4 Analysing the Competition
Understanding the competition
Almost no business, large or small, operates without any competitors. If there is one thing that gives an entrepreneur sleepless nights, it is the worrying about what competitors are getting up to. Will they copy the good business idea? Will they reduce prices and grab some precious customers? What new products are they planning and how will customers react?
Some businesses think it is best to get on with their own plans and ignore the competition.
Others become obsessed with tracking the actions of competitors (often using underhand or illegal methods).
Many businesses are happy simply to track the competition, copying their moves and reacting to changes.
There are some good reasons why any business needs to keep a close eye on competitors:
• To help the business understand where they can create an advantage
• To find out about, and respond to, competitor actions
• To see if competitors are investing in new and better products
• To spot changes in the ways that customers buy
There is no excuse for an entrepreneur not to keep an eye on the competition - there is lots of information that is readily available.
Getting this information and putting it together is a bit like doing a jigsaw puzzle. Each individual piece of data does not have much value. The important skill is to collect as many of the pieces as possible and to assemble them into an overall picture of the competitor. This enables the business to identify any missing pieces and to take the necessary steps to collect them.
What do businesses need to know about their competitors? Here are some examples of information that would be very useful – assuming it could be obtained!
• Overall sales and profits, by product and market
• Business costs (usually an estimate)
• Organisation structure
• Methods of promotion and distribution
• Key customers and suppliers
• Product quality and reputation
Does competition benefit customers?
Businesses might prefer…