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Questions to Answer When Analyzing Competition

Bill Warner, Managing Partner, Paladin and Associates

Sun Tzu expressed it in many ways with respect to preparing for war when he wrote "know your enemy." Preparing to compete in business is similar; you need to know your competition in detail. As in war, you don't want to enter the battlefield with the wrong weapons, deploying inappropriate tactics, with too few people, or engaging on the wrong terrain.

Before you launch a new product or service, you need to be prepared to answer a lot of questions about your competitive position, such as:

  • What makes your product or service better?
  • Why should a customer buy from you?
  • How are you differentiated?
  • How successful are they?
  • What are you doing to exploit their weaknesses?
  • What strengths do they have, and how are you responding?
  • What are they going to do to beat you?
  • Are they public or private?
  • Who funds them?
  • Who is their lead investor?
  • What financial position do they have?
  • What is their pricing strategy?
  • What is their marketing strategy?
  • How is their sales force deployed?

Not being able to answer basic questions about your competition will reduce your chances of winning a sale and possibly raising equity funding. Worse yet, you will not be able to form a clear strategy to beat them.

What You Need to Know  

An assessment of each of your competitors needs to be created. The research can come from all sorts of sources: their Web site, SEC filings, media articles, consultant briefings, marketing material, their customers, and former employees. Of course, make sure you are not gathering information that is confidential.

Basically the content of the assessment include:

  • Company description including demographics and size.
  • Summary of key management.
  • Financials, with an analysis of strengths and weaknesses.
  • Description of how they are capitalized.
  • Product and services descriptions, assessing their strengths and weaknesses.
  • Description of their marketing and sales strategy.
  • Positioning analysis and what makes them different.
  • Determination of what threats they represent to your strategy.
  • Description of what opportunities you have to beat them.

This basically is a SWOT analysis (strengths, weaknesses, opportunities and threats). (See SWOT Analysis Worksheet.) This basic information is what is needed to formulate a plan to beat your competition and to answer the tough questions.

How to Use the Information

Once all the information is available, your strategic initiatives come from summarizing what you have learned from the competitive assessment. Here are a few examples of possible summary points:

  • They are missing many of the key product features that are required to win in the marketplace.
  • They are financially weak by carrying too much debt.
  • They have a cost disadvantage, so dropping their prices will be hard.
  • They are spending far too much on development at this point in their maturity.
  • They are loosing market share and don't seem to be responding with new marketing initiatives.
  • They could merge with another company and become a powerhouse.
  • Their customers dislike the quality of their service.
  • They are missing a great opportunity in another market.
  • If we had integration partners, we would have a key strength they don't have.
  • Their management team changes indicate they are preparing to sell the company.
  • They have had three rounds of funding, and their investors are tapped out.

Strategies for Winning

From your summary, formulate what the most effective initiatives will be to assure your company's success. Your company can only have one competitive strategy.

So, your strategy has to be the composite of what you need to do to beat the ones that matter-the ones that have the greatest strengths and represent the greatest threat.

Here are some examples of strategic initiatives that illustrate what the elements of a possible competitive strategy are:

  • We will position the company as having the most comprehensive solution because none of the competitors offers all of what buyers need.
  • The chemical industry is best for us because none of the competitors have presence there.
  • Our cash position is strong, and their cash is running low. We will spend money on marketing initiatives and gain market awareness with our new and superior product.
  • We will partner with the leading complementary software product company and present a more complete solution than any competitor.
  • They cannot drop their price. Our price is below theirs and we offer much more.
  • We will partner with the large integration services companies where our product adds value to their offering.
  • Briefings will be given to all the leading industry analysts so they know how superior we are when they advise clients.
  • Our media blast will position us as an emerging leader with more capabilities for less money.
  • We will feature our patented technology, which gives a tremendous improvement to our customer's processes and saves them money.

Proceed to Win

Your basic marketing strategy and product plan needs to be founded in a sound understanding of what it takes to win. Have a solid and realistic understanding of what you are up against. This leads you to respond in a way that overcomes all objections you are going to experience from customers or investors.

© 2007 Bill Warner. All rights reserved.

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