Adapted from content excerpted from the American Express® OPEN Small Business Network
The competition section indicates where your products or
services fit in the competitive environment. Presenting your
business in the landscape of its competitors proves that you
understand your industry and may be prepared to cope with some of
the barriers to your company's success.
Present a short discussion of each of your primary competitors.
If possible, include their annual sales and their market share.
Each assessment should include why these companies do or do not
meet their customers' needs. You should then explain why you
think you can capture a share of their business.
Strengths and weaknesses can fall into a number of different
categories. Sales, quality, distribution, price, production
capabilities, image, and breadth of products/services are all ways
companies differentiate themselves. Ask yourself: Who is the price
leader? Who is the quality leader? Who has the largest market
share? Why have certain companies recently entered or withdrawn
from the market? These factors are critical to a successful
competitive analysis.
Tips
- Never say "we have no competition." Lenders
won't believe you. Even if your product or service is
truly innovative, you need to look at what else your
customers could buy instead. Remember, the first personal
computer competed with calculators and typewriters; the
first calculator competed with slide rules.
- Your competitors won't always be immediately
evident, since they don't necessarily provide the
exact same product or service as you do. If you sell
gourmet salsas, you will be competing with other salsa
makers, and you also might compete with makers of gourmet
ketchup, mustards, and other condiments. List these as
"indirect competitors."
- Many business plans fail to give a realistic view of
their true competitive universe by defining the
competitive field too narrowly. Think as broadly as
possible when devising a list of competitors by
characterizing competitors as any business customers may
patronize for similar products or services. A local
florist obviously competes with other flower shops, but
must also contend with delivery services such as
800-FLOWERS and supermarkets that carry flowers and
plants.
- To determine your competitors' strengths and
weaknesses, evaluate why customers buy from them. Is it
price? Value? Service? Convenience? Reputation? Very
often, it's "perceived" strengths rather
than "actual" strengths that you will be
evaluating.
- A table can be a good way to present your competitive
analysis, since it will allow your competition to be
evaluated at a glance. Columns should include the name of
your competitor, market share or position, annual sales
(if available), strengths, weaknesses, and
comments.
-
Consider describing who is not your competitor. The
person reading your plan may have an inaccurate picture
of who your competition is. If this is the case, you will
have to dispel those preconceptions by explaining why
these businesses are not your competitors. For example,
people may think that a company that hires out freelance
technical writers competes with temporary personnel
agencies or clerical agencies. This company might want to
stress that it is not a clerical agency, but rather a
writing consultant.
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