Competition: A good or bad thing?

Kevin Mader

One of THE Original Covers!
Staff member
Admin
#61
Interesting thoughts.

I originally tried to stay away from competition in sports, as ultimately, this is not my main arena for concern (business and education are). So I’ll avoid this discussion if that’s o.k. with the group.

Firstly, Cindy, welcome to the Cove!! We are happy to have you here. I would like to use your example as a point of discussion, so please don’t take anything here as a personal attack. I feel that I needed to make this clear based on some not so recent (but not distant enough) events.

Let’s examine the case with trying to get the best price for a given item. My first question is in how we look at our supplier base. Are they a necessary evil? Or, are they a partner in our effort to make good products/services? How should we treat our partners, if in fact, that is what we see them as? I give Energy my vote here.

Also, what are the hidden or unknowable costs involved with leveraging your supplier? What are the costs associated with getting three quotes and processing them internally? Do these costs out weigh any savings found on paper? But this speaks mostly to good business practice.

On the topic of Competition, competing suppliers lower their costs arbitrarily, without knowing the ultimate effects to the system or organization (their own). One may loose their hat on one job to gouge you on another. Some see this as give-and-take. I see this as a lack of trust and as a lack of a common AIM (or vision) for both parties. If a company cannot make the required margins on their products to sustain their business, how will they be able to invest in ‘innovation’ or organizational improvements? While we are enjoying our savings here today, in this case, we are losing elsewhere and for how long? Take for instance the automakers today. Most are engaged in a 0% financing campaign in order to draw business. While automakers sales dollars soar, their profit margins plummet. Loss of margins mean that R&D dollars aren’t available. Net gain: loss of innovation. Does this impact the customer (dealerships)? Does this impact the consumer (you and me)? The answer is yes. Competing to give cars away at cost today nets losses of unknown magnitude in the future. But the scenario I’ve described plays out in all industries. Innovations and excellence (quality) are what separate one maker from another. This creates competition, but competition is not a means here. It is an outcome.

Cindy, your intentions are good and noble, but I’m afraid that they are guided by old theory (perhaps you are required by company policy to shop around). Many Buyers I know are operating under this prevailing style, and the practice is quite common. While you feel you are saving money for the organization (proof is on paper after all) by getting the best at the lowest price, are you accumulating costs somewhere else in the process/organization?? Are you sure that you are saving money? Because in a very real sense, the money you are talking about isn’t just the company’s, it is partly yours too.

The theory I share is that Competition will ultimately destroy Quality, and as such, is not a good thing. Thanks for the posts, everyone!

Regards,

Kevin
:bigwave:
 
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M

M Greenaway

#62
Cindy

Instead of looking for the lowest price tag, and using competing suppliers to beat each others price down, I would suggest you ask each potential supplier to quote their best price only once, and also determine the Total Acquisition Cost - not just price in selecting your source.
 
J

James Gutherson

#63
Whats happens also, when a larger supplier, with a bigger warchest, sells below cost for a while forcing smaller companies to match them to get any business. This eventually drives the smaller guys out of business, leaving the big guys with a monopoly. Then your prices go back up, as the big guy can charge what he wants.

This has happened time and time again in the Australian domestic airline market. Consumers reap the rewards for a brief period but then suffer in the long run.

I agree with Energy and Kevin and Martin, this type of thinking is short term, and short sighted.
 
Last edited by a moderator:
#64
Kevin Mader said:
The theory I share is that Competition will ultimately destroy Quality, and as such, is not a good thing.
You know it could go the opposite way. A good example is the Chevy Cavalier. When first introduced, it was next to junk. In order for Chevy to stay in that class, they had to either introduce a new model, or improve the quality. As time progressed, market pressures forced the Cavalier to undergo some dramatic changed is style and quality. Yugo, on the other hand, did not respond to competitive quality issues, solely relying instead on price. They are no long in the competitive market.

The point is that competition, if focused properly can cause quality improvements. MBNA is an example of competition can take a quality focus. The key is to determine where you plan to compete. With some it is in $ (a tact that rarely works), for some it is in time, and the list goes on and on. Competition is neither good or evil, but can be used for either.
 
D

David Hartman

#65
James Gutherson said:
Whats happens also, when a larger supplier, with a bigger warchest, sells below cost for a while forcing smaller companies to match them to get any business. This eventually drives the smaller guys out of business, leaving the big guys with a monopoly. Then your prices go back up, as the big guy can charge what he wants.

This is exactly what the Japanese did as they infiltrated the US auto market. They broke into the market with product that was priced below the current market average (loss leaders - they "plan" on losing money on product breaking into the market - they make up for these losses by increasing profit margins on their domestic sales and in other "established" markets).

Now look at the price of a Japanese "import" today (even the ones designed and built here) against comparable US domestics and you'll find their price "above" the market average (and still selling, because they now have a proven product and a faithful customer base).

I'm not sure that this type of "competition" meets my understanding of "fair trade", and I'm just as sure that this practice would not be allowed by the Japanese if we attempted to enter their markets in the same fashion (a practice that most so called short-sighted US company's would not venture into).

We (the people of the US as a whole) still have this belief that competition consists of equals duking it out in a fair fight, with the better man/woman/child being the victor. And we still get upset when one of the competitors plays dirty by throwing salt in the face of an opponent ("cheating" to gain an advantage).

But the bizarre part of this is that we (as customers) are then willing to coerce and entice those providing products to us to "do whatever it takes" to beat their competitor's price - even to the point of our cheating our suppliers out of what may be a fair profit.

Wouldn't it work better to make long term commitments with suppliers, working with them as a team, helping them with their problems, allowing them to participate in our product planning sessions, and developing the proverbial "win-win scenario"?;)
 
R

Randy Stewart

#66
Wouldn't it work better to make long term commitments with suppliers, working with them as a team, helping them with their problems, allowing them to participate in our product planning sessions, and developing the proverbial "win-win scenario"?
What are you smoking? :eek:
I agree, and IMO this is where the B3 really fall on their face. Remember all the issues with the famous C9 Advisory in the Sanctioned Interpretations to QS?
I am the mentor for our Supplier Quality Team and this is one of the topics I stress. Working out the issues with a supplier goes a long way. Beating them over the head may get some results but doesn't help in the long run. :agree:
 

Kevin Mader

One of THE Original Covers!
Staff member
Admin
#67
Dave B,

I think that we are talking about the same thing, only my distinction is that Competition as a means is different than Competition as an outcome.

Regards,

Kevin
 

Mike S.

Happy to be Alive
Trusted Information Resource
#68
Kevin Mader said:
The theory I share is that Competition will ultimately destroy Quality, and as such, is not a good thing. Thanks for the posts, everyone!

Regards,

Kevin
Lemme try again -- I wrote a long discourse and submitted it but it got hung-up and lost with a 30 second timeout notice. :mad: This will be shorter but try to get the point across.

Kevin,

I know you're a brilliant guy, but I gotta disagree. When you say "no" to one thing you must say "yes" to something else or you're doin' nothing. What do you propose to replace competition? Don't say "partnering" because that is not IMO practical on scales from every automaker to every Joe who buys a six-pack at the local market.

Further, I'd say history proves you wrong. Competition has been a major factor in most markets for hundreds or thousands of years, yet quality has not been "destroyed". Today you can get most any item at most any Q level you want depending in part on how much you are willing to pay and how much homework you do. Where is this destruction?

Nuttin' personal -- just a stir to the pot. :bigwave:
 
M

M Greenaway

#69
If people are competing to provide the best 'quality' (whatever that is) then that competition must be a good thing.

If they are competing to provide the lowest price tag alone then invariably quality will suffer.

So I dont think its competition which is bad, just what we are competing for !
 
D

David Hartman

#70
M Greenaway said:
If people are competing to provide the best 'quality' (whatever that is) then that competition must be a good thing.

If they are competing to provide the lowest price tag alone then invariably quality will suffer.

So I dont think its competition which is bad, just what we are competing for !
Doesn't this analysis depend on your definition of "quality"?

If quality is comformance to spec, and I determine that my customer wants a low-cost, throw-away automobile (Vega, Yugo, etc.) which I procede to develop, produce and sell; have I not conformed to spec and therefore produced a "quality" vehicle.

On the other hand, if quality is being defined as a superlative, no expense spared, best-in-class product and I provide my customer with a Rolls-Royce, have I then met my definition of "quality".

Or, if in producing either type of product I examine my sytem and supporting processes to eliminate waste and maximize throughput; is that what we refer to as quality? :bonk:
 
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