Launch - Spring 2008 - (Page 20) Your Business Plan: Competitive Analysis Questions Of course, writing up a competitive analysis is still important. Venture capitalists and angel investors want to see that you’ve carefully considered your industry and can prove your concept and market space, but experts say an analysis is considered more of an academic exercise and should not define or constrain your efforts to innovate. So the next time you sit down to write a business plan or create a new product or service, here are a few examples of companies that found their way in the blue ocean. Think Different >> >> >> >> >> >> Where is your competitor located? What are the competitor’s strengths? What are their weaknesses? What are your competitor’s annual sales? What is the company’s product line? How do the products compare to yours, in terms of quality, appearance and any other criteria? >> What is their price structure? >> What are the company’s marketing activities? >> What are the company’s supply sources for products? >> Is the company expanding or cutting back? >> What do they do better than you? Competition research and assessment doesn’t need to be complicated. You can do much of this research yourself, but you may consider employing research firms to find information that isn’t available publicly. Here are a few tools for acquiring competitive intelligence. Online Searches are a quick method of finding competitive information. However, this search will only provide information that has become public. On-site observations of the competitor’s parking lot, customer service, volume and pattern of suppliers’ deliveries, etc., can yield useful information about the state of the competitor’s business. Surveys and interviews can yield plenty of data about competitors and products. Research surveys and focus group interviews generally provide more in-depth perspectives from a limited sample. Competitive benchmarking is used for comparing your company’s operations against your competitor’s. In making specific comparisons within an industry, an organization gains information about common marketing practices, available work force and suppliers. Put It to Work The results of your competitive analysis can establish the skills necessary to succeed in your business and define your distinct competitive advantage. But beware of focusing too much on your competitors’ weaknesses. Instead, focus on innovation and new market spaces. Gary Rhoads, director of the Entrepreneurship Center at Brigham Young University, says startups should focus on developing new categories and unique claims, not so much digging up dirt in their competitor’s backyards. “They should focus on execution, management and getting the right people on the bus,” he says. Take, for instance, the popular energy drink Red Bull. The idea to create Red Bull originated in 1984. At the time, nobody thought that a functional drink previously unknown in the Western world (especially one packaged in an 8.3-ounce can and sold at a premium price) would ever stand a chance. “They could have been a cola drink, but instead they coined the term “energy drink,” and put them in a new category. The iPhone did the same thing. Apple wasn’t too concerned about their competition, because their product was the first of its kind. When you get bigger, or launch a ‘me too’ company such as a dress shop, that’s when you should worry about your competitors’ reaction,” Rhoads says. “Competitive analysis, while a mere exercise, is important for startups because venture capitalists and angel investors like to see possible threats and proof of concept in the industry.” Rhoads says that when your company does get big enough to start worrying about the competition, react by researching cost comparison, altering design and packaging, etc. “Jolt is still trying to compete with Cola; but Red Bull said ‘Let’s not even try to compete.’” In the past 15 years, Red Bull has quietly captured more than 70 percent market share in more than 100 countries. The drink has been copied by more than 100 competitors, but companies such as Coca-Cola and Anheuser-Busch have been unable to take market share away from them. Dietrich Mateschitz, a former toothpaste salesman who built the multi-billion dollar energy drink company, says of his success: “If we don’t create the market, it doesn’t exist.” 20 launch spring
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