Who is your competitor?


At first sight, the answer to the question ´Who is your competitor? seems easy: All companies which produce or market similar or comparable products and services. However, this is a limited view, because, in general, competition is not limited to direct rivals, but goes far beyond. And management practice shows that it is the indirect or new competitors which are the most dangerous as they are either unknown or not considered rivals in the first place.

Basically, we can differentiate among 7 types of competition:

  1. Brand Segment Competitors
    These are companies which offer comparable products to the same target group. Thus, the Opel und Ford automobile brands are positioned similarly and address more or less the same customers.
  2. Product Class Competitors
    With this extended definition, a car manufacturer not only regards its direct, similarly positioned rivals as competitors, but all producers of cars.
  3. Functional Competitors
    From the point of view of a car manufacturer, functional competitors include all other means of transport, such as railway, plane, taxi or bus.
  4. Generic Competitors
    These include all companies which compete for the same customer money. Thus, Cadillac would see itself competing with providers of high-value cruises which also address the ´elderly wealthy´ as a target group.
  5. Vertical Competitors
    Vertical competition exists if a company competes with enterprises in the same value chain, which can also be its customers. Example: Retail brands compete with the brands of consumer goods manufacturers. At the same time, retailers are the customers of the consumer goods producers.
  6. New Competitors
    New competitors can either come from adjacent industries or from fast-growing geographic areas: Apple, traditionally a computer manufacturer, has revolutionized the mobile phone market with its I-Phone. Concerning new geographic areas, an increasing number of new competitors, often positioned in the low price segment, is entering European markets, threatening established companies.
  7. Substitutes
    These are alternatives that a customer can choose: Renting a house can be seen as a substitute for building a house and downloading a song from an Internet portal is a substitute for purchasing the song on a CD.

Which new or potential competitors can you discover when applying these 7 competitor categories to your company? What conclusions do you draw from your analysis?


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