26 Aug How To Understand Your Competition
How To Understand Your Competition.
When you decide to get involved in selling a product or service into a market, do you spend any time analyzing that market and the potential return you can hope to get? Do you look closely at existing competitors to get an understanding of market dynamics? Do you feel you know your competitors sufficiently well to allow you to make rational decisions about competing in a market or niche? This article looks at the attractiveness of your industry and how you can better understand your competition.
It is important that you have a clear understanding of the competitive landscape in which your business operates. If you do not gather market intelligence about the industry, your competitors and their business strategies, you will find it difficult to compete effectively for your share of the customer spend. Knowing your competitors and profiling how they operate allows you to make sensible decisions in relation to whether you should continue in your chosen market segment as well as how you should price and market your own product set.
Without getting too theoretical about how you can intelligently look at the competitive model for your industry, and the niche within which you operate, it is useful to look at the model developed by Prof. Michael Porter of Harvard Business School, for analyzing the 5 forces that interact in any competitive market. A simple version of the model is shown below.
Essentially, what the model is showing is that there are 5 concurrent forces impacting every industry and that the profitability of the industry will be dictated by the power of these forces. Where the forces are strong, profitability will be low and where the forces are weak, profitability will be high. When you are defining your industry, you need to look at A) the industry structure, B) how the industry is changing, and C) what the implications of these changes are for your business.
Click on this link to view an expanded view of Porter’s Five Forces model and its implications for your business….