Identifying Competition

To develop an effective business plan we need to understand and determine our competition.  It isn’t unusual for a company that is starting out to proclaim that they have no competition.  The fact is, frequently; they have not completed enough market research to realize all the competition factors. 

If a town has no restaurants and we want to open a restaurant there, do we have competition?  Sure, we do!  People could still get food from a grocery store and travel outside of town.  While eating at home doesn’t advertise against us, we are fighting for a share of the town’s stomach.  If another solution provides food for people, it is chipping into our share of the market.  It is incredibly rare to not have an alternative solution competing with yours. 

In this instance, the town has no other restaurant.  Granted, we would be the only restaurant, but we are not the only option for people to eat.  The grocery store would be considered an in-direct competitor.  They are not directly competing with us and even restaurants outside of our market are not direct competitors.  In-direct competitors are alternative choices, but not necessarily operating within your market segment or competing directly with you.

If we had another restaurant open across the street, they would be direct competition.  We are both targeting the same geographical and consumer segment.  Direct competition can be much easier sometimes to identify.

If a business founder cannot find any competition, they may want to take time to do more market research.  If there is no competition, there may be a reason or competitors that you have not yet realized.  If the reason is that the idea isn’t profitable or there isn’t a market for the offering geographically, we should reassess our vision.

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