Companies which are in the same industry or similar industries, offering a similar product or service, are competitors. The presence of one or more competitors could reduce the prices of goods as well as services as the businesses try to gain a larger market share. Competition also requires that companies to become more efficient at reducing costs.
Expanding your business requires you to be constantly learning about it and making necessary adjustments. However, it is only possible to grow and improve when you learn in relation to yourself. This is why it’s vital for companies to have competitors. Learning about your organisation in relation to the competition will broaden your knowledge about the target audience and industry so that you are able to refine your business strategy.
The First Thing To Know About Your Competitors
The first thing to know about your competitors is the kinds of competitor they are. Your competitors include any business that might deter a potential customer from choosing you, but this can take different forms.
- Indirect competition is the conflict between vendors whose products or services are not the same but that could satisfy the same consumer need.
- Direct competition is where businesses are selling products or services that are essentially the same.
Why You Should Conduct A SWOT Analysis
Conducting a SWOT analysis is crucial for business as well as marketing plans. It includes the study of your competitors, what they offer, the manner in which they offer it as well as what their customers say about their services. Dependent on your industry, you may have dozens of competitors. However, you should limit the list to the top three or four for conciseness.
You may want to answer these preliminary questions first:
- Who are your leading competitors? List between three and five. Why should they be included in the top?
- What products or services do they sell? How do they sell them?
- What are their past sales and marketing strategies? Has it differed from the past?
These questions give the basics to get started. When you have each of these questions answered, it’s time to intertwine SWOT analysis into the mix.
The premise is simple. Whatever your topic of choice, identify the strengths, weaknesses, opportunities, and threats. In this case, we’re applying SWOT analysis to your competitive analysis:
- Strengths – compare your products with theirs
- Weaknesses – you’ll compare your products.
- Opportunities – look where your product is positively different and could do better than theirs
- Threats – look where their product is better than yours
How To Assess Market Share
The term ‘market share’ refers to the proportion of total sales that a business claims to have in a specific market over a specified period, in other words, the size of a company relative to the size of the industry. Total sales may be measured by volume (unit share) or value (revenue share).
Establish a business’ market share by dividing its total sales or revenues by the industry’s total sales over a fiscal period. Utilise this measure in order to get a general idea of the size of a company relative to the industry.
Identifying your competitors correctly is a crucial step in the sales and digital marketing processes.
Find out more about what these processes entail by doing our Sales and Digital Marketing Course. Follow this link for more information.
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