industry players should attempt to crater those strategies that can improve the structure of the telecommunications industry, because all will stand to benefit.
