SUNHOUSE: how to compete with a bigger, stronger rival

A question every startup should answer

This is a question Shark Nguyễn Xuân Phú has repeatedly put to startups.

Fewer people know that SUNHOUSE itself once faced a similar situation: a stronger, more established competitor that could sell at prices SUNHOUSE could barely match.

How the company addressed that challenge offers a valuable lesson in competitive advantage.

When a competitor sells below your production cost

SUNHOUSE began as Phú Thắng Company Limited, established in 2000. In its early years in household goods, the business imported most of its materials, keeping production costs high.

According to Nguyễn Xuân Phú’s account, reported by CafeBiz from VTC News’s Đường tới thành công programme, SUNHOUSE was competing with a Korean company that already had a manufacturing advantage in Vietnam.

The problem was that the competitor’s selling price was even lower than SUNHOUSE’s production cost.

The competitor controlled most of its material supply, while SUNHOUSE still depended on imports. Even at a price equivalent to SUNHOUSE’s cost, the competitor could still make a profit.

Continuing to cut prices could mean losing more money with every sale.

Keeping prices unchanged made its products harder to sell.

Phú described it as a problem that seemed almost impossible to solve.

SUNHOUSE changed its cost structure instead of continuing a price war.

Rather than simply trying to sell for less, the company chose a much harder route: investing upstream in manufacturing to gain control over materials and components.

SUNHOUSE invested in aluminium rolling, handles and knobs, plastic moulding and other supporting production processes.

In an account published on SUNHOUSE’s own website, Nguyễn Xuân Phú said that after roughly two to three years of investment in supporting factories, the company could produce almost all its components, accessories and materials in-house by 2007.

The most important result was more than additional factories: costs fell substantially and the company gained greater control over production.

SUNHOUSE expanded strongly in its domestic market between 2007 and 2010. By 2016, its reported revenue was approximately VND 1.8 trillion.

The lesson is not to build a factory whenever things get difficult

Reducing the story to “a competitor sells cheaply → we manufacture ourselves → we win” makes it easy to draw the wrong lesson.

The more important point is how SUNHOUSE identified the root cause of its competitive disadvantage.

Its weakness was more than a smaller brand. Its cost structure put it at a disadvantage against the competitor.

When the problem lies in costs, more advertising may not solve it. Neither may more promotions. Pressuring the sales team to sell more does not fix the underlying issue either.

SUNHOUSE addressed the source of its disadvantage directly: its supply chain and manufacturing capabilities. That is the central insight of this case.

Business lesson: four questions before you react

When a larger competitor starts doing the same thing, small businesses often turn immediately to price cuts, more advertising, extra promotions, copying competitors’ products or selling more to offset thinner margins.

Sometimes those responses only address the surface of the problem. Before reacting, ask four questions:

1. Where is the competitor actually stronger? Capital, costs, technology, brand, distribution or customer data?

2. Can that advantage be copied? A promotion is easy to imitate. A supply system built over years is much harder to replicate.

3. If they sold the same product for 20% less, could your business survive?

4. What competitive moat could you build that even a well-funded rival could not copy immediately?

That moat might be technology, data, a customer community, distribution, operating processes, brand, manufacturing capabilities or the pace of innovation.

The greatest competitive threat is more than a bigger rival.

The greatest danger is having an advantage that someone else can replicate within a few weeks.

That is why the challenge Shark Phú raises remains worth reflecting on. Entrepreneurs can ask themselves:

“If a competitor appeared tomorrow with more money, more people and almost the same offering, what reason would customers still have to choose us?”

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