Is Your SMALL BUSINESS Outstripped By COMPETITION ??

Whatever business you are in, you are bound to find rivalry unless you have a special licence or a patent to be there. It is extremely important that you understand what your competition is doing. A simple analysis that can be done follows.

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INDUSTRY Analysis:

1. Industry Competitors: threat of intense segment rivalry. A segment is unattractive if there are strong and numerous competitors or if it is stable and declining, if fixed costs are high, or if high stakes are involved in staying in that segment.
2. Potential entrants: Threat of mobility. Market is unattractive if it has low entry and high exit barriers and high entry and exit barriers.
3. Substitutes
4. Buyer: Their growing bargaining power
5. Supplier: Their growing bargaining power

Identifying Competition:

1. Market concept: In this approach, competitors are companies satisfying the same customer needs. It reveals a broader set of actual and potential competitors as in this approach companies study both direct and indirect competition.
2. Industry: Includes degree of differentiation and number of sellers; mobility, entry, and exit barriers; cost structure; degree of vertical integration; degree of globalization. In this approach, only the industry is considered, i.e., firms offering products that are close substitutes of one another.

Analyzing competitors:

• Strategies: Firms following same strategy in a given target market are called a strategic group. Height of entry barrier is different for different groups and members of a group are key competitors of each other.
• Objectives of competitor: Strengths and weaknesses: the following three parameters are to be analyzed for the competitor: share of market (target market), share of mind (recall rate of the company’s brand), share of heart (first preference of customers)

Selecting competitors:

Select either weak or close (one who resembles you the max) or bad (one who does not follow the rules of the market) competitors to focus your attack on. Good competitors should rather be encouraged.

Market standings and strategies:

1. Market leader: Action needs to be taken on three fronts:

a) Expand the total market(which can be done by ‘creating new customers’ by market penetration strategy, new market segment strategy or geographical expansion strategy, or by ‘more usage’ which can be done by increasing level of consumption or by increasing frequency of consumption)

b) Defend current Market share: this can be done by continuous innovations so that u keep increasing competitive strength and value to customers. it can also be defensive by reducing the probability of attack, divert attacks and lessen their intensity.

Position defence (building superior brand power), flank defense(create outposts to protect weak fronts or launch counter-attacks), preemptive defense(launch the first attack), counteroffensive defence (second one to attack),mobile defense(explore new territories), contraction defense (strategic withdrawl from weaker territories and reassign resources to stronger ones)

c) Expanding market share: should be done after proper cost benefit analysis. There might be legal, economic and perceived value implications.

2. Market challenger: Fiirst decide what the strategy should be. Generally it is to increase the market share. Then decide whom to target, the leader, or weaker ones of its own size, or the small regional and local ones.

Then choose a general attacking strategy:
Frontal (match the opponent on every front), flank (attack the weak spots, can be done on geographic or segmental basis), encirclement (launch a grand offensive and capture a major share of enemy), bypass (leave the enemy and attack easier markets to broaden your resource base), guerrilla (small intermittent wars to harass opponent).

Now choose a specific attacking strategy like price discount, prestige goods, innovation...

3. Market follower: Imitate if you can’ t innovate.
Counterfeiter (duplicate’s leader’s product and package), cloner(slight variation, imitator(maintains some differentiation though copies some features), adapter(improvises).

4. Market Nicher: Be a leader in a small market than a follower in a large market. The nicher generally ends up knowing the target customers so well that it meets their needs better than firms who sell to that particular segment, albeit casually. Bigger firms generally go for multiple niches rather than single niches because it helps them diversify.

There are three main things to be done: create, expand and protect your niche.

Finally there are two types of companies:

1. Competitor centered companies: Though they develop a fighter orientation, they get too much engrossed in their competitors and are unable to concentrate on their target customers. It becomes too reactive and forgets its own goals.
2. Customer centered companies: These are in a better position to identify new opportunities and pursue their goals.

Thus, for any company it is important to study both the competitors and the customers.

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