Why do we need to understand our competition?
- Understanding who our competition is and how they operate helps us with so much, especially when we are starting out defining our own business or new product or service. This activity is designed to get you thinking about just how much information you can ascertain from the competition – or lack of it.
Understanding the competition enables us to:
A basic analysis of the competition also demonstrates to anyone reading the Business Plan that we understand we aren’t operating in a bubble; and are prepared to learn from the successes and challenges of similar businesses. This will give the reader confidence that we are adaptable and resourceful.
- understand how saturated (see below for definition) – or not – the market is in our area
- get insight on pricing
- get insight on how others have structured similar businesses
- understand the strengths and weaknesses of their services, products, customer service etc
- learn about the success of specific products or services
- get ideas about how to market our business
- learn if there are any open specialty niches in our industry
What if we have no competition?
If there are no similar businesses to yours in the area, it may be that the business you envisage is:
None of these reasons should stop you pursuing your own desire to open a business; but identifying why a similar business does not currently exist in your area should give you reason to pause and dig a little more. The information you find could help you define your business more clearly, potentially identify further opportunities or even anticipate issues.
- a totally new concept to your area
- previous attempts at opening such a business have failed (for whatever reason)
- a related business fills that gap ie an internet wifi company may also provide a successful service that fixes computers
- the business you are proposing is outdated ie a tv repair service when buying a new tv may cost a fraction of the repair costs
- the type of business you envisage has been centralised to the nearest large city
What if I have too much competition?
- A saturated market (ie a market where multiple businesses are providing the same services or products to the point where all possible customers have been satisfied) isn’t necessarily an indicator that you shouldn’t proceed either; but it
- a signpost that you need to think very carefully about what would make your product or service more attractive to the client.
So whether you have too much, too little or just enough competition shouldn’t dissuade you from continuing with your business idea at this point, but it should prompt you to learn as much as you can about why the industry looks the way it does in your area.
- how will you find customers if they are all currently satisfied with the existing businesses?
- what can you offer that the existing companies don’t?
- is there a specific niche you can target?
- would it be better to diversify your offerings in order to overlap into a market that is less competitive?
How to identify the competition
- We asked our Case Studies to identify their competition.
As a first step we suggested they made a list of the businesses they could identify using one or more of the following techniques:
We are going to work with this list in the next activity.
- Use their existing knowledge
- Use online resources like business listings, Google, local city/town directories etc
- Visit the local library or town hall
- Drive or walk around the neighborhood noting down business names and locations
- Talk to friends or other local contacts
- Now it’s your turn. List competitors in your operating area. You can use Worksheet 3 if you like, or simply make a list in your notes or on computer file.