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Your Competitive Environment

(updated 2020)

Competitive Environment

Awareness
Any leadership book worth reading will tell you that awareness is essential. Whether it’s self-awareness for the sake of self or self-awareness for the sake of others, e.g. emotional intelligence, being aware and prepared to respond appropriately to both normal and unusual stimuli is a cornerstone of leadership. 

Often times our peers “test” our knowledge of current events and highly controversial topics; this test is not necessarily for the sake of testing, but in the interest of holding a friendly conversation. Inevitably that conversation is processed and their perception of the conversation is what that co-worker, friend, family member, or acquaintance shares with other peers: was this an average conversation = no need to report; was it an abnormally arduous conversation = report negative; or was it a fun and enlightening conversation = report positive. We are human, which means that we are social animals that share our experiences; it’s a normal expected occurrence. This very human interaction is the same reason why business owners should be vigilant in maintaining an awareness of their environment. Remaining alert and ready to provide an appropriate response sends the signal to industry peers, employees, and customers that you’re serious about your business, you’re reliable, and you’re ready to serve. Additionally, the environment is constantly sending feedback about the health of your company. Is the report average, negative, or positive, and are you aware enough to pick up on these signals?

Competitive Analysis
A competitive analysis entails collection of data on competitors and factors that effect your competitive advantage, such as market share, pricing, and anticipated events. Most business owners complete an initial analysis of their company’s environment, as part of a business plan. They identify their competitors and they carve out their niche in the market based upon the analysis. Often the Strengths, Weaknesses, Opportunities, or Threats (SWOT) technique is applied:

SWOT Question Examples
Strengths What is your competitive advantage?
  • more variety
  • lower cost structure
  • proprietary technology
Weaknesses What do you need to improve?
  • increase brand recognition
  • reduce overhead
  • improve customer service
Opportunities What events could improve your competitive advantage?
  • acquisition of a competitor
  • new products/services
  • favorable changes in laws or regulations
Threats What events could derail your competitive advantage?
  • new market entrant
  • higher costs for raw materials
  • unfavorable changes in laws or regulations

This framework helps to ensure that owners view the organization from a 360 degree perspective.

As the rigors of running a business set in, it can be a challenge to revisit the business plan and reassess the competitive environment through an objective lens. Ideally, a competitive analysis is an on-going process that engages diverse perspectives to avoid myopic decision-making. Our competitive environment is constantly changing; if you operate based on old information, you may actually work against your cause - giving your competition the advantage.

Trend Identification
Maintaining awareness of the company’s environment on a regular monthly, quarterly, and annual basis helps business owners identify relevant changes in current trends, as well as new emerging trends and issues. This is especially important during turbulent economic times and times of industry uncertainty. Proactive monitoring enables proactive action and decision-making, versus reactive emergency response.

Businesses are impacted by global, national, regional, local, and industry specific events; therefore, identification of macro and micro environmental trends is valuable, no matter the size of the business. Identifying trends may also provide an edge over a competitor that lacks relevant competitive intelligence.

The negative energy of one individual’s interpretation of the solution can be the driver of negative results. Likewise, the positive actions of one optimistic person can drive positive results.  Five Actions for Success

Demographics
Much like competition, demographics are constantly changing. Not necessarily every year; but, you cannot know when a significant shift occurs unless you monitor the landscape.

Demographics include age, gender, race, employment level, salary level, education level, location, home ownership, on a macro level, as well as the micro factors more specific to your company such as area births, deaths, and industry concentrations - there are a lot of moving parts. Noting significant shifts in demographics, and any correlations to preferences, helps business owners to make informed decisions about product placement, new product introduction, product retirement, and company expansion or contraction in local markets.

Strategic Direction
All of the aforementioned factors help to ensure that your business maintains a relevant strategic direction. How can you possibly know how many units you can expect to sell without having a real sense of your market? What happened last year is not sufficient for projecting this year’s growth, shifts, and revenue. Is there increased competition? Is there readily available market share to capture due to the exit of a competitor? Is there a market opportunity due to the increased buying power of a market segment? Are you in position to capitalize? Or has the industry experienced a reduced barrier to entry that could threaten your market share?

These are not difficult questions. But they do require leadership that completes thorough and objective analyses on a regular basis, to remain alert and aware of the competitive environment in which they operate.