Too much competition, as well as too little can hurt you and your market. Too much can set up price cutting, while too little competition can lead to customer rejection. Customers are reluctant to buy products with only a few suppliers, because they may not get the number of products they want, or at the time they want them, or at the same price as everybody else is paying.
You can get a hold of information concerning your competitors from their annual and 10K reports (available through your public library); writing the company’s financial officer and asking for information; a prospectus, which comes out when a corporation plans on selling a new stock issue on the open market; industry trade journals; and the business section of your local newspaper.
Knowing your competitors’ resources will help you formulate your own strategy. If your competitor has lots of money, it won’t have trouble shelling out the start-up costs for a new product, or even enduring the financial strains of redesigning a product that didn’t work. They will also have the luxury of sinking more money into advertising, thereby capturing more of your market’s attention. Under-financed companies cannot afford to make mistakes of the same magnitude as better-financed ones.
Knowing how well your competitors’ product performs is important. If it’s a lemon, customers will have to get it fixed or buy a new one, which both mean spending more money. The initial purchase price is often not the final cost of a product.
It may also be worthwhile for you to find out why your competitors price their products the way they do. Their pricing structure often tells you how much overhead they have for marketing, engineering, as well as finance and administration.
Be careful with how you inject discounts into your pricing strategies. If your competitors’ discounts are based on a learning curve, you must define your experience level to see if you too can discount prices and by how much. If your competition has more than one product, they may be offering a dollar volume discount based on the total dollar value of all products. If you have only a single product, your discount alternatives will be more limited.
In comparing your competitors’ products, you may want to use a table or chart format. One picture can speak a thousand words.
Be sure to make a strong statement on why your competitors are not meeting consumers’ needs, and how you will.
You may want to carry out an informal consumer survey of your key industry competitors.
You can also mention any indirect or unknown competition your company has and whether this is growing or shrinking, and how much of a threat it poses to you. Unknown competition may be companies like you who are not yet in the market.
Try to limit this section to one or two pages at the most.
English businessman C.M. Fogg wrote to the London Times about his encounter with a Japanese colleague at a hotel pool in Kuala Lumpur, Malaysia. The Asian swam over to Fogg and began chatting. “As soon as we reached some points of mutual interest,” said Fogg, “he reached into a pocket of his trunks and passed me a waterproof business card. What chance have we got against such competition?”