Understanding the Market Competition

“Keep our competitors focused on us, while we stay focused on the customer” – Jeff Bezos

Businesses that have been around for a while, know that market competition has become stronger, fiercer, and a lot more than ever before. While it is challenging to compete with an increasing number of players vying for the attention of the same customer base, competition is essential to keep businesses on their toes and for a robust economy. This in turn ensures that customers receive the best service and products, furthering the cause of businesses. The best companies in the world, stay highly successful and always at the top of the ‘heap’ because they keep a ‘finger on the pulse of their competitors’. They are able to anticipate the next move of their competitors and hence proactively get better such that customers would be attracted to them and stay. For customers this bodes very well since they not only get more choice, better quality of products, and lowered pricing, but also receive the best of customer service. By understanding market competition, a company would know how well or badly it fared with regard to innovation, top value, and service to customers. Since it is becoming exceedingly tough to get customers, a company that ensures it stays ahead in every sphere of its business would find itself attracting more and retaining customers for longer.

Understanding market competition is about obtaining information and making an analysis of the company’s more important and closest competitors. This enables a company to use the information to predict the next ‘moves’ of their competitors, while simultaneously making sounder and highly impactful business decisions. No company exists in isolation – each one is part of a large ‘market’, contending for the same customers, employees, investors, and other stakeholders. Hence, the main aim of understanding competition is to know which competitors pose a real threat, the strategies they currently have in play and the ones they maybe planning. In addition, it helps to ‘predict’ the reactions the competitors may have to what a company does, and how the company can use competitor behaviour to its advantage and to gain (may be even ‘steal) more customers. The good news is that competitor information is easily accessible, thanks to technology and it would be highly imprudent for a company not to make the time and take the effort to use this information to its advantage.

Despite the importance of understanding market competition, surveys reveal that most companies still do not take their competitor actions and strategies into account when creating their own strategies – with regard to new products, changes in pricing, and other such important decisions. There could be several reasons for this lapse – mainly a lack of planning tools and difficulty in ‘unearthing’ the strategic plans and objectives of their competitors. Not many companies are able to know definitively what their main competitors care about, what their assets and strengths may be, and how the competition plans to use these tools to gain customer attention and business. It takes an investment of time, resources, and concerted effort to gain these insights, but the benefits of being able to predict competitor behaviour far outweigh the investment. For example – if a company knew the financial status of a competitor, it would be in a better position to know which assets they could bid for in the market and at what price, since the competition with cash crunch would be unlikely to bid for them.

It is no mean task however, to gain insights into the thought processes and strategies of competitors since companies and their leadership are hardly ever alike. Even if they maybe competing for the same customers and market talent, each company would have its own resources, market standing, experience, capabilities, assets, and an employee base, which it would want to guard and leverage to its advantage. These varying aspects naturally imply that each company would have a different strategy to understand and beat market competition, thereby gaining more customers and retaining them for longer. Even if two market players have similar aspects, their leadership and boards may have different perspectives, leading to varying strategies. In the competitive scenario of today, getting inside the head of competitors and their decision makers will help a company to not only understand the plans and strategies of its competitors, but also the possible changes in the market as a whole. Understanding the psyche of the competition’s decision makers is also extremely crucial in predicting behaviour and gauging reactions to the changing market scenario. It makes sense for any company then, to move beyond just gathering data about its competitors, and moving towards using this market competition ‘intelligence’ to its advantage on a sustained basis.

The fact is that there are several kinds of market competition. There could be some offering similar products and or services, which would therefore not be easily distinguishable for the customers. The most potent strategy in such a scenario would be for a company to provide the offerings at a price point lower than what may be offered by its competitor. However, over time, price wars can be a self-defeating move. There are other types of competition where each business would be able to differentiate its products and services in several ways, apart from pricing. They would highlight the features and benefits of their offerings in a manner that would allow customers to distinguish clearly one from the other. A great example of this would be the smartphones and devices that continuously flood the market. While the offerings may be the same, the easily distinguishable features of the products, make it simpler for customers to buy depending on their needs.

Understanding market competition means comprehending and getting a grasp on the ‘rules’. The fact is that gaining market supremacy is nothing short of a war, where the aim is to oust everyone in the path and gain complete dominion – what makes this so challenging is that this would be the aim of every market player in existence. Every competitor has to function within the same market and obey the guidelines laid down by the government such that they would face consequences if they flouted those guidelines. Infringements or copyright violations, for example, would put a company in the middle of reputation damaging controversies that could end up in litigation. It would be better for companies to understand market competition in order to put in place strategies that would give them a better chance at trouncing their competitors. It is important that prospective customers are able to see a marked and positive differentiation between a company’s offerings and that of its competitors. The differentiation however, should be important to and seen as valuable for customers, in order for them to choose in favour of a company. In addition, a company must leverage on the benefits of technology, source materials at lower costs, and create products with lowered costs to itself, such that the savings could be passed on to the customers by way of lowered pricing yet with a large enough profit margin. This would be a win-win situation for both the company and its customers.

The fact is that every player in the market today has its strengths and weaknesses. A smart company would strive to play up its strengths and do its best to overcome its shortcomings, while simultaneously studying the market competition for the same. Depending on the strength of its competitor, a company would be able to allocate resources in order to remain competitive, while ensuring that the competitor does not ‘steal’ any of its customers. Does your company consistently assess its competitors? If not, it is time to start doing so in order to reduce risk, the amount of time and effort required, and for the proper utilization of resources – in order to stay competitive and become the most preferred business partner for customers in the particular market segment.

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