|Choosing your competitors.|
No matter what industry you decide to get into, if you don’t have a truly unique product, you will have competition. And that's normal.
Competition is healthy and necessary, because it forces companies to differentiate themselves, deliver real value, continually improve their products taking into consideration their customers’ needs ... well, at least, it should be this way under normal conditions.
A market without competition is a monopoly, and we all know the consequences of a monopolistic market.
What is really important when you analyze your competition, is to choose the right companies to compete with from the very beginning.
Can you compete with large corporations?
Many entrepreneurs, perhaps yourself, complain about the presence in their area of large chain stores and franchises, or even small but very aggressive business owners who sell at very low prices. In both cases, the important thing is not those companies themselves, but the reason why you feel they are taking customers away from you.
To really get the point about this subject, you have to make yourself a few questions first: Does your company have the financial capacity to afford a big payroll the same way large chain stores do?, can your company purchase large merchandise volumes to negotiate lower prices with vendors?, can you sell your products at highly discounted prices the way other retailers do?
If the answer is no, then why are you competing with them?
The importance of choosing the right company to compete with.
One of the most important points that you should consider when starting your business, is to properly analyze - and understand - who your competition is, as it will have a strong impact when you design your business strategies and actions.
If you choose a competitor larger and stronger than your company, you probably have a good model to follow, but you will be exposing yourself to a lot of frustration along the way. Large companies generally have a good financial muscle, people and resources enabling them to act in a particular way in the market. And it’s certainly not within your reach.
Moreover, if you choose smaller competitors, it’s not going to help your business either grow or develop, because you will not have to make any significant effort to surpass and outsell them.
Quite the contrary, it might be this the same reason that will keep you stucked in the ground and not developing your business to its full potential.
What should you take into consideration when choosing your competition?
Generally speaking, you should consider the following:
- The scope and reach of your business: Based on your capacity to sell your product at a local, regional, national or international level, who your competitors are will be different.
- Your pricing policy: If for making a profit your company needs to set a product price which is higher than what others offer, then don’t consider those other companies as your competition from the very beginning, and concentrate your efforts on competing with those whose price is the same or higher than yours.
- The type of product you sell: if you have a product that can be considered somehow unique (really and truly unique), then stay away from generalist and low price markets, and concentrate on competing within specific market segments.
- Your "Unique Selling Proposition": what makes you different from others. Identify companies that have a business proposal similar or equal to yours, and compete with them, or keep them as reference to follow.
Knowing that you are competing with the right companies, will relieve you from a lot of headaches, allow your company to healthily compete, develop and experience the wonderful feeling of growing up at your own capacity and rhythm.
Take this into consideration when developing your business plan or even when, along the road, you realize your company is competing with the wrong guys.
Related article: Strategic Planning: The difference between desires and goals.