Learning how to identify your competitors is essential in business and especially while writing a strategic plan. To stay competitive, and in business, you must understand who your competitors are, what they are offering and how you fit into this competitive environment.
If you’re gearing up for a big athletic competition, your training regimen is directly proportional to who you’re competing against. You really don’t want to work harder than you have to, right? Well, it’s the same thing for your business. Certainly, if you’re running a for-profit business, you’re competing to win. If you’re a nonprofit or a department head, you’re competing for scarce resources, usually funding. In all cases, you need to know who you’re trying to beat so you can position yourself properly. Regardless of your industry, competitors will likely fall into three categories:
These companies are the ones you need to find out the most about because they’re your fiercest competitors. When customers are making purchasing decisions, their products or services always end up on the short list. With this group, you’re vying for the same customer dollar. More than likely, you have three or four companies that fall into this category.
These companies offer alternative products and services than your offering. Usually, you don’t worry about these companies too much, but you should keep tabs on what they’re up to. Sometimes an indirect competitor can become a direct competitor.
Substitutes or new entrants
While conducting your competitive analysis, determine if there are substitute products or potential new entrants. A substitute product is anything that delivers the same set of benefits to your customers as you do, but is not a competing product. For example, DVD rental is a substitute service to cable TV. There could be new companies or entrants coming on the scene that might change your industry completely, such as satellite radio has done to the radio industry.
The Bottom Line
The clearest way to identify your competitors is to figure out if you weren’t around, who would supply your customers to fill their needs and what customers would buy to solve their problems?In answering this question, don’t restrict your thinking only to companies similar to your own. Consider firms outside of the realm of possibility such as those who compete in the industry from a corporate strategic viewpoint. When contemplating the future, it’s necessary to envision any number of possibilities.