Where Has All the Competition Gone?

Big marketing wars are a thing of the past here in Israel. They have given way to stability in most large business sectors.

Do you remember the pasta war between Osem and Elite? The coffee wars? Pepsi's fight to enter the Israeli market - and its monkeys? What about when the credit card companies fought newcomer Alpha Card? And the violent battles between Maariv and Yedioth Ahronoth?

All these battles were the stories of the 1990s. Now try to remember a single tasty marketing war from recent years. Does anyone have a suggestion, except for a few yogurt, humus and mayonnaise fights?

No, your memory isn't going. Big marketing wars are a thing of the past here in Israel. They have given way to stability in most large business sectors.

The market is nicely divided up between the suppliers; everyone with their own share and niche. No one has any interest in starting a new world war.

A few months ago a senior executive at one of Israel's biggest companies was asked why he didn't enter a specific market category. The executive, who has the backing of a giant international firm, admitted that he simply was not interested in starting a marketing war with the food company that controlled that category.

He said that if he opened up a front against them in a specific category, they might open up fronts against him in markets where he enjoys healthy profits.

Who needs it?

And that is the entire story of the Israeli economy in recent years - while standing on one leg.

A long list of sectors has settled down to a certain level of competition that allows the players to make a very nice living without being dragged into marketing wars that demand management's time and effort, budgets and sometimes even harming the company's cash cows. Every firm holds on to its cash creators and does not threaten those of its competitors.

The big tycoons prefer to create value for their companies in the financial arena. Instead of entering a new product category and battling with a strong enemy, they prefer to create value thorough financial moves: offerings, issues, mergers and partnerships. The financial markets are boiling hot, and it is much easier to make money there.

All of these big marketers are tied to one another in complicated ways. Either they are partners or they are each other's suppliers or buyers, or they are real competitors who meet at parties and smile at each other.

But mostly they spend their time displaying deterrence signals to each other. The result is that the pursuit of the Israeli consumer is really only half-hearted and not very important.

This is exactly the situation where the entry of major foreign firms into Israel would be expected to break down the status quo. But this just did not happen.

AIG, the international insurance giant, is willing to make do with a few percentage points of the local market.

Citigroup, the world's largest financial group, is willing to settle for working with the 100 biggest companies in Israel.

Even though these giants have the ability to shake up the Israeli economy, they have chosen not do so. Does this mean the Israeli economy is so competitive that it does not need to let foreign giants in? Not necessarily.

The Israeli economy is too small and too concentrated, so foreign companies have no real interest in investing resources in becoming major players here.

If these foreigners would do so, then Israeli consumers would benefit greatly from increased competition - but for the companies there is very little money to be made. This means that we consumers will continue to be forced to settle for a small sale here and a break there; but certainly no real competitive breakthrough will make our lives easier, or cheaper.

Israeli companies' big efforts today are going to keep the customers from venturing elsewhere - and will increase their share of our money.