Its a jungle out there. A competitive analyis plans your next business adventure
When taking on an expedition through the wild, be prepared
Business is an adventure and you, the entrepreneur, a bold explorer dropped into a jungle. This might be a new expedition or somewhere you have been there before and either way, the jungle is vast and unexpected forces are always coming into play. Some can build a company up to become king of the jungle. Many others threaten to exploit your weaknesses and take away your power. A competitive analysis can give you the necessary tools to survive. Here’s what that looks like:
Know the barriers and unfriendly forces with a competitive analysis
The jungle is remote and difficult to navigate. Food is hard to come by. Even the smallest insect can be poisonous. Few risk venturing here, and among those that do, having a map, compass and a broad understanding of regional taxonomy is a serious advantage.
A competitive analysis like Porter’s Five Forces can be that all-in-one guide:
- Who eats who – Know your competitive environment
Avoid becoming a factor of natural selection by researching how many companies are out there and how they position themselves in the industry food chain. Know which ones stand out and why customers see them: high quality products, excellent customer service, or just being the cheapest option. Convenience can also make a competitor dangerous. Bundled TV, phone and broadband services may make it harder for a company to enter that market offering those services individually.
- A mountain trek or a tourist trap – How easily can new entrants threaten your success
Some treks are easier to take on than others and attract more visitors who want to try. Far fewer people climb Mt. Everest than Primrose Hill. With lower barriers to enter, more competitors are willing to take the risk and join the market, driving down potential prices and profit. Higher market barriers, like government regulations or heavy start-up costs, make entry more difficult, which puts existing companies in a stronger position to charge higher prices to consumers and negotiate better terms with suppliers.
- Foraging skills in a jungle or a desert – The power of suppliers
Knowing which plants are edible is a useful skill, but less likely to satisfy your hunger in an environment inhospitable to life. More flora and fauna available make it easier to survive. In the same way, many suppliers and a high availability of materials makes it easier to find the same supplies for less, better quality or with greater convenience. Fewer suppliers, however, are like water in the desert, and have more control over driving the price of their materials.
- Who wants what you’re after — The power of customers
Is the goal of your jungle journey selling a staple that everyone needs or some rare, obscure offering? The amount of buyers and suppliers in the market can give customers more or less control over prices. When it costs a company too much to lose customers or find new ones, customer power is more significant. With only one or two large customers making up most of your business, they have more power to push prices down. Too much competition makes it easy for customers to switch, but by being aware of the threat, you can implement strategies like a loyalty scheme to address it.
- Jungle hike video games and virtual reality – The risk of substitute products
All the trees and chirping of a jungle but without the sweat and humidity: A virtual reality jungle tour can be enough for some people to avoid ever experiencing the real thing. When another product solves the same need as what you offer, price increases or other, less predictable factors could drive them to try the substitute option. A growing awareness around the environmental impact of meat, for example, has led consumers looking to reduce their intake, driving a broader selection of meat-free substitutes in that market.
The benefits of taking the journey
Even conquering the Mount Mayon Volcano can become a more feasible goal when you know how to approach it, what to expect, the main risks and how much experience and equipment you need for the climb.
By understanding your market, competitors and customers, you can more easily identify your competitive strengths, weaknesses, opportunities and threats, and design strategies building on those strengths, maximising opportunities, and where possible, minimising threats and weaknesses.
If your business is facing declining sales or losing market share, a competitive analysis equips you with the tools to reverse those downward trends.
Let’s chat
Not everyone has time to invest in researching and developing the best and most secure way to make it through that jungle. Factors like product range, number of industries and local, national or international operations can make the process even more complex.
But we can help. We can run a competitive analysis and deliver a high-level business strategy assessing and identifying your competitive sweet spot, uncovering value where your competitors are unable to deliver, and equipping you with a sustainable competitive advantage.
Reach out today to plan your next adventure!
