Home > Business and Strategy, Leadership > When does competition matter?

When does competition matter?

Porter has a fairly strong focus on competitor analysis for strategy development. Some other writers and experts claim that competitors don’t matter – just get on with pleasing your customers. So do competitors matter and if so, when?

I’ve tended to hold the view that you should always keep a watching brief on your competitors, but not get obsessed. No need to stalk them, conduct industrial espionage or get similarly carried away in most situations. These days with social media and websites its pretty easy to know what they’re up to most of the time anyway. However I’ve recently had two experiences that have confirmed pretty strongly that watching and ‘outwitting’ your competitors, even when they are also ‘friends’ can be fairly important for survival.

The first was when I heard the owner of a well-known supermarket in Hamilton talking about the arrival of several competitors into his patch. One was a food specialty store run by a pretty savvy Auckland operator. However, the specialty store did not last long, despite being very successful in other cities. As soon as the supermarket owner heard of the plans to move into his patch, he had his staff check out the specialty stores products and pricing in a nearby city. He made sure he was offering the key products and brands that they stocked. By the time they opened, customers had already seen the ‘new’ products and mostly at better prices. I’m not suggesting this is the only reason the specialty store didn’t last as I don’t know, however, it does suggest that close competitor analysis in this case, may well have paid off. A savvy business owner or manager can certainly make the competitors road tougher than they had hoped.

The second situation is a client of mine who already operates with some key competitors, but each have their niche and operate quite nicely in the same space. However, due to some structural changes and financial commitments of one of the competitors, they have now moved into direct competition in terms of their offering. When I alerted my client to the development, they had not responded or thought about what was happening. Since then we have observed the competitor applying similar marketing tactics (not as successfully as yet!) and getting in front of our customer base. However, because we have analysed the probable reasons for the competitor move, the likelihood of it continuing, and their probable weaknesses and strengths, we have been to respond and plan to survive what we believe will be a short-term problem (we’re pretty keen to ensure it’s short-term!). However, had my client not developed a plan to manage their response to the competitor move, it could have had a major impact on their customer base and bottom line.

So do competitor’s matter? – well yes. When do they matter? – I guess anytime they have their eye on your niche, your customers or your competitive advantage!

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