The Competition

A very important part of your market research is the investigation of your potential competitors. When doing this investigation, don’t think of your competitors as ‘enemies’, consider them as a source of information. Look at what your would be competitors are
doing, analyse the factors that have contributed to their success or failure. Determine if there are any gaps to be filled. Capitalise on these gaps and areas of weaknesses. The following are some of the items that are included in this section:

Competitive comparison
Use this topic for a general comparison of your offering as one of several choices a potential buyer can make. Use a separate topic, in the market analysis section, for detailed comparison of strengths and weaknesses of your specific competitors. You should discuss how your product lines and retail offering compare in general to the others. For example, your outdoor store might offer better ski equipment than others, or perhaps it is located next to the slopes and caters to rental needs. Your jewelry store might be mid-range in price but well known for proficiency in appraisals, remounts, and renovation. Your hobby shop has by far the largest selection of model trains and airplanes.

In other words, in this topic you want to discuss how you are positioned in the market. Why do people buy from your business instead of from others in the same market? What do you offer, at what price, to whom, and how does your mix compare to others?
Think about specific kinds of benefits, features, and market groups, comparing where you think you can show the difference. Describe the important competitive features of your products and/or services. Do you sell better features, better price, better quality, better
service, or some other factor?

Sourcing and fulfillment
Explain your product sourcing and the cost of fulfilling your service. Manufacturers and assemblers should present spreadsheet output showing standard costs and overhead. Distributors should present discount and margin structures. Service companies should
present costs of fulfilling service obligations. For example, sourcing is extremely important to a manufacturing company. Your vendors
determine your standard costs and hold the key to continued operation. Analyze your standard costs and the materials or services you purchase as part of your manufacturing operation. Look for strengths and weaknesses.

Manufacturing companies want to have ample information about resource planning and sourcing of vital materials, especially if you are preparing a plan for outsiders, such as bankers or investors, or for business valuation. In this case, you may have additional
documentation you can copy and attach as appendices, perhaps even contracts with important suppliers, standard cost breakdowns, bills of materials, and other information. Where materials are particularly vital to your manufacturing, you might discuss whether
second sources or alternative sources are available, and whether or not you use them or maintain relationships with them. This is also a good time to look at your sourcing strategy, and whether or not you can improve your business by improving your product
sourcing.

But sourcing is not just for product-based companies. For example, a professional service company, such as an accounting practice, medical practice, law practice, management consulting firm, or graphic design firm, is normally going to provide the service by
employing professionals. In this case, the cost is mainly the salaries of those professionals. Other service businesses are quite different. The travel agency provides a service through a combination of knowledge, rights, and infrastructure, including computer systems and
databases. The Internet provider or telephone company provides a service by owning and maintaining a network of communications infrastructure. A restaurant is a service business whose costs are a combination of salaries (for kitchen and table waiting) and food costs.

  • Description of competitors
  • Size of competitors.
  • Profitability of competitors
  • Operating methods

Description of competitors
Identify those businesses which will be competing with yours

Size of competition
Determine the assets, sales volume and market share of the major competitors

Profitability of competitors
Try to determine how profitable the business is for those businesses already in the field.

Determine:

  • Which business are making profits
  • Which ones are making losses and
  • How much (profit or loss).

Operating methods
For each of the major competitors, try to identify the relevant operating methods. Consider the following.

  • Price of the product and/or service
  • Quality of the product and/or service
  • Hours of operation; ability of personnel
  • Servicing, warranties and packaging
  • Methods of selling; distribution channels
  • Credit terms; volume, discounts.
  • Location, advertising and sales promotion
  • Reputation of the business, etc

Once you have identified your competitors you need to further classify these as

  • Primary
  • Secondary
  • Potential

This is because:-

  •  The classification makes your research easier
  • Your marketing strategy may be different for each group.

How can you find out the size and profitability of your competitors’ businesses? You may use the following tips:

  • Read the publications that cover the business scenes, e.g. annual reports.
  • Conduct primary research by contacting business directly. This may not be very useful.
  • Contact the firm’s suppliers or other individuals who are in a position to know or estimate the position.
  • Make a reasonable estimate from the bits and pieces of information you have collected.
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