Be the best or be different.
A horse never runs so fast as when he has other horses to catch up and outpace. - Ovid
Competition drives us to try harder, do better, aim higher and be the best but it’s not always about winning. It is about a mindset of constantly striving to push the limits of what is possible. As Simon Sinek describes in his book – ‘Infinite Games’ doing business is an infinite game with players and conditions are in a continuous state of change. There is no winning or losing, either you’re ahead or behind. For entrepreneurs, competition is a huge motivator.
Primarily, competition validates the demand for a product or service because there is enough supply in the form of players vying for a share of the market and enough demand in the form of buyers willing to pay for a specific product or service. Competition encourages businesses to continuously improve, raise standards, evolve, grow and exceed customer expectations. Market saturation and stagnation occur only when the players cease to innovate and evolve, and these players generally don't survive. Too many competitors can also cause dilution, lack of distinctiveness and confusion in the marketplace.
Competition levels the playing field and gives all players a fair chance to survive or thrive under the same set of conditions, and the fittest will naturally survive. If there is a single player in the market that gains the monopoly, it is generally because it has outpaced the competition in various ways and for a variety of reasons.
A business with no competition in a profitable market is rare. You can create an entirely new target market if you have a unique idea. Therefore, there's the likelihood that someone else will soon want a piece of the action. If you are the first entrant into a market with a successful product, it is more than likely that someone will follow and try to copy or out-perform you. In their book Blue Ocean Strategy, Chan Kim & Renée Mauborgne describe a market universe in which a business creates and captures uncontested market share making the competition redundant.
Interestingly, many market leaders were not the first movers but the ones who started as challengers; they learned from the mistakes of the pioneers and did it better. Many entrepreneurs and investors profess that there is no such thing as a first-mover advantage in the business world, especially in the start-up world. Many of the big tech brands that are household names today were not the first to market their ideas or business models. Apple didn't produce the first personal computer, Google was not the first search engine, Facebook was not the first social network, Uber was not the first ride-hailing app, and the list goes on. Nevertheless, all these brands have diversified to grow and maintain market leader positions.
As part of your market analysis, you need to research your competition by segment and geography. In this post we will explore:
The competitive business landscape.
Why competitor analysis is important.
How to conduct competitor analysis.
Tips for first time Solopreneurs and Entrepreneurs.
# 1 The competitive business landscape.
There are 2 broad categories of competition in a free market system: Perfect competition and Monopolies.
Perfect Competition
Direct competitors are brands that sell the same products to the same audience and compete for the same potential market. An example of direct competitors is Burger King and McDonald's business rivalry. Both of these companies operate in the same industry, satisfy the same need, use the same B2B and B2C distribution channels, and target the same audiences. Another such example is Coke and Pepsi. They differentiate and compete more on brand and marketing than on product or price.
Indirect competitors are brands that sell products or services that are not necessarily similar but satisfy the same consumer needs. An example of this would be McDonald's and Pizza Hut. Even though these two vendors sell different products, they are considered competitors as they operate in the same industry, target the same audience, and satisfy the same need.
Potential or Replacement competitors are brands who can replace the business' offering altogether by providing a new solution. For example, the smartphone was a replacement competitor of digital cameras. Even though these two products had different uses, smartphones could provide a totally new solution to the existing photography need of the customers. As a result, these products disrupt existing industries and shift consumer demand.
Monopolistic Competition
Monopoly is when there is only one seller in the market. The market could be a geographical area, such as a city or a regional area, and does not necessarily have to be an entire country. So, the single seller is able to control prices.
Monopolies fall into one of three categories: natural, legal and oligopoly.
Natural monopolies include public utilities, such as electricity and gas suppliers. They inhibit competition, but they're legal because they're essential to society.
Legal monopolies arise when a companies receive patents giving them exclusive use of an invented product or process for a limited time, generally twenty years.
Oligopolies mean few sellers in a market. In an oligopolistic market, each seller supplies a large portion of all the products sold in the marketplace. Companies in oligopolistic industries include such large-scale enterprises as automobile companies and airlines.
Peter Theil, founder of PayPal and a prominent Silicon Valley investor, makes a strong case for monopolies and declares that competition is for losers. His view is that brands that operate in highly competitive environments are outcompeted and never make money. It is partially true that no one makes real money in markets and industries characterised by too much competition, especially with businesses with meagre margins and too many players competing on price rather than value. In his book Zero to One, Thiel explains that to be successful in business, you need to create X value for the world and capture Y% of X. These two variables are independent. You need to bet on a contrarian truth whose time has come, dominate a niche market by being the best, become indispensable and inimitable, gain an unfair advantage, and then build a monopoly by making your offering affordable and easily accessible. Though the context of this book is targeted more towards the tech start-up world, the principles of doing business today are extremely relevant given the enormous economic shifts taking place globally.
#2 Why Competitor Analysis is Important:
Competitor analysis is the process of evaluating the strengths and weaknesses of your competitors gain insights that can be used to improve your own business strategy.
Competitor analysis is critical for any entrepreneur or solopreneur. Here’s why:
Helps you identify market gaps: By understanding your competitors' strengths and weaknesses, you can identify market gaps that your business can fill.
Provides insights for business strategy: Competitor analysis can provide valuable insights into how you can improve your own business strategy. You can identify areas where you can differentiate yourself from your competitors and improve your product or service offering.
Helps you stay ahead of the competition: By keeping an eye on your competitors, you can stay ahead of the competition and respond to any changes or developments in the market quickly.
Helps you understand your customers: By understanding your competitors' customer base, you can gain insights into your own customer base and identify ways to improve your customer acquisition and retention strategies.
Helps with pricing strategy: Competitor analysis can help you determine the appropriate pricing strategy for your product or service. By understanding your competitors' pricing strategy, you can adjust your pricing to remain competitive and maximize profitability.
So it's a good idea to have a fix on who you are competing with and what market share you can hope to achieve. Once you fully understand their business model, differentiators, market share and tactics, you can formulate your own product, pricing, positioning, go-to-market strategy and differentiation strategy.
#3 How to Conduct Competitor Analysis
There are a number of steps you’ll need to take to conduct effective competitor analysis:
Identify your competitors: The first step is to identify your direct and indirect competitors. You can do this by conducting research online or through industry reports.
Evaluate their products or services: Once you have identified your competitors, the next step is to evaluate their products or services. What are they offering, and how does it compare to what you are offering?
Analyze their marketing strategy: Look at how your competitors are marketing their products or services. What channels are they using, and what message are they communicating to their customers?
Evaluate their pricing: Look at how your competitors are pricing their products or services. Are they offering discounts or promotions? What is their pricing strategy?
Analyze their strengths and weaknesses: Evaluate your competitors' strengths and weaknesses. What are they doing well, and what can you do better?
Determine their market share: Estimate what percentage of the market your competitors currently control.
#4 Tips for First-Time Solopreneurs and Entrepreneurs
Start with secondary research: Conducting primary research can be time-consuming and expensive. Start by conducting secondary research to gather information on your target market and competitors.
Use online tools: There are a variety of online tools available to help with competitor analysis. Consider using tools like SEMrush or SimilarWeb for competitor analysis and tools like Statista or IBISWorld for market sizing as these go hand in hand.
Don’t underestimate the importance of qualitative research: While quantitative research is important, don’t overlook the value of qualitative research. Conduct interviews with potential customers and industry experts to gain insights into their needs and pain points.
Continuously monitor and adjust: Market sizing and competitor analysis are not one-time activities. Continuously monitor your target market and competitors and adjust your strategy as needed.
Monitor trends: Keep an eye out for shifts in the marketplace to identify non-obvious or potential replacement competition.
In conclusion, competition is an inevitable aspect of the business environment, and entrepreneurs and solopreneurs need to understand the different types of competition and how to conduct competitor analysis. By conducting effective competitor analysis, you can gain valuable insights into your competitors' strengths and weaknesses, identify market gaps, improve your business strategy, and stay ahead of the competition. So, take the time to evaluate your competitors and use the insights gained to improve your own business strategy and achieve success in your market space.
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Wishing you success, prosperity, personal growth and positive change.
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