If what you do can easily be copied by other players (or competitors), then you bring no added value. Put another way, if you enter the industry and just copy what the other players are doing then you bring no added value. You'll decrease the size of the pie for everyone when you enter. (The pie here refers to the total money that can be made in the industry)
I think most businesses, especially franchises, fall into this category. As long as new players enter, supply will increase and demand will soon fall. Unless demand is ever increasing or there is still unmet demand, entering the game and copying other players will be a good enough strategy.
One good example is the water-servicing business. In the Philippines, setting up a water servicing business has been once a profitable venture. As new players came and saturated geographic locations, profits predictably has fallen. The additional players who are competing for the same customers has decreased the size of the pie.
One good strategy for this situation is by adding value. Your added value is the change in the size of the pie when you enter the game. If you add value, then you increase the size of the pie.
I think most businesses, especially franchises, fall into this category. As long as new players enter, supply will increase and demand will soon fall. Unless demand is ever increasing or there is still unmet demand, entering the game and copying other players will be a good enough strategy.
One good example is the water-servicing business. In the Philippines, setting up a water servicing business has been once a profitable venture. As new players came and saturated geographic locations, profits predictably has fallen. The additional players who are competing for the same customers has decreased the size of the pie.
One good strategy for this situation is by adding value. Your added value is the change in the size of the pie when you enter the game. If you add value, then you increase the size of the pie.
Customers usually have a tendency to return to you once they buy your product/service but this is not always the case. Customers can be indiscriminate when products and/or services between sellers are alike. One way to add value then is to create loyalty among your customers.
A very good concrete example of creating loyalty can be found in the airline industry. Mileage or frequent-flyer programs create loyalty by rewarding customers for their patronage thru giving away free flights when a certain mileage has been flown in their airline. Such programs bring incentive to the customer to fly again with the same airline. Airlines then can look forward to keep their customers while at the same time attract new ones.
From Co-opetition by Adam M. Brandenburger and Barry J. Nalebuff
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