No matter how unique your product or service may seem to you, you will have competition. Consumers have an unlimited need for things, consumers have a limited budget (the basis of economics). They also will regard your product or service as having competition even if the logic of it escapes you. People niche products into groups where items can be substituted for on another, complement one another, and are purchased only when they have income at a certain level. You will need to think like a consumer of your own goods in order to realize who your competitors actually are. This subject is worthy of its own post and so we will gloss it over for the moment by simply having you jot down who you think your competitors are.

You have your list of competitors ready. Now, think what they could do to hurt your business. Without thinking of any potential solutions, write down all the ways your competitions’ business strategies may hurt or cripple your own business plans. Be broad and general as well as specific and targeted. Depending on your type of business, you may be dealing with both the businesses down the street and the entire global business community on the internet. 

Often the actions of other companies will be intended only to help themselves, but at other times their actions may be specifically targeted towards hurting you. What if your company site has a forum, feedback, or comments section and your competition starts posting negative feedback? If you can prove it, you have a way of fighting back (and potentially a lawsuit). If not, how will you deal with this negative feedback? What if the feedback is on other sites that you can’t control? If your competition is right down the street, what if they start cutting their prices to just below yours? Will you engage in a price war? What if a price war eliminates your profits? In general, how will you stay in business if your competition specifically targets putting you out of business? Address that and think of ways of dealing with that scenario so that you can both compete and profit.

Mostly, as stated before, the actions of your competitors will not be personal. They will be their own reactions to consumer behavior and competition in general. They will be motivated by nothing more than trying to increase or retain their profits and their share of the market. In your business plan you will need to discuss how the behavior of other businesses will change your business strategy. How will you deal with increased marketing efforts by your competitors? Will you increase your own marketing efforts? What if your competitors drop the prices on products or services similar to yours? What if a large and highly financed business steps into the arena as your competitor (or already numbers among your competition)? How will you respond?

Depending on your view of the companies involved, you may think of this example as belonging to either the former or the later category. In any case, a prime example of a company being both unprepared for and unable to ultimately respond to the behavior of a competitor would be the rather infamous Netscape Navigator vs Internet Explorer competition. Netscape was an early adopter of web technologies. They pretty much held the monopoly on advanced browsers. They could charge what they pleased and extend or limit the abilities of their browser at will. They had found a sweet spot in a niche market and were rolling in fame and glory (and one would assume money). To make a long story short, Microsoft put out Internet Explorer. Internet Explorer offered most of the features of Navigator. While web developers and designers regarded these products as being quite different (a tag war I won’t get into in this post), in the minds of most consumers these products were identical and interchangeable. The difference was that Navigator was priced at around $40 at that time and Internet Explorer was free. The consumer reaction to this price difference is obvious and the rest, as they say, is pretty much history.

In general, this exercise is to get you to acknowledge that your business will not exist in a vacuum. You will have competition. Your competition may or may not realize you are out there and may or may not regard you as competition. In any case, you must be ready, willing, and able to deal with and respond to the actions of other companies. You also need to acknowledge potential scenarios and how your business will adjust to these potential actions in your business plan.

Perhaps you have already noted that not all the issues you have address in this post (and in the previous one on worst-case scenarios) can be handled in a way that is both graceful and profitable. It has long been acknowledged that all business large and small have a point or points at which they cannot continue to function at a profit. Because of this, you must be ready to face the ultimate worst-case scenario: going out of business.

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