You have an idea for a business: how should you identify competitors?

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In the previous post, we analyzed suppliers. Now it’s time to look at competitors, those who are already in the sector and those who may yet to emerge. Why should you also look for the latter, who are not actually in the sector yet? Sometimes their appearance suddenly changes the conduct of business in the entire sector. An example of this is Apple, which in 2007 began selling a strange phone – a smartphone – that turned out to be a hit and put the existing market leaders Nokia and BlackBerry up against the wall.

Therefore, in your company’s business plan you must take into account the existence of competitors. Whether it will be easy for him to break through with his offer is indicated by:

  • the number of competitors and their location in relation to your store,
  • the increase or decrease in demand for the products you offer; competition in a given market intensifies when customers decline or buy less and less,
  • how you would differentiate your store and suits; if the business is easily recognizable, all the better for it,
  • the level of fixed costs, i.e., independent of the number of clothes sold; the higher it is, the worse it is, as the company loses its core competitive advantage and faces a wall – either zero profit or close the business.

Whether there will be new competitors for your store in the future is influenced by the scale of its business. If he plans and can make the majority of all men in the area buy suits only from him in a short period of time, he can rest easy. Another problem that your future competitors will face – and that he himself is probably facing right now – is the amount of capital needed to start the business. If someone like you were planning to build a car factory of an entirely new brand, there probably wouldn’t be enough money even to buy out the land. However, if it is to be a clothing store – there may be more similar stores in the future.

The entry of new companies into a certain market is also hindered by the customers themselves and the distribution channels. The latter may already be “reserved” by existing entrepreneurs. A company producing fruit preserves may find it very difficult to sell its jams and preserves in supermarkets, since the products of competitors are already there. Customers’ habits also play a big role, and it takes a long time to convince them of the novelty.

What’s next. Next you have to go back to market segmentation again, i.e. customers. Read about it in our next blog post.