Competitive Analysis: Newsletter
There might be a planet somewhere in the universe where companies
have no competition, but this planet isn't one of them.
make a critical mistake in their business plans - they claim they have no
A plan stating that no competition exists, quickly loses
credibility with bankers, investors, and experienced business people.
Don't make this mistake yourself.
Unless you're a government entity,
public utility, or communist country - you have competition.
these monstrous organizations are realizing that competition exists for
But competition isn't necessarily bad.
has Pepsi. Nike has Reebok.
Wal-Mart has K-Mart.
And the list goes on.
value of competition is that it forces you to analyze who you're up
against and what it takes to achieve success in your industry, market, and
Competitors actually help you clarify your selling position and
determine how to best distinguish yourself from the crowd.
Nike makes billions and so does Reebok.
they wake up with the desire to compete against each other and win.
point in time, Nike even adopted the mission statement, "Crush Reebok".
Signifying how a competitive rivalry can drive companies to greater
Investors will read your business plan and expect to
see your competitors identified - don't disappoint them.
Keep in mind that
most investors ARE investors because they successfully dealt with business
competition in the past.
With that in mind, never even imply the following
ideas in the competition section of your plan: "XYZ Corp has no
competition", "XYZ Corp's product is so superior that we have no
competitors", or "XYZ Corp's service is so different and unique that we
have no competition".
Your reader will disagree, wonder why you can't see
that you operate in a competitive environment, and assume you're a
This is clearly not the goal of your business plan.
Instead, your business plan should honestly and
intelligently outline how your business fits into the big picture of your
area, market, and industry.
If you do this concisely but thoroughly, and
pinpoint factors that separate you from your competition, it will go a
long way in the eyes of the investors reading your plan.
So exactly how do you identify your competitors?
Sometimes it's easy to determine and sometimes it is not.
If you intend to
open a donut shop, then all the other donut shops within perhaps a 10 mile
radius would be considered competition.
But what about supermarkets that
And what about bakeries that sell donuts and other baked
These are pretty obvious, and most people would consider them when
starting a company and writing a business plan.
But what about Bagel shops?
They don't serve donuts,
but they still compete for the same breakfast dollar.
And what about the
coffee shops and the Starbucks of the world?
Your potential customers
might decide to spend their money on a morning cup of coffee instead of a
donut from your shop.
Consider including these topics in the competition
section of your plan:
This section should outline the basic characteristics of your
Discuss the key features of competitors' products or services
such as: purchase price, peripheral costs, quality, durability, and
What is the perceived value of their product?
image or name brand a factor?
Where are they located?
What are their
credit policies and delivery terms?
How does their customer service stack
Also consider the financial strength, marketing savvy,
and technological advantages of your competitors.
How solid is their
access to suppliers, wholesalers, distributors and retailers?
Do they have
any strategic partnerships or patents, which could cause problems for your
Do they have economies of scale in place that make it difficult
for your company and others to compete.
In this section, provide a breakdown of your competitors by
percentage of market.
If possible, try to analyze and present this
information from both a revenue and units sold perspective.
This gives you
insight into your market, who the big players are, and where you can fit
in and begin to take market share from.
Consider preparing a five year
analysis showing how market share has changed and shifted over time.
Your company's ability to focus on a market niche can
help you gain market share.
Pick a niche and make it yours. It can
establish your products and reputation, and will help you gain loyal
customers and market share as your company grows.
Comparison of Strengths and Weaknesses
Clearly present and compare your strengths with that of your
competitors in this section.
Don't forget to present your weaknesses.
Every company has them.
Be honest and logical about the comparisons you
Consider product superiority, price advantages, market advantages,
management strengths and weaknesses, and more.
Barriers to Entry
Think about the factors that make it difficult for you to enter and
compete against established companies - these are called barriers to
The following list of barriers should be addressed in your business
plan, considering both the positive and negative issues related to your
business and your industry.
- Patents/Proprietary product differences
- High-start-up costs/Capital requirements
- Substantial expertise required
- Manufacturing or engineering difficulties
- Market saturation - no room within market for new
- Economies of Scale
- Brand Identity
- Access to distribution
- Government policy