Business Strategy Analysis: Laziness Breeds Anti-Capitalism
Recently the US Congress debated the merits of requiring all internet firms that sell products to collect sales tax. The rationale behind this is to make e-commerce firms and physical firms play on a level playing field. A local morning radio talk show program recently debated this topic as well. A business owner called and stated that he needed this law and needed the government's help in order to remain competitive. This business owner claimed customers come into his store and state they could get products cheaper on the Internet and not have to pay sales tax. This statement by the business owner is what this article addresses. Anyone who understands basic business strategy will see the owner as being lazy and using the government to do something he himself should be doing.
Using Strategy Instead of Laziness
The belief that businesses cannot compete because of some situation and need the government's help is an all too common occurrence in society. Business owners claim the Internet firms are not fair and need the government to level the playing field. When Wal-Mart enters a new area, small business owners cry foul and cry to the government. When foreign companies compete with American firms, the American firms whine about not being able to stay competitive. These firms all want a government, whether local or national, to do something the firms should be doing for themselves -- remain competitive.
Strategy theory states there are three basic strategies: cost leadership, differentiation, and focus. These all are discussed in a previous article. In the case with the Internet competition, the low cost position has already been taken by an Internet firm. That leaves a differentiation strategy or a focus strategy for the physical firms. Thus, a firm facing competition such as this must change its strategy to one of these two.
How can the physical firm differentiate itself? The answer to this question would normally be answered in performing the SWOT analysis discussed in a previous article. However, to short cut the process one would simply ask, "What can the Internet firm not do?" Once this question is answered, a list of potential differentiation modes can be compiled. Some generic ones are listed below.
- One way a physical firm can differentiate itself from an Internet firm is personal, physical customer service. Such customer service could include demonstrations of the product and brief one-on-one instructions in the use of the product.
- Another method of differentiation could be physical training classes where a live teacher instructs customers in the use of a product and is available for questions. If the customer buys the product from the physical store, then the store will give them full or partial lessons free.
- The physical firm might market itself as working with the customer to determine the right product. This determination could include sizing, goal matching, and usage. The objective is not to allow the customer to purchase the wrong product.
- The physical firm can also market itself as being able to provide the customer the product immediately instead of the customer having to wait as with an Internet store. Immediacy has a certain appeal to some customers.
- Another way a physical firm can differentiate itself from an Internet firm is to partner with other physical firms to offer discounts or other incentives. The physical firms in a region could work together to motivate customers to purchase items at the physical stores.
This is not an exhaustive list but rather some ideas where physical firms can overcome any benefit the Internet firms have. There is one important axiom in business. Rarely can one firm capture the entire market. Thus, there will always be market share to obtain, the difficulty is in finding out how to do it which is the very essence of capitalism.
This article has looked at how a physical products firm can differentiate themselves from Internet firms and overcome the advantages that Internet firms may have. The answer lies in getting customers to notice the physical firm by using techniques that the Internet firms cannot match due to their electronic nature. However, this differentiation strategy requires some thought and some work. For some, it is much easier to take an anti-capitalist position and to get the government involved to take care of the "problem". Unfortunately for the non innovative firm, this never really solves the problem.
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