Establishing a company comes with a wide range of challenges. One challenge, competition, or the pressure to stand out in a crowded market can either make or break your business. However, competition within an industry does hold value because it pushes you to improve business practices and sharpen your service offering to deliver a product that builds a strong brand.
Businesses can also take courage from regulatory agencies such as the Federal Trade Commission that are in place to regulate the marketplace and encourage a free market economy.
The following looks at ways you can exercise control within your company to stay in business and ensure its longevity by identifying and maintaining your business’s competitive edge.
SWOT Analysis
Although this technique may seem like just another paper exercise, it forms the foundation to build a reputable brand that markets itself and that customers keep coming back to.
You should do this analysis, taking into account internal and external factors, to discern your business’s current and future potential and plan accordingly. Internal aspects to consider are human resources and operational efficiencies. In contrast, external influencers have to do with suppliers and company compliance requirements.
We will now look at the steps involved in evaluating your company’s competitive position in a fact-based, data-driven way. You can use this as a team-building opportunity where you involve your staff to brainstorm the following:
- Strengths: At this point of analysis, you need to determine the company’s successes and retrace the steps that have led to each achievement. Once you’ve done this, you should then endeavor to document these procedures to ensure that your company preserves these practices. By looking at what the company is doing well, you may also identify areas in which your business distinguishes itself from its competition and build brand awareness based on that in your marketing efforts going forward.
- Weaknesses: Here, you will look at the challenges your business has faced and what obstacles have prevented your company from performing at its best. This will give you a point of departure from which to come up with solutions. For example, areas of improvement could be supply shortages or high staff turnover, which you can temper by planning for alternatives or working to create more job satisfaction.
- Opportunities: You’ll need to use your imagination yet still be realistic about where your business can expand. You’ll have to recognize the conditions that exist that will give your company the advantage. For example, in light of the COVID-19 pandemic, you could decide to establish an online platform where you offer your product or service via the web. Giving thought to improving your product quality, bettering your price, and sharpening your service will also create space for business growth.
- Threats: Some factors have the potential to harm your business, such as new technology, making your service becomes obsolete. For example, an accountant may need to expand their service because new software lets companies manage their own books. Another threat to your company could be the red tape within your industry that could cause delays and result in loss of income.
Now that we’ve seen what SWOT is and how its analysis can help steer your business towards a stronger foothold in the market, let’s look at the forces that shape this market so that you can sustain your advantage.
Porter’s Five Forces Framework
This model measures the intensity of competitiveness within an industry to guide your company’s strategy to remain profitable.
- Competition in the industry: This is the number of other companies that offer the same product or service as you. The more there are, the harder your business will have to work to improve its product or service quality to successfully compete in the market. You’ll need to spend a significant amount of time evaluating your costs so that your company has better leverage to offer affordable prices.
- Potential of new entrants: This factor has to do with the difficulty of getting into a particular industry. The more challenges there are to access a specific market, the less competition there’ll be. This is why it’s worth considering offering niche products that require extensive market research and trade knowledge. It’s a way to ensure that your company remains a forerunner in its field.
- Supplier bargaining power: Another balancing act that you’ll have to play as a business owner is weighing the risk of offering a product or service for which a few suppliers exist. For example, offer a product where you cannot get spare parts locally, and sourcing them is expensive. You’ll have to decide if it’s worth sacrificing some of your potential customers. This may not necessarily be problematic if you have clients willing to pay a premium for a high-quality product.
- Customer bargaining power: You also need to consider the market position of your customers. The more power they have, the more they’re able to negotiate for better prices. Independent customers are most likely to accept higher rates because they’re not purchasing the high volumes an institution might.
- Threat of substitutes: This points to the fact that the more unique your product or service, the more sustainable and profitable your company will be because there aren’t many alternatives out there.
As a business owner, you should regularly complete a SWOT analysis to determine whether there are necessary adjustments to your business strategy that need to be made. Competition is a driving force in business. It forces us to reflect on what is and isn’t working in our company. We also looked at measures to reduce the risks that competitors, suppliers, customers, and substitutes pose to our company.
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