Competition

If you have decided on your target market and it is large enough to be profitable and contains reasonable expansion possibilities, the next step is to check out your competition, both direct (similar operations) and indirect.

Competition is a way of life. We compete for jobs, promotions, scholarships to institutes of higher learning, in sports—and in almost every aspect of your lives. Nations compete for the consumer in the global marketplace as do individual business owners.

When sizing-up your competition, consider not only the directly competing companies you face (those who offer a very similar product with similar attributes), but also other product variations you may be competing with. Think about advances in technology, how your competition uses technology and how it can affect your profits.

When considering these and other factors, you can conclude that business is a highly competitive, volatile arena. Because of this volatility and competitiveness, it is important to know your competitors.

Questions like these can help you:

1. Who are your five nearest competitors?
2. How will your operation be better than theirs?
3. How are their businesses: Steady? increasing decreasing? Why?
4. What is their overall goal (profitability, market share, leadership)?
5. How are their operations similar and dissimilar to yours?
6. What have you learned from watching their operations?
7. What have you learned from their advertising?
8. What are their strengths and/or weaknesses?
9. How does their products or services differ from yours?
10. What are their product's strengths and weaknesses?
11. Are there weaknesses you can exploit?
12. What were their sales for last year?
13. What is their pricing structure?
14. What is their advertising message?
15. In what media vehicles do they promote their products?

In Item 1, the number of competitors (five) is arbitrary. Use your own judgment. Perhaps you have no direct competitors, and the only competition is indirect. But make sure you keep abreast of the competition on a regular basis—at least quarterly, but preferably more often.

You must make your business more profitable by picking up the good competitive practices and avoiding the errors of your competitors. A common error is opening a business in a market that is already more than adequately serviced.

Information is the key to a strong competitive advantage. Your suppliers can be good sources of information on your competitors. Visit your competitors' locations, Web sites, exhibit booths; sample their products.

You can also gather a wealth of media and advertising information about your competitors on the Internet from Competitive Media Reporting and USAData. These and many other resources provide access to databases covering many areas of industry, media, advertising, and competitive information.

Carefully viewing the competition will sometimes lead you to alter your basic business strategy or change existing operations to compete more effectively. This should be an ongoing practice since markets shift and success attracts competition.

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