7:  Online business competitors strategies

When people say “tough competition”, I tell them “competition keeps you on your toes”.   Competitive pressure  often helps the businesses to come up with innovative products, better services, competitive offerings, … competitors makes your life more interesting, so pay them due importance. 

Today, with cut-throat competition, competitor strategies has become an integral part of any business.  Knowing your competitors will help you say ahead in the race, and will ensure sustainability in the long run.   Some online businesses think it is better to go with your own plans and ignore the competition; there are also others who get obsessed tracking the performance of the competitors only to find out at the end that the data they gathered are of no use.  While doing competitive analysis you got to find the right balance, know exactly what you want to know about your competitors.

Competitive analysis has developed from simple emphasis on data gathering to a much greater in-depth analysis of customers’ strategies and actions.   The advantage of in-depth competitor analysis is that it provides broader insights on competitive environment, customers, suppliers, technology, trends, etc.  It also provides you an opportunity to understand your own vulnerability, limitations, and capabilities relative to current and potential rivalries.  

When you are analysing your competitors, it is important to understand 3 central elements

• What products does your competitor compete in?
• What strategies your competitors use to attract, win, and retain customers
• What does it seek to achieve in those markets?

Competitors as such can be categorized into 5 different streams

• Industry rivals:  Direct competition resulting from the activities of companies in the same industry. An example of this is the Cola wars, dominated for much of the 20th century by Pepsi and Coca-Cola.
• Market entry:  new entrants to the market are another source of competition with firms needing to understand how the new entrants might affect their business
• Substitutability:  Businesses with products or services that may be substituted with alternatives face competition, especially over price. For example, a train operator may face competition from airlines.
• Suppliers:  These businesses wield significant power if the item they provide is scarce or unique, or if there are only a few suppliers. Suppliers have considerable power to damage a competitive position.
• Customers:  the power of the customer is seen as another source of competition. This means considering how dependent the business is on individual customers, the ease with which customers can move to another supplier, the customer’s knowledge of the business’s competitors and the conditions (price, quality, overall offer) that are prevailing. An example of customer power is provided by the growth of the Internet as a sales channel, which has empowered customers.

Sources of information to know more about your online business competitors

• Recorded data:  Annual report & accounts,  Press releases, newspaper articles, analyst reports, regulatory reports, government reports, presentation/speeches
• Observable data:  pricing/price lists, advertising campaigns, promotions, tenders, patent applications
• Opportunistic data:  meeting with suppliers, trade shows, sales force meetings, seminars/conference, recruiting ex-employees, discussion with shared distributors, social contacts with competitors

While collecting information, it is of at most importance that you are clear with what exactly you want to know about your competitors.  In most cases you want to know about the following strategies  

• The competitor’s marketplace strategy: how it tries to outmaneuver rivals in the marketplace
• The competitor’s activity/value chain: how it organizes itself to develop and execute its marketplace strategy
• The competitor’s alliances and networks: what other businesses it aligns with and how it manages its network of alliances
• The competitor’s assumptions: what the competitor assumes about the marketplace and itself
• The competitor’s assets and capabilities: what enables the competitor to compete
• The competitor’s infrastructure and culture: the nature of the competitor’s business

Based on the information you have gathered and after your competitive analysis, you may want to compare yourself with the competitors strategies based on the following grounds

• Is the competitor or our own firm providing greater value along the modes of competition?
• Based upon customers’ judgments, who is providing superior functionality?
• Who is providing more useful services?
• Whose image and reputation is more appealing to customers?

Knowing your competitors strategies for sure will help you stay ahead of the competition.  It’s vital to use any information gathered to strengthen your online business. Analyzing everything you discover will help you assess and learn about your own company’s vulnerabilities, capabilities, and future direction.