How to Assess Your Business Competitors

Assessing your competitors serves four useful purposes:

1. It requires you to assess your existing market share and current business methods.

We all operate in a competitive environment, and it’s most likely that your competitors are planning to take customers and market share away from you. How will they do it? What strategies will they adopt? Who will they target? All these questions will be considered when you begin a serious competitor analysis review. Your prime objective is, of course, to secure “home base” before you seek new markets.

2. It can identify new market opportunities.

Most mature markets tend to be static in size and opportunity. Market share can only be won by attracting customers away from your competitors. How can you do it? Where are your competitors vulnerable? Do you have a competitive advantage you are not exploiting?

3. You can learn from the strengths and weaknesses of your competitors.

“Respect your competitor’s strengths and capitalise on their frailties” was an adage used in the Middle Ages, and it still makes good sense today. By studying your competitor you can avoid potential pitfalls and save valuable time by not having to re-invent the wheel.

4. It allows for an early review of potential changes in the market place.

Through competitive analysis, nasty surprises can be avoided or at least, minimised. Changes can come from many directions, new technology, personnel changes, production processes, etc.

Compelling reasons why you should consider a competitive analysis program.

1. Business survival.

Regrettably, there are plenty of examples of businesses which have ended up on the scrap heap because they were made redundant by their competitors. Frankly, competitive analysis can be a question of life and death in cut-throat industries, such as computers.

2. To counter the effect of slow growth.

In a shrinking market caused by external economic factors, the only way to maintain sales and profit results is to attract market share from your competitors. In knowing your competitors’ “Achilles heel”, you can attack with confidence. In knowing their likely counter strategies you can put in place a “damage control” program.

3. To eliminate “complacency”

It’s a common trap into which many business people have fallen in the past. They lose a customer and it comes as a complete surprise. They mistakenly thought they were providing a good service, but were unaware of the standard of their competition. A competitive analysis program will provide a good “litmus test” for your goods and services and ensure that you are kept informed of the products, service and standard of your competition.

4. To spot opportunities

Through studying your competitors and their methods, opportunities may emerge. Opportunities to purchase cheaper or better, opportunities to sell through a different medium, opportunities to produce more efficiently etc. Every competitor can teach you something which can make or save you money and you should approach the competitor review in this light.

5. To keep the business “going forward”

Many action-orientated business people thrive on a challenge… and whither away once it becomes mundane and humdrum. One way of keeping their interest fresh and invigorating is to make the competition the target. Get your “action dynamos” to understand that not only do they need to ensure your existing customer base is secure, but also that real progress must come at the expenses of winning customers away from the competition.

6. To stay competitive.

A final compelling reason why you should consider a competitive analysis program is because you have to assume your competitors are doing it to you. Let’s assume you are the manager of a manufacturing business. Imagine for a moment what the executives of your largest competitor could do with the following dossier of information on your business.

They’ve performed credit and finance checks on both the business and the key people. From this information they have a strong idea as to the financial position of your company. They know what future ability you have to raise capital, they know what assets are pledged as security, etc.

They can second guess your ability to withstand a downturn in the economy, a price ware or new competition. From the personal information they’ve gleaned on your key people they can second guess the salary levels, the level of the employees’ personal debts, etc.

This kind of information has been used in the past to offer attractive salary packages which pander to the known financial position of the prospective employee. As you are no doubt aware, there are limitless uses for this sort of information … and it’s not difficult to obtain. To get you started, we suggest you contact some of the larger credit collection agencies for details of their confidential finance reviews, (example: Dun and Bradstreet). The Credit Reference Association of Australia can provide you with a CRAA report on individuals and companies. This report will allow you to build up a model of the finances of your competitors. The various Corporate Affairs Commissions may hold financial information on your competitors’ companies which is available for public inspection.

They’ve reverse-engineered your products. They have a complete file on your material components – where it was purchased, the likely price, the delivery times, etc. They know your plant capacity, the state of your plant and equipment. In short, they know your product almost as well as their own.

With this kind of information they can give their salespeople a decided advantage in the field. They can modify their own product to capitalise on the weaknesses in yours. They can interfere with your production cycles by placing large orders of their own with your suppliers at crucial times.

This information wasn’t difficult to get. They bought your product and pulled it apart.

They made searches at the Patents, Trademarks and Design Office. Other searches at the Titles Office and Local Council revealed details of the factory site and layout. Casual discussions with plant suppliers revealed details of the capacity and condition of your machinery. In casual conversation, your factory employees unknowingly gave vital information about the management, production bottlenecks, large orders, and internal problems, among a host of other matters.

In a competitive environment, you can’t afford to wait until the attack begins.

Information on your competitors may be gleaned from these sources:-

• Magazines, newspapers, books, newsletters, industry specific journals, etc.

Why not consider using a general scrap book in which to keep this information, and perhaps separate files for your direct competitors?

If you don’t believe you have the time to read widely about your industry and competitors, why not use a clipping service? Briefly, a clipping service will provide you with a clippings on anything you specify.

For example, let’s assume you operate a toy shop. You may well request a clipping service to provide you with relevant information about existing competitors, new competitors, new products, statistics on the toy industry, publicity concerning the major manufacturers, importers, distributors, appointments within the toy industry, etc. Many of the larger advertising and media companies provide clipping services.

The bottom line: “To be informed is to be enlightened”.

• Using your own faculties to gather information

Your own eyes, the powers of observation (which can be learned), and a small spiral note book should be your constant information gathering tools. Use them to study your competition. Go and visit their premises, note the layout, the staff numbers, the state of the merchandise or stock. Inspect their stationery, their internal forms, the staff uniforms, the signage, the cleanliness of the premises, etc., etc.

The accompanying Worksheet C.4 (Site Examination of Competitors) will help you to perform a field review of your competitors. As a guide, we suggest that this should be done at least twice a year, and more often if you are involved in a very heavy competitive scene.

By the way, valuable lessons can also be learned from businesses which are not competitors, so keep a sharp eye out for lessons you can put into practice in your business. For this reason, it’s not a bad habit to carry a spiral note pad with you at all times. You never know when an interesting thought or experience will occur. Use the notebook to record opportunities… perhaps potential new customers, new suppliers, etc.

It is really amazing what you can see once you take off the blinkers and begin to look around.

Remember, little things can make a tremendous difference. If you doubt that, just think back to the tremendous devastation and loss of life caused by the failure of a little rubber ring on the Challenger space shuttle disaster.

• Information from the Government

Have you ever wondered what you get in return for all the taxes you pay each year?

One thing is information … if you know whom to ask, and for what. Government departments operate on a simple premise: “If you don’t ask, then you don’t get.” In considering a competitor analysis program, you should be aware that the various government departments hold an absolute gold mine of information relevant to your competitors, your industry, your market, your locale, etc.

Don’t know who to ask? Try the telephone book. At the beginning of each book is a comprehensive list of the various government departments (federal, state and local). It may take a few phone calls to get through to the right person but, generally, the information will be worth the effort.

• Incidentally, a prior telephone call to your trade or professional association may just enlighten you as to the reports, statistics, government departments, etc. which might be of interest.

These government departments should be considered:

• Australian Bureau of Statistics.
• Australian Securities Commission.
• AUSTRADE
• Australia Post
• Department of Industry, Science and Tourism.
• Department of Consumer Affairs.
• National Industry Extension Service.
• Small Business Development Bureaus.
• Local Courthouses.
• Patents, Trademarks and Designs Office.
• Various Departments for Industry, Labour and Industrial Relations.
• Various Regional Development Boards (generally operated as quasi-government bodies).
• TAFE Colleges and other educational institutions.
• Governmental promotional units (for reference to other departments).

•  Libraries

Librarians are trained to help you obtain information, even if you have only a vague idea as to what you require. Computers have certainly sped up the process.

Some of the larger libraries even have cross-referencing facilities. Try these library sources:

• State libraries (located in each capital city)
• Local and council libraries (including mobiles)
• Educational libraries (universities, colleges and schools)
• Private libraries (industry associations, etc.)

Remember, also, that the Federal Government runs a book shop in each capital city. Much of the information gathered by it (such as industry statistics, government research papers, etc.) is available via these book shops. Ask for their publication entitled Australian Bureau of Statistics – Catalogue of Publications and Products.

Alternatively, write or phone your request for statistical information directly to the Australian Bureau of Statistics.

ABS Marketing ABS Information

Box 10 GPO Box 796

Belconnen, ACT, 2616 Sydney, NSW

Phone: 02 6252 5000 Phone: 02 9268 4611

Fax: 02 6251 6009 Fax: 02 9268 4668

Toll Free: 1800 655 436

• Customers

Your own and your competitors’ customers can provide a great deal of information for your competitor analysis program. Train your employees to ask pertinent questions at every opportunity. Use your sales force as an information-gathering unit. Hold regular debriefing sessions with your staff to collate all the external intelligence which has been gathered. Key customers often have detailed information about sales levels, pricing policies, new product plans, sales methods, service policies, and many other vital aspects. In many cases, even loyal customers of your competitors will be willing to talk freely about their dealings with your rivals.

They see it to be in their interest to air complaints in the hope of stimulating competition which might result in an advantage to them as customers. It may even be appropriate to have your top sales executives go out and talk with the managers of your own key customers, and also those of your competitors. The objective is, of course, to elicit information. Ask probing questions such as:

• “What are the key factors in the purchasing decision?”
• “Why are they satisfied with their current supplier?”
• “In what ways are our competitors failing to meet your needs?”
• “What are the principal complaints?”
• “How can we serve you better?”
• “What would induce them to switch to another vendor?”

Some other thoughts:

Consider holding industry seminars and conferences in which customers and potential customers are invited to “air” their views.

Conduct customer surveys which ask probing questions about their relationship with you. Get them to identify your weaknesses. Get them to discuss the strengths and weaknesses of your competitors, too.A strategy which has worked well in the past is to get an independent firm to handle the survey so that better responses are obtained under the guise of anonymity.

Some loyal customers may allow you to review your competitors’ tenders, bids, contracts, offers, etc.These may reveal technical and manufacturing capabilities, new service programs, changes in sales strategies and image, etc.

• Suppliers

Let’s consider this information source in reverse. What information do you think your three major suppliers know about you? The chances are strong that they would be able to predict your turnover, profitability, staff numbers and capabilities, state of equipment and capacity, major customers, etc.

Firstly, the confidentiality of your operations must be considered paramount. The message behind the wartime saying “Loose lips sink ships” should be understood and practiced by all your employees.

Secondly, discreet questions of suppliers will uncover a mine of information. To get the best results, a coordinated program should be implemented with regular debriefing sessions. Incidentally, when we referred above to “suppliers” we were also referring to agents, wholesalers, distributors, and catalogue sales people… in fact, anybody who goes door to door.

The competitors themselves

Your competitors give plenty of information on themselves for free.

• Do you have all their product brochures?
• Are you on their mailing lists?
• Will you receive details of their press releases?
• Do you gather, retain and study their outward “literature”? For example, copies of newspaper or magazine adverts for their product.
• Which products are they pushing?
• What features are they emphasising?
• What market segments are they targeting?

Don’t forget to review the “Positions Vacant” columns, either. Many a business has tipped its hand by the style of advert and the calibre of personnel sought. Employees of competitors are a fertile source of information, particularly those of businesses that don’t have a formal policy on disclosures.

The following steps may prove useful in designing your very own competitor analysis program:

Step 1. Identify the competitors.

This may seem like elementary advice, yet it is largely ignored by business operators (both large and small). Worksheet C.1, entitled “Schedule of Competitors” will assist.

We suggest your competitors be grouped into direct and indirect competitors.

“Direct competitors” are those who are competing in your local market with products and/or services which satisfy the same consumer desire. “Indirect competitors ” may well be competitors who sell the same product or service, but (at present) they have little or no influence in your local market. However, some day that may change, which is why they need to be monitored.

Alternatively, you may have indirect competitors in your market place who – while they don’t sell exactly the same product or service – can influence the buying patterns away from your product/service.

Some examples:

An accountancy firm	A specialist hardware store
Direct competitors	Direct competitors
Other accounting firms in the local market	Other local hardware stores
Tax Agency firms	Indirect competitors
Indirect competitors	Catalogue companies selling hardware items.
Solicitors	Travelling sales people representing theStores (eg. Target etc)
Finance Brokers.
Insurance Brokersmanufacturer. Non specific
Investment Advisers

Step 2. Gathering the information.

There is plenty of information in the market place about your competitors. It’s simply a matter of systematically sifting through it and using a good recording system which will allow you to instantly access it in the future.

Worksheet C2 will aid you in this information-gathering function.

Don’t be concerned if you can’t find the answers to all the questions posed. The objective behind competitor analysis is to identify “trends and changes” quickly… and “guesstimate” information is better than nothing at all.

Naturally it goes without saying that your employees have been briefed on what they can and cannot disclose to the outside world.

Other Competitors

Much competitor analysis information can be gathered from the competitors themselves or from other competitors. Trade/industry association meetings are fertile places for gathering such intelligence information. It can be beneficial to strike up a relationship with indirect competitors, competitors operating in a niche market segment, and perhaps “full-on” competitors who operate in a different regional market. Much can be gained by sharing views on a whole range of issues.

External Advisers

These days, professional firms see themselves as more than mere providers of services. They also believe they are the providers of information and many produce their own bulletins, articles, newsletters, etc. Quite often they are provided as a free service with only a telephone call required to get your name placed on the mailing list.

Consider these sources:

All of the major banks produce magazines which give condensed summaries and commentaries on economic and other statistical data. Similarly, other professionals produce a range of literature on and around their areas of expertise, including accountancy and legal firms, exporters and importers, merchant bankers, stockbrokers, trade associations, trade unions, research centres (both university and private), credit bureaus, and private trading entities, etc.

You never know… some of these sources may even “profile” your competitor, thus saving you a lot perspiration and time in gathering the information.

Credit Agencies

We have already mentioned the kind of information which companies like Dun and Bradstreet can provide. These kinds of companies have large databases of information on which to draw. They also provide a specialist service of gathering the information for you. There are several companies operating in this field, and we suggest you check your local Yellow Pages directory.

Trade Shows and Exhibitions

Astute and experienced exhibitors at trade shows have a dual purpose in attending. The first is to identify sales prospects, and the second is to study the competition. Brochures are collected, new products identified, sales personnel evaluated, “loose banter” studied, etc.

All of the attached forms will assist you to gather information on your competitors.

C.2 Comparison Profile

C.3 Competitor Comparison Profile

C.4 Site Examination of Competitors

Step 3. Evaluating your competitors’ strategies

The purpose behind identifying your competitors, and gathering information on them, is to allow you to analyse their strategies so that you can re-shape your own.

Worksheet C.5 will help summarise them, and the questions asked in the Business Review Checklist will assist in the compilation of your answers.

The objective of this worksheet is to get you to recognise the most important strategy in each area. Having completed all the worksheets (C.I -C.5), you are now in a position to evaluate, and perhaps reposition, your own strategies in the light of your knowledge about your competitors.

• You are aware of their principal advantages.
• You have identified their predominant strengths and weaknesses
• You have researched their likely strategies
• You have compared their product and/or service with yours.

A proven strategy – in business as in war – is to concentrate on your competitors’ weak points.

“You may advance and be absolutely irresistible if you make for the enemy’s weak points.”

said Sun Tzu, the ancient Chinese military adviser

Real success will come from pitting your strengths against your competitors’ weaknesses. However, be mindful that strategy changes require a lot of forethought. Consistency and commitment are vital as, in many cases, the desired results may take a while to filter through. Additionally, the counter reactions of your competitors should be considered and planned for. Let’s consider the “action tactics” which may emanate from the weaknesses you’ve identified in your competitors’ products.

ACTION STEPS:

• Ensure your sales force have been “fully briefed” on these weaknesses. Their sales presentation format may require modification so that the competitors’ defects are tactfully pointed out (if necessary) and the reasons given why your product is superior.
• Your research and development staff might be notified of these weaknesses in an effort to strengthen your own product.
• Brochures, advertising campaigns, etc. might require modification in order to capitalise on the weaknesses detected.
• Marketing campaigns might be designed to attack these weaknesses, either by way of a flank attack, direct attack, guerrilla warfare, or a combination of all three.

In guerrilla “no-holds-barred” warfare, these defects have been pointed out to customers of the competitor, safety authorities, consumer advocate bodies, industry groups, etc.

Whatever your tactics, remember…. it is possible to live with your competitors and benefit from a spirit of peaceful co-existence.

“I thank my Competitors

My competitors do more for me than my friends.

My friends are too polite to point out my weaknesses,

but my competitors go to great expenses to tell of them.

My competitors are efficient and diligent.

They make me search for ways to improve my products and my services.

My competitors would take my business away from me if they could.

This keeps me alert to hold on to what I have.

If I had no competitors, I would be lazy, incompetent, complacent.

I need the discipline they enforce on me.

I thank my competitors. They have been good to me.

God bless them all.”