Knowing who your competitors are and where they are is an obligation that you must attend to from the first moment you decide to start a business. When you develop your business idea, you should already begin studying where your competition is.
It is a prevalent mistake among first-time entrepreneurs to think that their idea is so revolutionary that there are no competitors in the market in which they will be implanted. That is rarely the case, and this error can be severe while writing your Business Plan. You keep it as a premise.
There are two large groups of competitors when you enter a market sector:
1) Those who offer the same product or service as you or an equivalent one.
2) Those who provide a different but substitute product or service.
When you write your business plan, remember to include a market study. It is in this study where you must investigate the needs of your audience and how the competition is giving them a solution:
*It would be best to talk to your potential customers; they will be your first source of information to know who your competitors are. You can also put yourself in your clients’ shoes and find who can respond to your needs in the press, specialized guides, the internet, and whatever sources are available, such as professional associations and associations in the sector.
*Also, talk with those who will be your suppliers and distributors to continue analyzing the sector and detecting competitors.
*In your analysis of the sector, you must identify present competitors as well as future ones. This means that there are companies that currently do not compete in your industry, but for which it can be easy to make a change in their production line and join as new players.
*It is also possible that other new companies like yours want to enter to compete in the same sector. This is particularly the case in emerging sectors, where there are few barriers to entry.
*Barriers to entry into the sector are an excellent tool to measure the possibility that you will have new competitors in the future. These barriers can range from suppliers that exclusively serve one of the competitors to limited distribution channels, scarcity of raw materials.
*Resist the temptation to compete on prices. It is tempting to lower the cost to gain more market. The problem is that this strategy may not work in the long term, as there may be a cheaper product available in the future. The solution is to add value to your offer through customer service or by incorporating a wide variety of services to satisfy all kinds of needs.
Therefore, your competitive advantages are significant for taking a good position in the sector and preventing your competitors from damaging your bottom line.
Research your market well to identify your present and future competitors as a way to protect your market share.
