Competition
In our capitalistic economy, competition is at the heart of our success. It’s what keeps prices in check, provides innovative products, creates jobs, and causes good companies to grow.
How should small business deal with competition?
Firstly, they need to find out who the competition is. This is not as easy as it once was. It used to be the similar business down the road or in a nearby town. Not so any more. Competition is popping up in areas unheard in the past. Discount stores are expanding their product lines to take advantage of their customer base. The internet provides quick-click shopping from sources all over the world.
Direct competitors are the easiest to know. These offer the same type of products and service to the same customers as you do. Indirect competition comes in two forms. Either those that offer the same products to different customers, or those that offer different products to the same customers. The problem with indirect competition is that they may soon offer the same products to your customers.
To understand the competition you must first know who your own customers are, and why they buy your products and services. Using market research you must understand both the demographics of your customers and what they like about what you are offering. If you don’t know this, how can you measure your competitive position? Use written surveys that ask what your customer likes and doesn’t like about your products or services. Ask specific questions about who they are.
Armed with this knowledge about your own customers, there are several sources for competitive information. Your customers themselves, your employees, and your vendors all can work. You must understand that your customers and your venders may not be completely forthcoming, but they can provide useful information. Hopefully, your employees will not have this problem. There jobs depend on your success.
The internet can also be a good source of competitive data. The business owner needs to go online taking the role of the customer, and even purchase your competitor’s products if necessary. Have your employees do this as well.
Large companies have competitive analysis organizations. Small businesses must also allocate time and resources to this process. A SWOT analysis should be utilized. SWOT stands for strengths, weaknesses, opportunities, and threats. Here you analyze your competitor’s strengths and weaknesses and compare them to your own. Based on your strengths and their weaknesses you can evaluate opportunities that arise. Of course the opposite can be true if you have weaknesses and they have strengths. Here, threats are revealed. But by knowing this and planning, you can take action before it is too late.
Public data on competitors like annual reports, newspaper articles and advertising can also be useful.
You must look at both the quality and price of your competitor’s products and service. I have said many times that small business must not try to compete mainly on price. Your prices must be competitive, of course, but you should focus on adding quality and offering service, not having the lowest prices.
In small business, competitive analysis must be a, continual, organized process. It can’t be hit and miss. It must be an assigned responsibility even to yourself if you are a business owner with no employees. Try to stay ahead of the curve. You won’t always have all the information you need, but you will be in stronger SWOT position. It’s better than trying to catch up when it’s too late.
This article was written by Seattle SCORE Chapter member Fred Parkinson for the Kitsap Sun in Bremerton.