Choose a Sign-in Option
Understanding who you are competing with can help you clearly define the industry in which you compete. Defining your industry accurately is critical to developing a cohesive strategy for your business.
What it is: An industry is a group of suppliers seeking to provide products and services to a common set of customers. The industry is defined by the suppliers who compete more so than by the customers who buy (this is called a market). But an industry is made up of competitors offering a similar service or product.
What it does. An industry is defined by what the job competitors do for their targeted customer base. Each industry has a set of competitors (who compete in the industry), buyers (those for whom the competitors are trying to do the job), suppliers (the companies that provide raw materials and services to the competitors), substitutes (those who supply different products that can do the same job for the buyers as the competitor's product offering) and potential entrants (those who could enter the industry and provide the same products and services as the current competitors in the industry). The interactions of all of the players in the industry will impact the average profitability of the competitors in the industry (see Porter Five Forces Industry Analysis in this library).
How it is used: By defining the specific industry in which you compete, you can more clearly understand who the competitors are and how you compete. It also defines the other players in the industry (suppliers, buyers, substitutes, and potential entrants) and provides a basis to project how their actions will impact your future market share and profitability.
Where: Industry and competitor definitions are a necessary part of well-written business plans and marketing plans.
Why: If you do not understand who else is providing what your customer is hiring you to do, or could do so in the future, then you are at risk to lose your customer. If you do not know who else meets the customers' needs in the same or a similar way , you are at risk of being displaced by that customer and potentially in the entire industry.
Where it shouldn't be used: It is always valuable to understand your industry and competitors.
Any restrictions: None
Warnings: Defining your industry and competitors too broadly or too narrowly can cause you to draw the wrong conclusions and overlook important competitive information.
Gathering data: Utilize industry experts, secondary research, customer surveys, and focus groups to gather information on what job your targeted customers are hiring your company and their products and services to do.
Identify competitors that provide the same products and services in the same way you do.
Document the buyers (customers) in the industry who have the needs and will hire companies to do the same job as you.
Document the suppliers who provide products and services to you and your competitors to make the products and services that they provide to buyers.
Identify substitute providers who your customers could hire to get the same job done, but differently than the competitors in your industry.
Forecast potential entrants that could provide the same products and services as your competitors. Try to forecast the drivers that would cause them to enter or keep them from entering.
Analyze the data: Use the data to identify the players in each of the five categories above.
Which competitors are the strongest in their category, and therefore the greatest threat to your market share and profitability?
Which ones are growing faster than the others? What is driving their growing market share?
Which ones are losing market share? Which have declining customer satisfaction (and why)?
What are the driving forces for the substitute suppliers to begin to target your customers?
Are you allowing profits to grow so much that you are inviting other potential entrants to enter your market?
Interpret the results: If all of your analysis points to a clearly defined industry, you have done your job well.
Present results: The results are often included in a business plan or marketing plan as part of the PowerPoint.
The use of a table like in the template is useful. Be sure to clearly identify the job the customer is hiring your industry to provide.
This content is provided to you freely by Ensign College.
Access it online or download it at https://ensign.edtechbooks.org/projectbased_internships/defining_the_industry_and_competitors.
