Time to redefine competitors

JAKARTA (JP): Companies are now facing stiffer competition. Therefore, according to business strategist Rhenald Kasali, companies must be fit to their environment to stay ahead of competition.

The Jakarta Post's last week interviewed Rhenald, chairman of the Management Studies Program at the University of Indonesia, to hear his views and suggestions on how companies can survive the tight competition. The following is an excerpt from the interview.

Question: What should an Indonesian company do in this time of change, especially now that economic and political reforms have opened the Indonesian market even wider, and which has resulted in an influx of foreign products into the country?

Answer: Companies are just like people. People live by the law of nature which is the survival of the fittest. From the time we are born, we have to adjust and be able to fit in with our surroundings. This is especially so in countries that experience four seasons. When winter comes, parents prepare their children to live in cold conditions. They use heaters in their homes. When its summer, it is a different story. They use air conditioners to cool their homes. They do other things when spring or fall comes.

People adjust to their environment, companies have to do so to.

Companies have to fit with their environment. This concept is called strategic fit. Strategically they have to be fit with their environment.

The problem is that the business environment keeps changing from time to time. They change because of conjuncture, which may be cyclical, short term or long term. Companies have to see trends and megatrends and stay fit with the environment. If companies cannot do so, they will die.

Q: Can you explain in detail what you mean by strategic fit?

A: Strategic fit comprise several components which include customer fit, competition fit, technology fit and culture fit.

What I mean by customer fit is how we stay fit with our customers. People change from time to time. In the old times, people shopped at traditional markets. But now people shop in air-conditioned supermarkets. Those days people drank coffee made in their own kitchen. But now people like to go to cafes to have coffee. Back then people bought newspaper once a week, now they buy it everyday, and some even twice a day. So companies need to know their customers behavior so that they can stay fit with their customers. As for competition fit, companies must keep their eyes wide open on its competitors as competition is dynamic. In business, we can look old, not because we are getting older but because our competitors look younger. Coca Cola has rejuvenated its products with various efforts, including advertisements that made their product look young all the time, while its competitor Pepsi Cola has not done the same. So Pepsi is looking old.

As competition is dynamic, companies must also be dynamic, no matter what their competitors are doing. Sara Lee, for instance, has changed the image of the mother on its products several times as a mother's image changes according to the times. In the past, a mother was usually represented by a fat woman with curly hair, but now its a lot different. A mother is represented by a slim, fit and fresh looking lady.

In technology fit, the challenge is to choose technology that will fit our needs. You cannot just buy any technology. You have to consider many different factors, including cost, the customers capability of controlling the technology, and their adaptability to the rapid growth of technology. You must avoid buying technology that will be obsolete after a few years or months.

Kompas, for instance, did not do long-distance printing of its newspaper because of regulation constraints. But now since there is no regulation barriers, it does long-distance printing in Bawen, Central Java and in Surabaya, East Java. The Jakarta Post also does long-distance printing of its newspapers in Bali. To pursue these things, companies need to pursue technology fit.

As for culture fit, we have to produce products that are culturally fit to customers in different parts of the world. The recent Ajinomoto case in Indonesia serves as a good example. Ajinomoto said the product did not contain pork elements, but it acknowledged that it used pig enzymes in the production process. The company forgot that that's a sensitive issue here.

Q: Among the four components of strategic fit, which is the most important for a company to focus on to survive, especially in this time of slow economic recovery...

A: Now we have to prioritize competition fit because of the reformation in Indonesia. The Asean Free Trade Area (AFTA) is awaiting us at our doorsteps. Even now, we are seeing many products from Singapore, Malaysia and most of all from China, flooding our markets. We have been especially open since the financial crisis. Foreign presence is felt in almost all sectors. And this tightens competition for local producers.

The increase in competition is not only due to foreign companies but also from local ones. Just look at your industry, the media. In the old times, we had to have SIUPP (publishing license) to start a newspaper, but now, there is no more SIUPP, so anyone can produce newspapers. This is also the case in the television industry. Anyone with capital can establish a television station. The airline industry is also so open, making competition even tighter. These factors make it important for companies to pursue competition fit now.

Competition fit is especially important in this era of globalization as products can come into the market without going through an introductory period. Normally a product goes through a product life cycle, beginning with an introductory period to make the product known to the people. After that, the sales of the product normally reaches its peak, and if it is not maintained well, its sales will decline. Aqua, for instance, spent five years in the introductory period. However, because of globalization, some products take the upper position in the market without going through an introductory period.

For instance, when Hard Rock radio station and Kosmopolitan magazine first appeared in Indonesia, they went straight to the upper position in the industry because of their strong brand names. They did not need an introductory period as they were already well-known. When Hard Rock radio station was launched, it startled Prambors radio station, the longtime radio station in Jakarta. Also Kosmopolitan surprised Femina magazine. If MTV, for instance, launches a radio station in Jakarta, it will compete head-on with Prambors and Hard Rock. Therefore, Femina,Prambors and the others have to be fit to face competition from Kosmopolitan and Hard Rock.

Q: How do we know that our business is not fit with the environment, and what should we do if it is not?

A: When our business is not fit with our environment, it will send signals. Just like our body, when it is not fit, we can, for example, catch a cold, become feverish or suffer stomach cramps. And we need to tackle it quickly. So does our business. Our business is not fit with the environment when our customer satisfaction level drops, morale of our employees drops, employees' absenteeism increases, internal conflicts increase and so forth. All these indicate that our company is not fit anymore.

When things go wrong, we must take steps to restore our business's health. They include:

First, researching our customers behavior to ascertain if there are changes in their behavior so that we can take measures to make us more customer fit.

Second, redefining our competitors. Competitors are not solely those producing the same products, but also those who serve the needs of our customers. For instance, if we produce instant coffee, the nearby cafe selling coffee is our competitor. The cafe serves the need of our customers, namely to keep drowsiness at bay.

Third, making internal improvements, including salaries.

Fourth, repositioning, redesigning, reworking or relaunching our products.

-- Riyadi Suparno