Do You Know Who Your Real Competitors Are?

When entrepreneurs talk about their competitors, the talk is usually disparaging rather than admiring. The competitor gives bad service, they cheat, they only get business because of bribes or political connections, they deliver inferior products and do not pay taxes to reduce their prices.

We seldom hear that their technology is great, their service levels enviable and their legendary efficiency allows them to sell at great prices. Yet many competitors must be as good or better than you; they are making sales while competing with you.

We want to see ourselves as better than our competitors, so we focus on their faults. Instead, rather develop your own value proposition, one that really does offer something special and preferably unique to the market. Then see how your value proposition stacks up against theirs.

Doing this can be a sobering experience, you may find that you are not the greatest after all. You then have the opportunity of improving your products, customer service, pricing, communications and customer relations to become competitive.

FIVE FORCES

So far, I have talked about traditional competitors selling similar products and solutions to yours. Prof. Michael Porter produced a neat model, the Five Forces of Competitive Position, showing that aside from traditional competitors there were competitive forces in the power of buyers, the power of suppliers, the threat of new entrants and the threat of substitutes.

In many industries the buyer-seller relationship is a very unequal one, especially if the buyer is a large organisation and the supplier is an SME. The buyer may allocate delivery slots, dictate pricing and terms and generally be in a position to give advantage to certain suppliers and make life difficult for others.

Equally, where the supplier is extremely powerful they may dictate to their resellers. Typically, the franchisor or supplier tells you how and where you may trade, forbids you to sell other goods and influences your pricing. In both these cases the imbalance of power means the rules may change adversely at any time.

The really serious competitive threats are of new entrants and substitutes, and these two threats are sometimes combined. Large local and international operations looking for growth could see the sector you occupy as an attractive opportunity. New disruptive technologies can change the rules and immediately capture large shares of the market.

We may think that these trends will not affect our SME but there are numerous examples to show that is not true. Simple "mom's taxi' school transport operations have been badly affected by Uber in wealthier areas.

Precision engineers find themselves in hot competition with nerds equipped with 3D printers, legal and medical advice is dispensed online and even long-standing NGOs find themselves in competition with international apps. No one is immune from all the changes coming.

COMPETITIVE STRATEGY

It's a good idea to figure out a competitive strategy in advance. Business conditions are tough, and competitors will do everything in their power to take business away from you. Research and make notes about current competitors. Look for the things they boast about, their unique values, their strengths and weaknesses.

Place them on a position map so you can see which competitors are strong on experience, which boast about technology or customer service, and what type of customers they have. Then work out where you want to be seen in comparison to them. What do you have to do or fix to get to that position?

Look for new technologies and trends that could affect your industry.

Examine big international players operating in the same product space in other parts of the world, and keep an eye on their expansion plans.

Update your product and customer strategies to cater for what you have found. This is actually easy; almost everything is available on the Internet. The hard part is making your company less vulnerable to competitors.