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EntrepreneurshipEntrepreneurshipUnit 2.2Unit 2.2

Analyzing a business’s competitors Analyzing a business’s competitors and industryand industry

Students will Assess their Market’s Students will Assess their Market’s Competitors and IndustryCompetitors and Industry

Students will be able to:Students will be able to:• Research competitors and identify their Research competitors and identify their

nicheniche• Assess competitors’ strengths and Assess competitors’ strengths and

weaknessesweaknesses• Assess industry characteristicsAssess industry characteristics

The Purpose of The Purpose of Competitive AnalysisCompetitive Analysis

Competitive AnalysisCompetitive Analysis explains the explains the market positions of both a market positions of both a company’s direct and indirect company’s direct and indirect competitors.competitors.

Competitive analysis often uncovers Competitive analysis often uncovers new business opportunities by new business opportunities by pinpointing where customer needs pinpointing where customer needs are not yet being met.are not yet being met.

What is a Niche?What is a Niche?

NicheNiche A small, specialized segment of the A small, specialized segment of the market based on customer’s needs.market based on customer’s needs.• Some businesses will focus on the smaller Some businesses will focus on the smaller

segment instead of competing with everyone segment instead of competing with everyone else for the bigger market. else for the bigger market.

• Example:Example: In real estate, Planned Unit In real estate, Planned Unit Developments (PUDs) target the 55+ age Developments (PUDs) target the 55+ age group, instead of competing with all the other group, instead of competing with all the other builders in an area. They don’t sell homes to builders in an area. They don’t sell homes to their niche—they sell “lifestyle.” their niche—they sell “lifestyle.”

Competitive OverviewCompetitive Overview

The first stepThe first step in creating competitive in creating competitive analysis is to research one’s top analysis is to research one’s top direct and indirect competitors.direct and indirect competitors.

Direct competitorsDirect competitors offer similar offer similar products.products.

Indirect competitorsIndirect competitors offer close offer close substitutes that meet the same basic substitutes that meet the same basic need.need.

How to “Research” CompetitorsHow to “Research” Competitors(Create a table to analyze)(Create a table to analyze)

Identify your top direct competitors.Identify your top direct competitors. Identify your top indirect competitors.Identify your top indirect competitors. State the locations of your top competitors and State the locations of your top competitors and

the number of years in business.the number of years in business. Describe the primary markets or market Describe the primary markets or market

segments your competitors serve.segments your competitors serve. Describe the primary products and services your Describe the primary products and services your

competitors sell and how much they sell, if competitors sell and how much they sell, if known, in units or sales dollars.known, in units or sales dollars.

The Value PropositionThe Value Proposition

TheThe second stepsecond step in the competitive in the competitive overview is to analyze your top direct overview is to analyze your top direct and indirect competitors in greater and indirect competitors in greater detail to determine their strengths detail to determine their strengths and weaknesses. This will help you and weaknesses. This will help you determine the determine the valuevalue propositionproposition of of each of your competitors. each of your competitors.

How to Determine theHow to Determine the“Value Proposition”“Value Proposition”

Evaluate your competitors’ product or service Evaluate your competitors’ product or service selection, quality, and availability.selection, quality, and availability.

Evaluate your competitors’ promotion strategies, Evaluate your competitors’ promotion strategies, including advertising, branding, packaging, and including advertising, branding, packaging, and labeling strategies.labeling strategies.

Evaluate your competitors’ pricing policies and Evaluate your competitors’ pricing policies and pricing structures.pricing structures.

Explain your competitors’ customer service and Explain your competitors’ customer service and after-sale service policies.after-sale service policies.

Example: LeFever’s River GrillExample: LeFever’s River Grill(Competitors’ Strengths and Weaknesses)(Competitors’ Strengths and Weaknesses)

StrengthsStrengths WeaknessesWeaknesses

Ken Stewart’sKen Stewart’s Great reputation for quality Great reputation for quality and service; personalized and service; personalized touch of owner; leverage touch of owner; leverage brand name to additional brand name to additional catering servicescatering services

High prices; additional High prices; additional restaurants spread owner restaurants spread owner too thin to maintain too thin to maintain personalized touch and personalized touch and superior servicesuperior service

Moe’s RestaurantMoe’s Restaurant Something new and Something new and different; can maintain different; can maintain intimate appealintimate appeal

Small size; lack of brand Small size; lack of brand awarenessawareness

Lanning’sLanning’s Old-world feel; superior, Old-world feel; superior, white-glove service; white-glove service; perceived as a very “Special perceived as a very “Special Night Out”Night Out”

May not appeal to May not appeal to Generation X and Y; may Generation X and Y; may appear too outdatedappear too outdated

River Front at the River Front at the SheratonSheraton

Location inside hotel; can Location inside hotel; can handle large events and handle large events and cateringcatering

Relies on hotel customers; Relies on hotel customers; convention market is convention market is heavily tied to local heavily tied to local economy and visitors not economy and visitors not controlledcontrolled

The Olive GardenThe Olive Garden Well-known; consistent food Well-known; consistent food menumenu

Not perceived as something Not perceived as something specialspecial

Industry TrendsIndustry Trends

You can find opportunity in an industry You can find opportunity in an industry by looking at trends and patterns of by looking at trends and patterns of change. Consider:change. Consider:• Has the rate of sales growth slowed?Has the rate of sales growth slowed?• Does the government heavily regulate the Does the government heavily regulate the

industry?industry?• How volatile is the industry?How volatile is the industry?• Is it becoming more difficult for new companies Is it becoming more difficult for new companies

to enter the industry?to enter the industry?

Industry ForcesIndustry Forcesthat Affect Your Businessthat Affect Your Business

1.1. Barriers to EntryBarriers to EntryConditions or circumstances that Conditions or circumstances that make it difficult or costly for outside make it difficult or costly for outside firms to enter a market to compete firms to enter a market to compete with the established firm or firms. with the established firm or firms. Existing businesses may bar new Existing businesses may bar new companies from certain distribution companies from certain distribution channels.channels.

Industry Forces thatIndustry Forces thatAffect Your Business Affect Your Business (Cont’d.)(Cont’d.)

2. Threats from Substitute 2. Threats from Substitute Products.Products. • Example: Suppose you are planning to Example: Suppose you are planning to

open a restaurant serving low-open a restaurant serving low-carbohydrate meals. You will be carbohydrate meals. You will be competing with other restaurants in competing with other restaurants in your area, with grocery stores, and with your area, with grocery stores, and with specialty food stores.specialty food stores.

Industry ForcesIndustry Forcesthat Affect Your Business that Affect Your Business (Cont’d.)(Cont’d.)

3.3. Sources of SupplySources of Supply may affect may affect costs, pricing, and sales. costs, pricing, and sales.

Consider:Consider: Access to affordable sources of inventory, Access to affordable sources of inventory,

raw materials, and goods;raw materials, and goods; Where your suppliers located;Where your suppliers located; What trade discounts they offer;What trade discounts they offer; Availability of alternative sources.Availability of alternative sources.


4. Buyers’ Ability to Bargain.4. Buyers’ Ability to Bargain.

In industries where large discount In industries where large discount buyers have bargaining power, a new buyers have bargaining power, a new business may have difficulty gaining business may have difficulty gaining a foothold. Small businesses usually a foothold. Small businesses usually compete by offering personalized compete by offering personalized service and customized products. service and customized products.


5. Technology5. Technology

Technology allows companies to Technology allows companies to improve their business processes. improve their business processes. Companies that use technology to Companies that use technology to operate effectively and efficiently are operate effectively and efficiently are more likely to remain competitive.more likely to remain competitive.

Competitive IntelligenceCompetitive Intelligence

Visit competitors’ outlets.Visit competitors’ outlets. Buy your competitors’ products.Buy your competitors’ products. Search the Internet and your Search the Internet and your

competitors’ Websites.competitors’ Websites.

Industry CharacteristicsIndustry Characteristics

Each industry has basic characteristics Each industry has basic characteristics or demographics. or demographics.

For example:For example: Number of companiesNumber of companies Annual revenuesAnnual revenues Average size of the companies by Average size of the companies by

number of employeesnumber of employees

Terms to Define:Terms to Define:

Competitive AnalysisCompetitive Analysis Direct CompetitorsDirect Competitors Indirect CompetitorsIndirect Competitors Industrial MarketsIndustrial Markets Industry TrendsIndustry Trends Industry CharacteristicsIndustry Characteristics

Let’s ReviewLet’s Review• Identify ways to research competitors Identify ways to research competitors

and identify their niche.and identify their niche.• How can you assess competitors’ How can you assess competitors’

strengths and weaknesses?strengths and weaknesses?• What are 5 industry forces that may What are 5 industry forces that may

affect your business?affect your business?• List examples of industry characteristicsList examples of industry characteristics

SourcesSources

Allen, Kathleen R., & Meyer, Earl Allen, Kathleen R., & Meyer, Earl (2006). (2006). Entrepreneurship and small Entrepreneurship and small business management. business management. New York: New York: Glencoe.Glencoe.

Green, Cynthia L. Green, Cynthia L. Entrepreneurship: Entrepreneurship: ideas in action. ideas in action. Boston: Thompson/Boston: Thompson/

South-Western.South-Western.

Created by: JJ AbernathyCreated by: JJ AbernathySnow Canyon High SchoolSnow Canyon High School

20062006