In a previous Blog, The Hidden Cost of Competition, I referred to the type of competitive analysis required for the business planning process. This, however, is not the only use for a well-executed competitive analysis.
Many of Pleiades Publishing Services clients are serial entrepreneurs. These clients start an enterprise with the end in mind … they come in with the intention to cash out!
If we begin our venture with the end in mind, and if that goal happens to be selling our business for major dollars, then a finally tuned competition analysis is one of the best tools to use from the very beginning.
Perverse Forms of Cooperation
I used to tell my business development classes that there was no such thing as competition, just perverse forms of cooperation. Your competitors and their close associates are your most likely Joint Venture partners, and your business’ most likely buy-out candidates.
This is especially true if you have developed patented, proprietary, products or processes or own intellectual property rights that would add value to their business. If your business bids for government procurement contracts, your prime contractor, or their associates might just offer to buy you out if you have built value into your business structure, and you would have to be better than your competition.
When doing a competitive analysis, review the strength and weakness of the major players in your industry. No matter how successful, the big guys can’t do it all. There is always a niche left to target. The smart player finds it, develops it and sells it back to the market leader a few years latter. I was fortunate to serve as a general manager for one of 3M’s divisions. It is part of 3M’s corporate culture to find emerging businesses, with promising technology. If the 3M-acquisition team feels the technology is a good fit, they either license it or they buy the business outright. 3M is a company built on flexibility and innovation and have never been hampered by “the not invented here culture” that has blocked the growth, and stock price of some of their “Blue-Chip” peers.
So now you know why, here is how…
Business takes place in a highly competitive, volatile environment, so it is important to understand the competition. Questions like these can help:
- Who are your five nearest direct competitors?
- Who are your indirect competitors?
- Is their business growing, steady, or declining?
- What can you learn from their operations or advertising?
- What are their strengths and weaknesses?
- How does their product or service differ from yours?
Start a file on each of your competitors; include advertising, promotional materials, and pricing strategies. Review these files periodically, determining how often they advertise, sponsor promotions, and offer sales. Study the copy used in the advertising and promotional materials and their sales strategies.
What to Address in Your Competitor Analysis
Names of competitors: List all of your current competitors and research any that might enter the market during the next year.
Summary of each competitor’s products: This should include location, quality, advertising, staff, distribution methods, promotional strategies, customer service, etc.
Competitors’ strengths and weaknesses: List their strengths and weaknesses from the customer’s viewpoint. State how you will capitalize on their weaknesses and meet the challenges represented by their strengths.
Competitors’ strategies and objectives: This information might be easily obtained by getting a copy of their annual report. It might take the analysis of many information sources to understand competitors’ strategies and objectives.
Strength of the market: Is the market for your product growing sufficiently so there are enough customers for all players?
Ideas for Gathering Competitive Information
Internet: The Internet is a powerful tool for finding information on a variety of topics.
Personal visits: If possible, visit your competitors’ locations. Observe how employees interact with customers. What do their premises look like? How are their products displayed and priced?
Talk to customers: Your sales staff is in regular contact with customers and prospects, as is your competition. Learn what your customers and prospects are saying about your competitors.
Competitors’ ads: Analyze competitors’ ads to learn about their target audience, market position, product features, benefits, prices, etc.
Speeches or presentations: Attend speeches or presentations made by representatives of your competitors.
Trade Show displays: View your competitor’s display from a potential customer’s point of view. What does the company’s display say about them? Observing which specific trade shows or industry events competitors attend provides information on their marketing strategy and target market.
Written sources: Use general business publications, marketing and advertising publications, local newspapers and business journals, industry and trade association publications, industry research and surveys, and computer databases (available at many public libraries).
Do you have some suggestions for a research process or type of information we have missed? If so, please send it on. The strength of Pleiades Publishing Services is the ability to share our experiences to help each other reach our goals. We are here to help you bring your message to the world… and make a profit.
I’m a retired SBDC counselor, who knows where to look stuff up — both online and IRL. In this case my seed-source is a series of SBA Business Planning publications. For individual business support with any aspect of your business contact the nearest SBA-sponsored Small Business Development Center. There are SBDC offices in every state, in big city’s and small towns. Just Google your State or Town’s name + Small Business Development Center, or contact the SBA for their nearest SCORE office for additional mentoring support.
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