The level of competition in business can make a huge difference when it comes to the success or failure of a new business.
If you try to operate in a highly competitive market against strong established competitors you are going to have a very hard time staying in business!
An important part of analyzing the competition in business is developing a profile of your competitors that provides you with a comprehensive picture of the strengths and weaknesses of current and potential rivals in your industry.
If you can identify the strengths of your competitors, you can decide which strengths you can compete against and which strengths you should not even try to compete against. Any weaknesses you can identify are areas that you could work on and develop into strengths for your business.
Competitor Analysis - Profiling Your Competitors
You would do competitor profiling to:
- Identify your competitor's future strategies and plans
- Predict how your competitors will react to your future strategies and plans and
- Understand a competitor's strength and weaknesses
The process of profiling your competitors consists of six steps:
- Determining who your competitors are
- Determining who your potential or future competitors may be
- Decide what information that you want to collect on these rivals
- Collect, find, or gather the required information
- Do a strategic analysis on the collected data, and finally
- Developing a strategy based on that analysis
Identifying current and future competitors
The traditional method of identifying competitors takes a supply side perspective where existing suppliers (you and your competitors) in the market are grouped according to their competitive strategies. Where do you fit?
Another method of identifying competitors assumes that potential rivals are unlikely to enter the market using current strategies or manufacturing methods. To break into an existing market, new rivals will probably be looking for new or innovative ways to deliver value to the customers. As customers and their perception of the value they get from your product or service is the focus of your future competitors, this is where you look for information. The question you need to ask is 'which competitors do your customers see to be your major competitors?'
Ask the question and the answer may just surprise you!
The most useful information to collect is likely to include:
- Sales data
- Product mix
- Advertising and marketing activities (and no, they are not the same thing)
- Key customers and markets
- Management style and
- Current trends in research and development activities
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