Competing with a Market Leader
By Stephen A. Rutan

If your industry is dominated by a large and powerful competitor, perhaps one that is so successful that they have become the household name on the tip of every customer's tongue, you may be ready to throw in the towel and start looking elsewhere for business success. Before you do, however, hold onto that towel and reconsider your options! The business model paradigm that makes your competitor great could provide you with exactly the right tools to differentiate yourself and discover a better way to meet customers' needs.

You might think that a company like eBay has it all figured out. They are the dominant player in their marketplace - perhaps the largest online auction site in the entire world. They have millions of fanatical buyers and sellers and, one would think, the most carefully crafted business model for consumers seeking to peddle their goods on the internet. Ask any American to name an online auction site and chances are that they will immediately mention eBay. Ask them to name a competitor and they are likely to come up empty. It would seem that this company has the right stuff for an unbeatable model for success, but even this market giant sees trouble on the horizon! In spite of the phenomenal success that eBay has enjoyed, one must always remember that complacency for any firm in any industry opens the door for disaster or, at least, the launching opportunity for an up and coming competitor.

In Korea, just such an upstart firm, Gmarket, has grown as big as eBay in that country in three short years (BusinessWeek, July 17, 2006). They have done this not in a weak or fringe market country for eBay, but in the strongest market for eBay in the Asian arena. It appears that the business model paradigm that made eBay such a worldwide powerhouse had some holes in it and Gmarket dared to fill those gaps with a slightly different way of doing business. For example, in addition to offering the fixed price ''Buy Now'' option, Gmarket provides the ability to immediately negotiate directly with a seller rather than wait for the posted expiration time of the auction. For many buyers and sellers, this addresses perhaps the biggest drawback in the eBay model: waiting to have their needs met.

Gmarket has used a number of marketing initiatives to more successfully promote their emphasis on immediate transactions to differentiate themselves from the market leader. The appeal of this approach makes a lot of sense when you analyze the basic outcomes of the traditional auction process. Each auction creates two happy winners and a lot of unhappy losers. The seller benefits from the competition to find the buyer who places the highest value on what they are offering. The winning buyer presumably pays no more than what they perceive to be the value of the item for sale. All of the other participants suffer the frustration of having found something that they want and failing to acquire it. For all participants, the process takes time.

The ability to negotiate on a spot basis allows both ''winning'' parties to bypass the time inconvenience and anxiety of the multi-day auction process and conclude a mutually satisfying experience in a shorter period of time. The by-product is that there are fewer disappointed co-participants in the process. More efficient transactions and fewer unsatisfied customers - sounds like a no-brainer. Why didn't eBay figure this out?

The surprising thing is that eBay offers this same option in Korea! Their apparent strength - brand awareness and consumer familiarity with their business process (typically, a multi-day auction) - actually worked against them when another player introduced and promoted a more streamlined process. Gmarket became the brand identified with faster, more convenient transactions in spite of the fact that the market leader ultimately offered the same capability. eBay was stuck in its own paradigm for success.

So if you are faced with a similar situation in your business - a market behemoth that has clearly captured the hearts and minds of the majority of your potential customers - do not give up the fight! Carefully examine the market leader's business model to explore creative ways in which you can actually serve customers better. Perhaps you too will find that your competitor's biggest strengths provide you with the opportunity to re-shape your approach to the market and find new pathways to a successful future.

Steve Rutan is a Consultant with Center for Simplified Strategic Planning, Inc. He can be reached via e-mail at

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© Copyright 2009 by Center for Simplified Strategic Planning, Inc. Ann Arbor, MI -- Reprint permission granted with full attribution.