Strategic Planning Kit For Dummies, 2nd Edition
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If you’re gearing up for a big athletic competition, your training regimen is directly proportional to who you’re competing against. You really don’t want to work harder than you have to, right? Well, the same idea applies to your business. Certainly, if you’re running a for-profit business, you’re competing to win. If you’re a nonprofit or a department head, you’re competing for scarce resources, usually funding. In all cases, you need to know who you’re trying to beat so you can position yourself properly.

The clearest way to identify your competitors is to figure out what would happen if you weren’t around. Who would supply your customers’ needs, and what would customers buy to solve their problems? Also, who’s taking away your customers, and whose customers are you taking?

You can group competitors in three categories:

Direct competitors

These companies are the ones you need to find out the most about because they’re your fiercest competitors. When customers are making purchasing decisions, their products or services always end up on the short list. With this group, you’re vying for the same customer dollar. More than likely, you have three or four companies that fall into this category.

Indirect competitors

These companies offer alternative products and services than what you offer. Usually, you don’t worry about these companies too much, but you should keep tabs on what they’re up to. Sometimes an indirect competitor can become a direct competitor.

Substitutes or new entrants

While conducting your competitive analysis, determine whether any substitute products or potential new entrants exit. A substitute product is anything that delivers the same set of benefits to your customers as you do but isn’t a competing product. For example, DVD rental is a substitute service to cable TV. New companies or entrants coming on the scene may change your industry completely, such as satellite radio has done to the radio industry.

Don’t restrict your thinking only to companies similar to your own. Consider firms outside of the realm of possibility, such as those who compete in the industry from a corporate strategic viewpoint. When contemplating the future, you need to envision any number of possibilities.

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Erica Olsen founded OnStrategy to help growth-oriented organizations develop and execute sound, agile strategies. Learn more at

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