Exploring Competitor Examples to Improve Business Profits
By Indeed Editorial Team
Updated September 5, 2022
Published May 18, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Competition is healthy for business and can inspire innovation and improvements to operations, customer service, and production. By analyzing examples of competition, businesses may anticipate and respond to potential challenges to improve their market position. Understanding more about competition in business can help you assess and apply strategies to achieve success. In this article, we explain why it's important to review competitor examples, explore seven types of competition, list eight areas where businesses compete, discuss how to assess competition, and share how and why to use that information to gain a competitive edge.
Why examine competitor examples?
Reviewing competitor examples can provide insight into what to look for, as competition is both beneficial for businesses and necessary for sustained growth. Understanding competition allows a company to improve its operations, innovate, and reach new markets. Competition typically indicates a market is healthy or growing, which can provide more business opportunities for long-term success.
Competitors may draw sales from an unprepared company, but learning about a competitor's strategy can encourage a business to improve its own operations. When a business searches for an advantage against its competitors, it may also uncover potential threats to its operation and be able to address them.
Six types of competitor examples
Businesses that examine all likely types of competition can position themselves to anticipate and respond to threats and identify opportunities. There are six primary types of competition in business:
Direct. Direct competition comes from a business that sells the same products or services as another. Two companies that service industrial forklifts are direct competitors, while a company that services forklifts and one that manufactures them are not.
Indirect. Indirect competition occurs when two companies sell dissimilar products and services but target the same audience. For example, fast-food burger and pizza restaurants offer two different products, but the same target consumer is likely to choose between the two.
Replacement. Companies selling products or services they could substitute for the other business' goods may be in replacement competition. An example of replacement competitors is milk producers and plant-based beverage producers.
Potential. Potential competitors often are unrecognized by firms because they only exist if the competing company can enter and compete in the other business's market. A direct mail business could compete with an online marketer by employing digital delivery systems.
Future. Future competitors are those that have, or are developing, the capacity to produce goods or services in another business' market. In the technology field, a competitor may emerge quickly, such as in the cellular telephone field, or sudden increased popularity of a social media platform or computer game.
Phantom. Phantom competitors may be difficult to identify because they seem to compete but in the actual market do not. Phantom competitors may be a low-end discount retailer and an upscale marketer who both sell consumer household goods but have no clients in common.
Eight areas of competition
Competition can exist in any aspect of a business operation. There are common components where much of the competition between business operations occurs, and more minor areas that impact in a smaller way. These may include:
Products and services. This is the area where most businesses examine their competitiveness. The features and quality of the product, and how those aspects affect the benefits and value that a customer gains from the quality of the goods with its unique features, influence the purchase decision.
Sales teams. A sales team's effectiveness at closing, including the time and cost to close, combined with the profitability of the transaction, is central to any competitive business. The business with the highest success in these areas may close a sale faster, even where the goods offered may not be superior to the competition.
Customer experience. Hospitality businesses rely on customer service and improving a buyer's experience. Ones with the highest customer satisfaction ratings often are more competitive than those who might provide better amenities but are less focused on customer service.
Location. The competitive advantage of a business can depend on its location, either geographically or virtually. This business advantage applies to high search engine ranking, accessibility of product or service in real-time or online, and physical business location, such as in high-traffic areas.
Price. Traditional competitive analyses look at price as a prime point of competition, but the price is of importance only when other factors are equal. Using price as an indicator of competitive value may involve looking at price per unit of use, price as an indicator of status, or price as a budget limitation.
Technology. Technology may not determine competitiveness on its own, but technological superiority in the areas on which a competitor focuses may.
Costs. Cost of production, maintenance, delivery or development of a company's goods determines competitiveness. Lower costs while maintaining the other relevant areas of competitiveness provide a competitive edge by increasing profitability per unit produced.
Reputation. A company's reputation in quality, delivery of goods, reliability, sustainability, responsiveness to customer preferences, and other factors is one of the most impactful areas of competitive positioning. Because reputation is enduring and difficult to change, it's one of the most important areas in which a business focuses its efforts on establishing itself.
These eight examples of competition offer a business the chance to improve its market position where it can be most effective. While a business may not be dominant in all areas, it may focus its efforts on the two or three where it's strongest to improve competitiveness.
Assessing the competition
Evaluating the competition involves five steps. It requires a thorough assessment followed by action based on knowledge gathered using these factors:
Assess the business model. It's important for businesses to understand how customers and competition perceive them. They can also identify the short- and long-term objectives that motivate the companies, and assess what each competitor currently offers.
Identify competitors. After profiling itself, a business is in an enhanced position to identify competitors based on types and areas of competition. Businesses that regularly use competitive analyses adapt more quickly than those that assume a static competitive environment.
Profile your competitors in areas versus types of competition. By ranking competitors in the eight primary areas and six types, businesses establish which other operations pose the greatest threat and where the greatest opportunity to grow exists. After comparing that ranking to the investigating business's focus, a clear strategy to handle the competition may emerge.
Review the competition's content and products. For some goods or services, the goals and current limitations of the competitors may be clear. Others may have a current focus but are developing services or products in other markets that increase their competitiveness.
Understand how competitors distribute. The methods of delivery of goods may provide a competitor with an advantage or disadvantage. Faster, more reliable, more affordable, and more consumer-friendly tactics each offer customers an enhanced experience that may influence their buying decisions.
Using competitor examples to gain an advantage
Timely and accurate information about competitors gives a business the chance to gain a competitive advantage. A competitive advantage typically leads to better sales, which leads to increased profit. Using the information revealed in a competitor's analysis can make a business more efficient in these areas:
Brand awareness. The customer often determines who the competitors are, not the supplier of the goods. Understanding what the company's brand is and how the business can adjust it to improve its market position relies on the analysis of its competition.
Competitors' weaknesses. Analyzing the competition's weaknesses may help leverage a business. For example, a company with a small customer base may experience a decline in sales when a competitor starts offering similar services online, where they can reach a larger audience.
New opportunities. Examining competition provides learning opportunities to improve products, reach new audiences, and increase sales. Competition also exposes flaws and risks in one's own business strategy that reveals where the company may improve to attract a larger sales base.
Niche markets. Niche markets allow smaller companies to penetrate well-established markets dominated by bigger businesses. Those niche markets may not scale economically for the larger companies, allowing the smaller operation to excel.
Rank competitors. Using a matrix to rank each primary competitor versus all the eight areas and six types of competition provides information on which competitors to target. Updating competitor rankings regularly enables the company to keep up with the competition.
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