This is how you will know your competitors ….What I learnt about competition (Part 1)

When a startup or any other company is starting the business, they conduct discovery. They analyze the problem to find the right solution, they analyze the market just to know their targeted customers, their pain points, their needs and so many other important things. However, one of the important things people analyze when they are entering a certain market or any business is “COMPETITION”. 

Competition in business is often defined as a situation in a market in which firms or sellers independently strive for the patronage of buyers in order to achieve a particular business objective. I 100% agree with the definition. But this definition gives just a high level explanation about what competition is. But today I just want us to take time and discuss what competition is, what competition is not and we will go into detail just to clarify some points that people misunderstand about competition. Competition is something if you get it wrong, then your next moves are questionable and I can’t guarantee they will help.

Now the problem is, how do you know your competitors? Let’s dive deep into 2 ways people know their competitors:

Same product/service

This is the most known scenario of competition. When 2 businesses have the same products or offer the same services, we all identify that as a clear competition. Which is right but not in all cases. I said that this is the most known competition scenario because every business joining the market, they are always looking for businesses which are offering the same services or developing the same products. However the question that I always ask people is this, is every business offering the same service or selling the same products your competition? People think that the answer is Yes, which is true in so many cases but others not.

There are some cases that companies may be doing the same things but targeting different markets or different targeted customers. When you are doing the same thing but doing it for different people, in my opinion that is not a competitor. Because at the end of the day, whatever we are doing as companies is to serve people. Then if the people we target are different, there is no competition, until the other business becomes interested with the people you are serving.

So for this way of looking at your competitors, don’t only consider or focus on people with the same products / services because some of them will have their own market where you don’t have to compete if you are not targeting that same market.

Same customers

I have a feeling that this way of considering businesses with the same customers as your competitors is still being overlooked. People have a tendency of only considering businesses as their competitors only when they also offer the same services or same products. Which is why I wanted to mention it separately.

There are a lot of cases where businesses offer 100% different services/products but find themselves in competition because they are targeting the same customers. This needs to be explained wisely, I will give examples, some  businesses sell chocolates and they find themselves in competition with other businesses that are selling flowers. You might ask yourself how? 

Here there is what I call an “Alternative” factor in competition, we do different things, but people can buy your product as an alternative of mine, which makes you a direct competitor to me. If someone is going to a date and choose to buy a chocolate instead of a flower, it means in this case, a chocolate is an alternative of a flower which means If I have bought a chocolate, there is no need of buying a flower (even though you can also buy both). it means the people with the flower shop need to identify and analyze the chocolate shop as their competitor and vice versa. Both businesses need to find a way to compete with each other.

However, I have to mention that not every business that you target the same customers is your competitor. Which is where the “complementarity” factor comes in, I will give you an example, if you have a business that sells phones, you target the same customers as a business that sells phone cases. Your targeted customers are the same but you are not competitors. In fact in this situation you can even work together to boost both of your sales ( a topic for another day).

People who work in tech know that actually 2 products can help each other to boost sales even though they are on the same market targeting the same customers. This is where system integration comes in, which means you can even use our resources and we can use yours and still win on both sides.

Knowing your competitors helps you to know the amount of work that you have to put in, in terms of innovation, creativity and other activities that can help you stand out in the market. When you fail in recognizing your true competitors, I can’t see a way you are going to win the market . In my next article, I will focus more on the competitor that only few people care about, but the way you deal with that competitor reveals how well you are ready to deal with others.