[Market Economy Guide] Successful Companies and Long-Lasting Companies

These days, business competition is not “one-on-one,” but “one against many”

…A “strong company” is one that survives competition

“It’s not that the strong last long, but that those who last long are strong.”

This is a line from the 2006 film The City of Violence. Why did this line, spoken by Jang Pilho (actor Beom-su Lee) to Jeong Taesu (actor Doo-hong Jung), become one of the most memorable quotes chosen by many viewers? Probably because it contains a profound realization that runs through our lives.

A famous movie quote

We are now living in an age of unlimited competition. As society advances, the economy expands, and technology develops, the number of competitors increases and the pace of competition accelerates. In the business world, competition is becoming fiercer by the day. For companies, competition can even be described as a struggle for survival. Falling behind means extinction. Competition in the corporate world takes place in complex and varied forms. Former rivals may become allies, while companies that once operated in completely different fields may suddenly emerge as each other’s biggest rivals. That is why, in the mid-2000s, the following phrases became popular:

“Nike’s competitor is Nintendo.”

“Nexon’s competitor is Cyworld.”

Nintendo is Nike’s competitor?

At first glance, it is hard to see what Nike and Nintendo, or Nexon and Cyworld, could possibly have to do with each other. Nike is a leading sports brand, while Nintendo is a Japanese game company.

This relationship must be understood not simply in terms of industry categories, but in the context of how leisure time is used. At the time, as game consoles boomed, many people began spending on games the time they had previously devoted to sports. For example, a child who liked soccer increasingly spent time playing soccer on a game console rather than kicking a real ball. In this way, sports and the game industry, which had previously seemed unrelated, naturally formed a rivalry because their customers overlapped. If they share the same customer base, winning the competition means getting customers to spend more time using your product.

The competitive relationship between Nexon and Cyworld was no different. In the early 2000s, Nexon emerged as a powerhouse in the online gaming market. Unlike other online games at the time, which required users to pay a monthly subscription fee, Nexon allowed players to play for free. Instead, it adopted a partial free-to-play model centered on microtransactions, such as selling in-game items for a fee. As a result, Nexon earned enormous profits through paid item sales. This partial free-to-play model expanded players’ choices. Those who wanted better items, even at a cost, chose to purchase them, while those who preferred free gameplay over better items simply did not buy them. Naturally, Nexon was able to attract far more players than other subscription-based online games, which in turn led to tremendous profits.

At the same time, there was also a homegrown social networking service (SNS) that became wildly popular online: Cyworld. Cyworld was a site where users could create and manage their own web page, called a “mini-homepage,” by uploading photos, writing posts, and customizing it. Cyworld’s main source of revenue was a paid virtual item called “acorns.” Acorns functioned as cash within Cyworld and were used to purchase background music, mini-homepage skins, and other items.

Many people devoted a great deal of time to Cyworld, especially to managing their mini-homepages, and most of them eagerly bought acorns to decorate them. At the time, it was hard to find anyone in their teens or twenties who did not use Cyworld.

The reason game company Nexon saw Cyworld as a competitor was that Nexon’s game players and Cyworld’s users belonged to the same age group. Nexon believed that a large portion of the customer base that should have been using its games was instead drifting away to spend time managing Cyworld mini-homepages.

Now, after so much time has passed, we all know that the competitive landscape of the mid-2000s is no longer relevant. The rivalries of Nike versus Nintendo and Nexon versus Cyworld have already collapsed. Nike won an overwhelming victory over Nintendo, and Nexon did the same over Cyworld. And today, both Nike and Nexon continue to grow as successful companies, actively competing on the global stage.

Competition creates strong companies

The boundaries between industries have broken down, and the competitive landscape has also become more diverse. Unlike in the past, competition is now frequently not one-on-one, but one against many. In the process, countless companies have lost the competition and been driven out of the market, while a few have endured the pressure of harsh competition and grown into global firms.

In truth, determining in theory which company is a good company, a strong company, or a successful company would require careful analysis using extensive statistics and specialized data. But even without such theoretical analysis, we can recognize a good company, a strong company, and a successful company at a glance. That is because a company that has survived to the present is itself proof that it has defeated countless competitors and ultimately prevailed in fierce competition. That is why companies that have not only remained in business for a long time but have also grown ever larger become symbols of success. This is precisely why major global corporations are cited as evidence of success. Chanel, which began as a small hat shop and became an object of aspiration for women around the world, is one example. Honda, which grew from a small neighborhood factory into one of Japan’s leading automobile brands, is another.

■ Please remember

A company that has survived to the present is itself proof that it has defeated countless competitors and ultimately prevailed in fierce competition. That is why companies that have not only remained in business for a long time but have also grown ever larger become symbols of success.

Sung-no Choi, President, Center for Free Enterprise (CFE)

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Original title: [시장경제 길라잡이] 성공한 기업과 장수하는 기업

Author: Sung-no Choi

Date: 2020-05-18

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=8&idx=22634