Is There Room for a Fifth Shawarma Stand?

The market will determine if there is room for another competitor, not some outside consultant. Whoever is less efficient and provides poorer service will not survive.

Avi Mizrahi from the shawarma stand on King George Street in Tel Aviv is worried. Soon another stand serving the hot and tasty lamb sandwiches will open across the street and competition in the area will grow. He will be forced to come up with an answer to the strategic threat.

For now, Avi is thinking of a number of options, and some of the details of his action plan have been leaked to TheMarker.

The first possibility is to lower the price of his shawarma, or to increase the size of the pita so it will hold more meat.

A second option is to raise the price of the sandwich by two shekels, but to throw in a cold drink for free.

A third idea is to widen his product line and develop a falafel department, which will increase the variety of his menu.

Meanwhile Avi has become more careful about the cleanliness and neatness of his little store, and about the freshness of his salads. He also extended his business hours.

For some reason, a number of other possibilities never crossed his mind: To send out a press release stating that competition in the shawarma business in King George area was already fierce (five in total), and a new enterprise would be a suicidal move.

He also did not consider appealing to the Shawarma Supervision Division of the Fast and Fattening Foods Division of the Health Ministry to warn about the approaching mass bankruptcy in the shawarma sector; or to ask an international economic consulting firm to prepare a report on competition in the shawarma sector and examine whether there is room for a fifth shawarma supplier in the neighborhood.

He also did not ask the consultants to examine the narrow lamb meat shawarma sub-sector as a separate market, even though this part of the business is known for being particularly unprofitable.

Avi did not even find the time to spread rumors that his new competitor down the street was unprofessional, did not know how to make a sandwich properly and had altogether disgusting shawarma.

The cellular operators came out last week against the announcement of the HOT cable television and fixed telephony company to supply cellular services too.

Yes, the very same companies that have been complaining for years about over-regulation, are now begging for a little more regulation that will save them from having to compete with a fifth supplier.

The cellular operators are quoting a report from an outside consulting firm hired by the Communications Ministry, which claims the Israeli cellular market is competitive enough and no intervention is needed. On the other hand, the report also says there is no reason to prevent new companies from providing cellular services over the existing cellular companies' infrastructure.

The cellular firms naturally prefer the first of the recommendations: There is adequate competition in Israel. They claim HOT's entry into the cellular market will be suicidal. While overcome with happiness from the conclusion that the market is competitive, they are also derogating the level of service the cable company provides customers.

The cellular companies' concern for HOT's suicidal tendencies is really heart-warming. It is very rare to find such true concern for a competitor's welfare in the business world.

It is hard to know how much room there really is in the cellular industry for another competitor, if any.

But in today's open and competitive global economy, the best way to check this is to let the new competitor try. If they are good, they will succeed. Their share will, of course, come at the expense of others and will force them to become more efficient - but there is nothing wrong with that at all.

If there are really too many competitors, then the market will decide - and not some outside consulting firm. Whoever is less efficient and provides poorer service will not survive.

Avi from the shawarma shop understands this. Now he is waiting for the cellular sector to learn the same.