Business Plan Training Session 3: Competition

Business Plan Training Series

Section 3: CompetitionChuck Behn

1 September, 2011

1. Executive Summary2. Product/Business3. Market opportunity definition4. Competition5. Marketing & Sales6. Management7. Finance/Risks8. Appendices

Components of a Business Plan

If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle. - Sun Tzu

The will to win is important, but the will to prepare is vital. - Joe Paterno

What counts is not necessarily the size of the dog in the fight, it’s the size of the fight in the dog. - Dwight D. Eisenhower

The ability to learn faster than your competitors may be only sustainable competitive advantage. - Arie de Geus

Competition brings out the best in products and the worst in man.  ~Author Unknown

Never interrupt your enemy when he is making a mistake. – Napoleon Bonaparte

Competition Quotes

Identify Threats

Gather Data

Analyze Data

Compare Results

Build Strategy

Competitive Assessment Process

Identify Threats Gather Data Analyze Data Compare Results Build Strategy

Direct

•Currently providing products

•Announced entering market

Indirect

•Substitute products/services

•Similar products/services

Potential

•Looking for acquisitions

•Alliance or partner with competitor

Porter’s 5 Forces

Porter’s 5 Forces

Competitive Rivalry

Supplier Power

Buyer Power

Threat of New Entry

Threat of Substitution

Porter’s 5 Forces

Competitive Rivalry

• Switching costs• Customer loyalty• Costs of leaving market

• Number of competitors• Quality differences• Other differences

Porter’s 5 Forces

Competitive Rivalry

Buyer Power

• Number of customers• Size of each order• Differences between

competitors

• Price sensitivity• Ability to substitute• Cost of changing

Porter’s 5 Forces

Competitive Rivalry

Buyer Power

Supplier Power

• Number of suppliers• Size of suppliers

• Uniqueness of service• Your ability to substitute• Cost of changing

Porter’s 5 Forces

Competitive Rivalry

Buyer Power

Supplier Power

Threat of Substitution

• Substitute performance

• Cost of change

Porter’s 5 Forces

Competitive Rivalry

Buyer Power

Supplier Power

Threat of Substitution

Threat of New Entry

• Time and cost of entry• Specialist knowledge• Economies of scale• Cost advantages• Technology protection• Barriers to entry• Etc.

Porter’s 5 Forces

Competitive Rivalry

Supplier Power

Buyer Power

Threat of New Entry

Threat of Substitution

Identify Threats Gather Data Analyze Data Compare Data Build Strategy

Market

•How many competitors, suppliers, customers

•Competitiveness of market

Industr

y

•Standard measures

•Market leaders

•Industry organizations

Company

•Quantitative (financials, market share, IP, etc)

•Qualitative (quality, customer service, product value, etc)

What kind of information is available?

Market Competitiveness Examples

McDonald’s

Burger King

Wendy’s

Jack-in-the-Box

In-N-Out

Sonic

Whataburger

Hamburger Fast Food Market

AT&T

Verizon Wireles

s

Sprint Nextel

T-Mobile

Wireless Telecommunications Market

Industry/Company Data

Quantitative Qualitative

Financial reports Market share IP (# of patents

awarded) Products/services

offered Pricing

Quality Customer service Product value Company image/style Employee treatment Location Convenience

Identify Threats Gather Data Analyze Data Compare Data Build Strategy

What is important and what are trends?

Major differences

Similarities

Missing data

Example

Differences/Similarities

Identify Threats Gather Data Analyze Data Compare Data Build Strategy

Against

Industry

•Industry averages

•Industry standards

Against

Leaders

•Strengths

•Weaknesses

Your Company

Predictions

•Financial projections

•Other projections

How do you match against your competition?

Comparing Industry/Leaders/Self

Perceptual Map Example

Quality

Customer Service

McD’s

BK

Wendy’sSonic

J-in-Box

Identify Threats Gather Data Analyze Data Compare Data Build Strategy

Do you have the right strategy to succeed?

Market leadership

Market challenger

Market follower

Market niche

Expand the total market Defending market share Expanding market share

Market Leadership

Frontal attack Flanking attack Bypass attack Encirclement

attack Guerilla attack

Cheaper goods Prestige goods Product

proliferation Product innovation Improved services Distribution

innovation Promotion focused

Market Challenger

Cloner – counterfeiter of leader’s products Imitator – copies some aspects of leader but

differentiates in others Adaptor – builds on top of the leader’s

products by improving on them

Market Follower

End User Specialist Vertical level

specialist Customer size

specialist Specific customer

specialist Geographic

specialist

Product/product line specialist

Product feature specialist

Job-shop specialist Quality/price

specialist Service specialist Channel specialist

Market Niche Examples

Summary

If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle. - Sun Tzu

Posted on http://finance.groups.yahoo.com/group/dfw_estartup/

Send questions to cbehn1@verizon.net or (817) 680-9165

Thank You!