Business Competition
One of the reasons we have such a high standard of living in America is business competition. If we don’t like the price, selection, or service at one business we go somewhere else. This is not true of most other countries where government regulation restricts businesses from entering markets or expanding their product line. In many countries the government even runs the business.
Competition helps the consumer.
Although most businesses would prefer less or no competition, it also helps them because it keeps them on their toes. Successful businesses keep trying to improve.
So how should businesses deal with competition? They need to have a competitive analysis program.
Once they find out who their competition is (no mean task), they need to find out how they compare. Competitive analysis uses a variety of approaches.
First, it is important to carefully evaluate their competitor’s products and services. They must compare not only price but quality and service. Apples must be compared to apples. Here again, SWOT (Strengths, & Weaknesses, Opportunities and Threats) is used.
Sometimes, you reverse engineer their product by taking it apart or examine it to see how it is built, how it stands up, and what its quality is. After World War Two, Japan did this to most American products. They even named a town USA so they could say “Made in USA” (not U.S.A.) It took them a while but are they competitive? Cars? Hmmn.
Businesses can also use people to measure the competition. Perhaps they are hiring someone from the industry with competitor knowledge. They can talk to customers and suppliers. Sometimes the Better Business Bureau has competitive data. Mystery shoppers and personal visits can be used.
Another good source of competitive information is the trade show. Here, your whole industry is on display. New products, processes, and services can be examined. Businesses want to talk about what’s new.
Sometimes, public data provides competitive information. Annual reports, newspaper articles, advertisements, all can be useful.
Competitors must be examined from both inside their business and the external market. Internally, do they have some structural advantage that gives them lower costs? Do they have a better distribution system? Are they better with advertising and promotion? Do they posses a skill or process that is inherently better than yours?
Externally, are they better received in the market place? Why do their customers like them? Why do their customers buy from them?
Some worry about the ethical or legal issues. Most of us aren’t good “spies”. We feel uncomfortable snooping around. However, most businesses do it (they should). As long as it is reasonable, unobtrusive and non-disruptive, most consider it just part of doing business. Most competitive analysis is legal. Businesses have rights such as excluding you from their property but the law doesn’t prevent most competitive analysis techniques. Ethics vary from person to person so you have to set your own bar.
Many businesses even cooperate to a certain extent with their competition. Sometimes it’s good business. I have a term called “Coopetition”. Here you actually cooperate with your competition. Perhaps you can share expenses or lower overhead. Many restaurants are located adjacent to each other so that customer convenience is high. When you can’t provide your customers with a particular need, you recommend someone else. You solve your customer’s problem. In doing so, you build customer loyalty. Then they come back to you!
Make competitive analysis an on going activity. Stay ahead of them, catching up is too difficult.
This article was written by Seattle SCORE Chapter member Fred Parkinson for the Kitsap Sun in Bremerton.