Who is your competitor?
|
It might sound like an easy question to answer and it is true in some part - just look around to find who are playing in the same league/field that you are playing and you will figure out who your competitor is.
If you are in restaurant business, the guy operating another restaurant is your competitor - Thats an easy answer. If you think a little laterally - a good cook at home is also your competitor. Offices/work that lets a housewife go home at 5 pm is also your competitor (she has time to cook, leave aside if she is willing to)
The point that I'm driving home is there are obvious (traditionally defined) competitors and there are also not so obvious competitor in everything we do.
Here is one more, statistically evident, case if you still do not buy this logic that I extended to the restaurant business.
Private Equity (PE) firms - those that invest in early stage-to-public companies - Who is their competition?.
Let me elaborate - PE firms, specially those that focus on technology industry, are on look out for early stage/emerging companies that have a compelling technology/product which will be next 'super hit'. They will go and invest in them in anticipation of bigger returns on their investment. Now you might be beginning to understand why I call Google as a competitor to a PE firm, because Google also does (and continues to do) the same - Look out for companies that are building next super hit technology/product/service.
Look at this table below:
During the last 8 years, these 4 companies have acquired 252 companies that are in early-to-middle stage - predominantly a territory of PE firms. On 72 deals where deal value is announced they have spent a $43.4 Bn (if you add the remainder of 180 deals @ very conservative number of $3 Mil per deal, total value could well be around $100 Bn)
$100,000,000,000 ($100 Bn) worth of acquisitions by just 4 companies (dont forget that I've not collected stats of companies like Oracle, Cisco, Nortel, SAP and many others).
By traditional definition, this segment of investing/lending funds to early stage companies is supposed to be the territory of PE firms. But it is no more and hence I call 'Google+Microsoft+IBM+x+y+z' also as competitors to PE firms and that too in the category of 'obscure competitors'
I'm not suggesting that PE firms do not recognize this - they might well be!
All that I wanted to bring to attention of readers is that answers to 'who is your competitor' will not always be limited to 'obvious' ones that you are aware of and that we need to think laterally, vertically, horizontally and in many other ways to figure out those 'not so obvious', and more importantly, 'obscure' ones!
If you are in restaurant business, the guy operating another restaurant is your competitor - Thats an easy answer. If you think a little laterally - a good cook at home is also your competitor. Offices/work that lets a housewife go home at 5 pm is also your competitor (she has time to cook, leave aside if she is willing to)
The point that I'm driving home is there are obvious (traditionally defined) competitors and there are also not so obvious competitor in everything we do.
Here is one more, statistically evident, case if you still do not buy this logic that I extended to the restaurant business.
Private Equity (PE) firms - those that invest in early stage-to-public companies - Who is their competition?.
- Very obvious ones - 'another private equity firm'.
- Not so obvious ones - 'stock exchanges', 'banks' and other who lend funds (after all, these act as places where one can raise/borrow funds and that is what PE firms do)
- Obscure ones - Google, Microsoft, Yahoo etc
Let me elaborate - PE firms, specially those that focus on technology industry, are on look out for early stage/emerging companies that have a compelling technology/product which will be next 'super hit'. They will go and invest in them in anticipation of bigger returns on their investment. Now you might be beginning to understand why I call Google as a competitor to a PE firm, because Google also does (and continues to do) the same - Look out for companies that are building next super hit technology/product/service.
Look at this table below:
| Company | # Companies it acquired during 2001-2009 (YTD) | # Companies where deal value is announced | Total amount spent on value announced deals |
| 53 | 14 | $6,900,000,000 | |
| Microsoft | 81 | 23 | $12,509,344,000 |
| Yahoo | 39 | 19 | $4,887,000,000 |
| IBM | 79 | 16 | $19,112,000,000 |
| TOTAL | 252 | 72 | $43,408,344,000 |
During the last 8 years, these 4 companies have acquired 252 companies that are in early-to-middle stage - predominantly a territory of PE firms. On 72 deals where deal value is announced they have spent a $43.4 Bn (if you add the remainder of 180 deals @ very conservative number of $3 Mil per deal, total value could well be around $100 Bn)
$100,000,000,000 ($100 Bn) worth of acquisitions by just 4 companies (dont forget that I've not collected stats of companies like Oracle, Cisco, Nortel, SAP and many others).
By traditional definition, this segment of investing/lending funds to early stage companies is supposed to be the territory of PE firms. But it is no more and hence I call 'Google+Microsoft+IBM+x+y+z' also as competitors to PE firms and that too in the category of 'obscure competitors'
I'm not suggesting that PE firms do not recognize this - they might well be!
All that I wanted to bring to attention of readers is that answers to 'who is your competitor' will not always be limited to 'obvious' ones that you are aware of and that we need to think laterally, vertically, horizontally and in many other ways to figure out those 'not so obvious', and more importantly, 'obscure' ones!
Labels: Economics |
0 comments:
Post a Comment