100 CHAPTER 5 KNOW THE WORLD
The industry – what you are up against
Having considered your product, customers and target market, the next step is to take a
look at the industry in which you operate. This is the sum total of all sellers of the prod-
ucts – in other words, it is your competitors.
You and readers of your plan must understand what you are up against. You need to iden-
tify the major companies operating in your market sector, then assess their products and
services, pricing policies, market share, profitability and strategies. Sounds difficult? In
fact, you probably have a much better knowledge of this than you think.
In some cases most of this information is readily available. In others you can compile
it from sources such as those described above. The easiest competitors to describe are
those in existence today. Do not forget to assess the likelihood that other companies
might be planning to enter your market sector. There is also a growing possibility that
corporations from other regions or countries will enter your territory. You might touch on
this here, but you will also want to include it in the risk analysis.
If you find that there are many companies operating in your defined industry, you
might want to categorise your competitors. You need to find strategic categories, where
all the members will behave similarly or be affected in the same way by certain events.
Size is usually a good characteristic. A given sales situation might be too big for small
companies and too tiny for big companies. If you are competing in the middle group,
you have narrowed the competition for this particular opportunity. The box below shows
some characteristics that differentiate companies.
You don’t buy a Rolex to tell the time
The chairman of Rolex, when asked about the state of the watch business, replied
that he had no idea. He defined correctly that he was not a watchmaker, he was in
the luxury business. A classic example of getting it wrong is US railroad operators.
In the mid-1900s they thought that they were in the railway business. They failed
to notice that they were in the transport business, competing against airlines and
highways – and have never recovered from that fatal error.
You need to look very carefully at your business from your perspective and
from that of your customers. Make sure that you do not omit key competitors
from your analysis.