Let’s face it, nearly every business is operating in a hyper-competitive environment. We have the Internet (and the World Wide Web); we carry smart phones (with all the associated expectations of availability and service); and, invariably, we have a mixed culture within society that has direct market links crossing the planet.
The Two Choices of Competition
You have two choices. The 1971 choice or the contemporary 2012 choice.
The 1971 choice is to target your customer within 10 or 20 miles of your bricks and mortar premises and hope, through broadcast advertising, to attract them to your limited offering. In a confined market with a good balance of competition you could make a good living with an electrical store using that business model (in 1971).
The contemporary 2012 choice is to accept that nearly every business operates in a global hyper-competitive context. Your customers have more choice, are better informed about alternatives and substitutes and they can cross large areas of the planet to get a better deal, better service or a particular product or service.
If you sell coffee to go it’s also true. Starbucks, Hudson’s and every other global corporation are pushing their way into your local area so if you do choose the 1971 option your days may well be numbered simply because the rest of the planet are coming to compete with you.
The Rational Choice is to Compete
This is where the rubber meets the road – a strategic business plan and an integrated marketing strategy (possibly including an e-strategy) and a budget.
The most important thing that these pull together are the important researched factors at play in the business environment, strengths and weaknesses / opportunities and threats, and your ability to fund appropriate strategies.
It sounds simple… and boring… so large swathes of small businesses try to skip that step and jump into their market without understanding the competition, pricing, effective marketing or the customer. Shotgun approach… 99 per cent miss rate… and if they don’t go broke they are either plain lucky or exceptional.
Further, those strategic documents need to live in your desk and are amended whenever anything changes. If inputs rise or a competitor enters the market your business plan is affected.
If there are things you don’t know how to do without great pain and a few coin tosses – accounting, legal advice, management and marketing skills – then your budget should be able to accommodate consultancy fees. A good consultant should make you more money than they cost.
Understand why you are Competing
It’s important to understand why you are competing and to come to terms with the idea that competition is what makes a healthy industry.
But that’s not enough to really motivate you to try harder. So I’d put it this way:
If all things being equal in your industry the business that knows the most about the market, the customers, the competition and the environment (understanding their strengths and weaknesses / opportunities and threats), within a defined budget, should have the competitive advantage over those businesses that choose the 1971 strategy.
In most cases. Most of the time. Enough to explain why the majority of small businesses fail.