The other part of the market that we must study and explore is the Competition. As I mentioned earlier, "Business is War" and we must know everything we can about our competitors. We must also ask ourselves where would our potential customers go to buy a certain product if they don't buy it from us?
For that product or service that we are selling we have competitors who are selling relatively the same product to the same market. These are direct competitors. MacDonald's and Burger King are direct competitors as are Home Depot and Lowe's. They sell the same items to the same market.
Some aspiring entrepreneurs when queried by me when they were applying for financing, told me that they had no competition. How naive! Everyone has a competitor, they just didn't look hard enough. The only time that you wouldn't have a competitor is if you have identified a niche with an unfulfilled need!
Indirect competitors are those who sell the same product through a different distribution channel and thus to a different market. For example, consider Hallmark Card stores. Their indirect competition are those who sell greeting cards from a different kind of store, like CVS drug stores. They sell a wide array of personal products, pharmaceuticals, and greeting cards. Target Department Stores which sell tires and auto parts are indirect competition for the Pep Boys Auto Centers. Direct merchants or catalogue companies are indirect competition to department stores. L. L. Bean's catalogue business is an indirect competitor to Banana Republic, for example.
How to Find the Competition
You may have a good idea of whom your competition is. But you need to corroborate and substantiate it. For a small business, the first place to look would be the Yellow Pages. There you have all businesses organized by business line. All you have to do is to look up the particular business line and you will find numerous businesses indicated. They are listed in alphabetical order and some of them even have ads on the pages.
From these ads you will perceive a certain kind of image about that advertiser -- whether it is a large business, with many services, or not. To corroborate this information you should visit the businesses and determine if your impression of the business is the same of what you physically see. Can you get any ideas from the sales people or the attitudes of the customers when they are shopping in those stores? Is it a pleasant atmosphere or is the place disorganized and crowded? You can determine how you would fashion your business in view of this competition.
In addition to the Yellow Pages you can go to a business library and search Dun & Bradstreet's for the competition on a wider scale and territory. You will need to know the business line and/or the NAICS or SIC code (North American Industrial Classification System or Standard Industrial Classification) to do a sorted search. There are other resources for you to check, just ask your librarian the best place to look.
Another place to look for competitors is by contacting your Chamber of Commerce. The Chambers have lots of information on the business area. National trade and professional associations publish newsletters and magazines that not only predict trends, but also tell about current businesses.
Market Intelligence/Competitive Intelligence
The gathering of information on your competition can be an exhaustive effort. However, this effort never stops. You are always looking for information from magazine articles, industry newspapers and financial analyst reports about your industry no matter how mature your business is. Not only are you keeping track of the competition and any innovations they may be developing, but you are also keeping track of your targeted consumer. What is he doing now and how are his buying habits changing in view of the happenings in the economy and the environment. Is he nesting because he feels that going to the movies is too expensive and he would rather rent a movie and watch it at home on his wide screen HDTV theatre?