Every business has competition and prospective business owners ignore competitors at their peril. Unless a business has an absolute monopoly on a life-essential product, there will be competitors offering alternative and substitute products and services. That level of competition is revealed in the competitor analysis section of your e-business plan. A competitor analysis is an important requirement in any business plan because it (a) reveals the firm's competitive position in the "marketspace" (on-line marketplace), (b) assists you to develop strategies to be competitive, and (c) investors and other readers of the business plan will expect it. If you ignore or minimize the impact competition will have on your business prospects, then you have an unrealistic business plan. After giving some background about the type of competitors your business will face this lesson helps you identify and analyze your major competitors -- those most likely to impact on the success of your business. The analysis uses a variation of SWOT, a popular strategic planning tool, to help you identify strengths and weaknesses of competitors, and then opportunities and threats for your business. The lesson concludes with a statement of your company's sources of competitive advantage in the e-commerce marketplace. The lesson outline is:
Who is Your Competition?
--Identifying your competitors
--Finding your competitors
Analyzing Your Competition
--Creating a competitor analysis grid
--Writing up the results of your analysis
--Web site critiques
Defining Your Competitive Position
Who is Your Competition?
Identifying your competitors: The first step in conducting a competitor analysis is to identify your competitors. Begin this process by considering the range of competition in your marketspace because not all competition is the same, there are different types of competitors your business will face. Direct competitors are businesses that are offering identical or similar products or services as your business. These are companies that customers can easily buy from instead of from you, so these companies represent your most intense competition. Additionally, they have some degree of first-mover advantage that you will have to confront. For example, Purma Top Gifts will be competing with other retailers who are already on the Web selling handicrafts, artwork, and similar products either made in Purma or about Purma. Indirect competitors are businesses that are offering products and services that are close substitutes. These competitors are probably targeting your markets with a same or similar value proposition, but delivering a different product. A classic example is a survey General Motors conducted of new Corvette car buyers. When asked what products the buyers considered instead of a Corvette, the usual sports cars were on the list, but so was the Sea Ray, a sleek, fast boat. The Sea Ray was fulfilling the same basic need as a Corvette -- a sporty vehicle that made the buyer feel young and would impress friends, especially of the opposite sex. Similarly, television and the Internet itself are Amazon.com's indirect competitors because each product competes for attention in a consumer's leisure time. Future competitors are existing companies that are not yet in the marketplace that you intend to occupy, but could move there at any time. For Purma Top Gifts, a future competitor is an existing bricks-and-mortar gift shop in Purma that decides to start selling products on-line. One obvious source of future competition is an indirect competitor. As soon as an indirect competitor sees you having success in their area with a different product, they may try to duplicate your offerings and so they become a direct, perhaps formidable, competitor. Identifying all existing and potential sources of competition is an impossible task, indirect and future competitors can number in the tens, hundreds, or even thousands....