In a world without competition there are no winners, but there are also no losers. There are no prizes to be won, but there is also nothing to motivate you to try something new. Without competition, there is no drive to improve. In the business world, industry competition keeps companies engaged with what their consumers want and forces them to match or beat whatever the other guy has to offer to hang on to valuable market share. In many cases, this is a win for the consumer who gets to reap the benefits of improved products or lower prices.
Remove competition from the equation, and you’re left with companies without motivation to undercut each other or innovate because no one else is doing it either. In this situation, the consumer loses by being forced to pay whatever the oligopolies dictate, and the company loses out on opportunities to drive innovation.
This has become all too familiar in major industries that lack real competition in Canada. One of the most well-known industries that Canadians suffer high prices through is telecommunications. With just a handful of providers to choose from, the prices for consumers are high, the barriers to entry are even higher and the need for any of the providers to innovate is almost non-existent. The same trends have existed in Canadian airlines as well. The cost to fly from one side of Canada to another is the same as to catch a flight to Europe. But I can get down to Florida for half the price thanks to one of the many American-based airline options.
But there might be hope for us Canadians, after all. Some of the major companies have taken to creating subsidiaries that can compete on price. Shaw Telecommunications (acquired by Rogers) launched Freedom Mobile, offering Canadians a previously unheard of 10GB for $60 a month. WestJet Airlines just launched Swoop, their ultra-low-cost airline that will operate independently, and flies to select locations, charging for everything from a second carry-on piece and up.
What’s interesting is that the need has always been well-recognized to force competition and lower prices in these industries. Before launching Freedom Mobile, Shaw acquired WIND Mobile, the previous hopeful low-cost competitor in Canada, that couldn’t provide the same coverage as the big carriers. A few years back another company, NewLeaf, tried and failed to launch a low-cost airline competitor based on almost the exact same model as WestJet’s Swoop. Without the pre-existing capital and infrastructure, it never stood a chance. NewLeaf has since been acquired by Flair Airlines, an airline I had never heard of until just now. It’s good to know that some changes are coming to major industries, but I wish we could see more proactive innovation from the big players.
What do you think about the pros and cons of industry competition? Let us know in the comments.
—Kaila Joynes, Consultant
