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BW Businessworld

Terrible Troubles Of No. 3

Third best is perennially doomed to struggle. The holders of the title are forever caught between the top guns, and those snapping at their heels

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In sports, it can be a great experience when you are number three. You are felicitated with a bronze medal, your hard work is genuinely praised and, you become an overnight sensation like Sakshi Malik did after Rio Olympics. But that’s not how things pan out in the world of corporate warfare. In business, being number three can not only be an agonising experience but also become an existential crisis. The market leaders ahead of you try to stifle you to a standstill, while players behind you keep playing an aggressive game of catch up. More often than not, the number three becomes the big loser. And if you have been a market leader in the past and been overtaken by nimbler and smarter competitors, the road to irrelevance and even extinction is closer than you would like to think.

It happens in politics too. For decades, the Congress was the number one player in politics, both at the national and state level. And then it found the ground underneath slowly slipping away. It lost power in Tamil Nadu in the 1970s and has never recovered since. It was also dislodged from the top by the Marxists in West Bengal in the same decade. And then, from the number two slot by Mamata Banerjee. Nobody is betting on any revival of the party there. The agony is now being repeated in Odisha. Dominant for long, the Congress lost the numero uno slot to the Biju Janata Dal this century. And now, the BJP has dislodged it from the number two slot. Both at the national and state level, the Congress is staring at a bleak future. The slide from pole position to an also-ran-in-the-sweepstakes can be a painful experience.

Corporate competition can be as brutal as electoral politics. Just like the Congress, Bajaj Auto was the undisputed king of the Indian two-wheeler industry for decades. Citizens of the Nehruvian era had to pay in advance for a Bajaj scooter and wait a few years for delivery. All that changed in the 1980s, when the government liberalised rules that allowed Japanese auto companies to tie up with Indian outfits to manufacture and sell two wheelers. A little known company that made bicycles and mopeds tied up with Honda to create a new company Hero Honda. Within a short span, Hero Honda displaced Bajaj Auto as the number one two wheeler company in the country. Bajaj Auto remained number two till 2011, when Hero and Honda parted ways. In just a few years, Honda sales grew so fast that it dislodged Bajaj from number two position. There is an irony here. Bajaj Auto originally lost out to Hero Honda because it couldn’t compete with the new entrant on fuel-efficient motorcycles as it was predominantly a scooter manufacturer. By the time Honda parted ways with Hero, Bajaj had become a predominantly motorcycle player. Honda spotted a new market for scooters and rode the wave to become number two. Now, Bajaj Auto is a distant number three and virtually out of contention in the mass market.

When you are number three, new entrants can give you an existential shock even if you are very successful and profitable. Look at the telecom market. Even though it was a very late entrant, Idea Cellular promoted by Kumar Mangalam Birla was a text book case of a success story. Innovative pricing and marketing strategies backed up by smart advertising ensured that Idea raced ahead of older rivals in the market. By 2016, Idea was a very comfortable and profitable number three behind market leader Airtel and number two Vodafone with almost 200 million subscribers. And then came a shockwave in the form of Reliance Jio. The Mukesh Ambani-promoted new comer has used sheer money power to lure 100 million subscribers in just a few months. For the first time in years, Idea reported a quarterly loss. Now the company is in serious talks with Vodafone for a possible merger to thwart the Jio onslaught. No sane person would fault Kumar Mangalam Birla when it comes to strategy and execution. And yet, Idea has been hit by the curse of being number three in a brutally competitive market.

That said, Idea remains a healthy player, and a possible merger with Vodafone would be a voluntary strategy to reman relevant and competitive. After all, mergers and acquisitions have been part and parcel of corporate folklore across the world. But not all number three players are as lucky. Some actually struggle to survive. In the heady days when startups were becoming unicorns a few years ago, Kunal Bahl was dreaming of conquering the world. But he has now realised that even survival has become a challenge for SnapDeal. Battered, bruised and hammered by Flipkart and Amazon, SnapDeal faces a crisis. Hundreds of employees have been laid off. The promoters have taken a 100 per cent pay cut and yet the future remains cloudy.

The irony is that the curse of becoming or being number three spares almost no one. Look at Jet Airways. At Tata Motors. At Axis Bank. And draw sobering lessons.