A great deal of interesting and useful information can be derived from close observation of potential competitors. In one sense they are doing today what you are planning to do tomorrow. They should have already refined their product or service and learned from their mistakes — knowledge from which you can benefit. Furthermore, as they will be your competitors, it is wise to know their strengths and weaknesses. As you follow various avenues of research, compile a dossier on each of your competitors and add new information as you go along. This will make it easier to conduct your final assessment.
MARKET SHARE
When researching your competitors, consider the issue of market share. Try to work out how the market is currently divided up between competitors and how you can start to gain a share of that market. Your proposed business venture will either increase the likely size of the market (this is most commonly seen with new products or services) or succeed only at the expense of your competitors. Sometimes the success of a new venture can be due to a mixture of both, but the implications can be significant.
If you think you will be expanding the market it means new customers will be buying from you — where will they be coming from and what will attract them? Are you expecting them to stop buying something else to have the spare money to spend with you? If you are trying to break into an existing market, how will you win customers from other suppliers? One way of enticing customers away from competitors is to offer a better-quality product service. Another is to undercut current prices. Think carefully about which you can deliver and which will be most profitable.
DIRECT OBSERVATION
If your intended business is retailing, then walk around the area in which you are thinking of opening a shop to look at the types of retail businesses nearby and to check out potential competitors. Talk to local surveyors, who usually have a good idea as to the retail business in their area.
Once you have located a competitor, there are a number of techniques to use. If they are local you could sit outside their premises and observe the comings and goings; note down how many people go in and how many come out with purchases. In the case of industrial units, careful observation can reveal the names of suppliers and customers (conveniently written on the sides of vans) and the general level of activity of the business. Do this at several different times of the day or week, and for an hour or more at a time. If the competitor is a manufacturer, try to buy, rent, or borrow a sample of their product and check it out, noting any strengths and weaknesses. How does it compare with your own product in terms of appearance and features? What can you offer that the competitor does not? Note any patent or registered design markings, since these should be respected.
If the competitor is in the service sector, try to use their service yourself, or ask friends to phone as if they were customers. Enquire about prices and how soon the service can be provided (this may reveal how busy your competitors are or provide a target for you to beat).
RESEARCHING INFORMATION
You can also use less direct means to find out more about your competitors. If you have a potential supplier, ask their sales representatives who else they supply in your area. Read trade magazines and attend the relevant trade or consumer exhibitions, sincemost of the businesses who are actively trading are likely to be there as exhibitors or visitors. Obtain pamphlets, sales literature, and price lists from shows or exhibitions. Here your competitors are at their most vulnerable since their goods are on display, and you can usually walk straight on to their stands. Also, look at their advertisements and check out their web site. If possible, speak to some past or present customers. Try asking direct questions, such as “How do you find…?” or “Do … deliver on time?” Sometimes the answers can be remarkably candid. If a competitor is a limited company, they have to file annual accounts and returns, which are available to the public.
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