224-How Hostility Starts
Many years ago, I had the good fortune of living in London for three years. During that time, I would often have lunch in one of London’s many public houses, “pubs” to you and me. They served rich and ample fare such as Sheperd’s pie, sliced turkey sandwiches and, of course, English “bitter.” Sometimes, after work, I would meet friends for a drink at the same pubs. When I traveled the countryside, I could always rely on a local pub to provide good food and drinks at reasonable prices. They were a more comfortable equivalent of a fast food restaurant. And they were great places to socialize.
Things have changed. A couple of years ago, my wife and I spent a vacation in England. I was anxious to take her to some of my favorite pubs, both while we were in London and while we were in the Cotswolds. To my surprise, most of these pubs were gone. Those that had survived had largely transformed themselves into much more upscale restaurants. Gone were the gorgonzola sandwiches and the cheddar and bread offerings. In their place were white tablecloths and nice silverware settings.
The public house is under significant pressure in Britain. The number of pubs has fallen by 10% in just the last five years. What happened? New competition.
Competition, both above and below pub prices, has reduced the market for pubs. At the lower end of the market, supermarkets easily undercut pub prices with their substantial buying power. At the higher end, the British have expanded their taste for wine. All of this new competition has reduced the sales of beer, the pub’s key product.
This is a picture of the development of a hostile market, where price competition is intense and returns for the industry are often low. A reduction in the number of competitors is a hallmark of a difficult, hostile market. We have studied many of those markets over the last twenty-five years. Most hostile markets are caused by the expansion of competition. The minority examples of hostility are the result of a fall-off in demand. The British pub industry has seen both factors at work. But the most pressing has been the expansion of competition.
For a relatively short summary of how to operate in a hostile market, see these two Perspectives: “Success Under Fire: Policies to Prosper in Hostile Times” and “Use Subtle Strategy in Tough Markets”.
Changing tastes, increasing costs and intense competition continue to plague British public houses. Each year there are fewer standing than there were the year before. In 2010, there were over 55,000 surviving public houses. By 2022 there were only 40,000 surviving.
HOW CAN THESE BLOGS HELP ME?
If you face a competitive marketplace, read these blogs. We wrote them to help you make better decisions on segments, products, prices and costs based on the experience of companies in over 85 competitive industries. Much of the world suffered a severe recession from 2008 to 2011. During that time, we wrote more than 270 blogs using publicly available information and our Strategystreet system to project what would happen in various companies and industries who were living in those hostile environments. In 2022, we updated each of these blogs to describe what later took place. You can use these updated blogs to see how the Strategystreet system works and how it can lead you to better decisions.