Winning your own game - includes article on employee competitiveness - entrepreneurial success

Nation's Business, July, 1987 by Roger Thompson

Winning Your Own Game

Linda Hughes of Arlington Heights, Ill., and Chris and Sue Stangland of Eugene, Ore., had much in common as entrepreneurs. They launched small businesses about the same time, nurtured them with hard work and innovation and did so well that they attracted strong competition.

The parallel ends there, however. Hughes' company is still going strong, but the Stanglands' enterprise went under.

Their experiences spotlight a fundamental question to which nearly all successful entrepreneurs seek the answer sooner or later: Why do some companies soar under major competitive pressures while others collapse?

And there's no doubt that competition is going to be there.

The Arthur Young Business Plan Guide advises those contemplating a business start-up: "Almost without exception, the eventual performance of a prospective business will be influenced by external factors over which the business has little or no control. Most notable is competition.'

Says Ian MacMillan, professor of entrepreneurial studies at the Wharton School of the University of Pennsylvania: "It's a fact of life that if you have a really good product and you're making a lot of money on that product, you are a prime target for competition.'

A successful enterprise built on a single product or idea might suddenly find itself in an underdog role against competition for many reasons--the opposition might have more experience and resources or it might just have more marketing savvy, more imagination when it comes to improving the basic product or greater ability to cut costs and prices.

Consider how Linda Hughes and the Stanglands reacted to tough competition.

In typical entrepreneurial fashion, Hughes had started her business in the basement of her home, but it wasn't long before Lin-Art, Ltd., had a team of national sales representatives selling hand-crafted Japanese wall hangings known as Chokin. They are made of copper gilded with gold and silver.

She had shrewdly laid claim to the market by negotiating a contract with the Chokin artisans in Japan to be their exclusive distributor in North America. The prospects for the business were dramatized when her first shipment from Japan sold out just in her neighborhood.

Commercial interest in Chokin took off when she displayed her imports at the 1977 Chicago Gift Show, and the response there led her to hire the sales force to market the objects to gift, decorator and retail furniture stores. Orders flowed in faster than the shipments arrived from Japan.

In 1980, Hughes expanded her market for Chokin when she began to design items like vases. The most successful adaptation proved to be a limitedition plate that she sold to the Hamilton Mint. But her success did not go unnoticed. By the mid-'80s, Hughes recalls the Chokin market was awash with "cheap imitations' imported by small and large companies.

Hughes' sales slumped, but she weathered that first crisis by diversifying. Drawing on the sales experience she had built through Lin-Art, she launched an office supply company that generated $1 million in sales in its first months.

She has also met the competition for the Chokin market head-on. Hughes recently developed a new outlet by signing a joint venture with a small firm that makes decorative wooden boxes. The company will put Hughes' Chokin designs on its products, and her sales force will market them as executive gifts.

"I'm looking at every avenue, taking advantage of every opportunity to diversify,' she says. Had the company remained dependent on its original Chokin products, Hughes explains, the competition "would have forced me to close my doors.'

A key factor in her survival was her ability to identify and plan for the competitive pressures.

It was a different story at Pepperwood International, the company the Stanglands founded in 1977 with $1,500. They bought a mold for making various types of rubber stamps from a friend who had been unable to develop a mail-order market for them. The Stanglands were confident they could make the idea work.

They sold 25,000 stamps the first year and 6 million in the fifth year. The company employed 90 people to keep up with the demand for its 300 designs, which included messages, birds, animals and licensed cartoon characters.

In 1984, however, a major competitor entered the market and the Stanglands' sales dried up. They had started to recover when a nervous lender called in their loans, and Pepperwood went out of business.

In retrospect, the Stanglands agree that, ironically, their initial success was a factor in the eventual collapse of their business--they were too busy filling orders to see the approaching storm. "I didn't pay attention' to the competition, Chris Stangland recalls, noting that failure to develop new products had left his company vulnerable to competition.

One way that an entrepreneur can minimize vulnerability to aggressive competition, suggests Don Berno, legislative counsel to the Small Business Center of the U.S. Chamber of Commerce, is to remember the reasons why the business succeeded in the first place.