Last Updated on December 22, 2022 by Treana Wunsch
This article is the 11th in the blog series How to Write an Effective Business Plan. Each post guides you through writing a section of your business plan. I was going to write an ebook and charge for it but decided to give the information for free. In this article, I go over how to research and write the Competitive Strategy section of your business plan. If you want guidance on writing your own business plan, follow the series from the beginning.
What is a Competitive Strategy?
A competitive strategy is a key element of any business plan. It focuses on how a small business can gain an advantage over its competitors, allowing it to acquire more customers and increase market share. A competitive strategy must encompass all aspects of the company’s operations, from marketing and product development to customer service, pricing, and distribution.
For small businesses, crafting a successful competitive strategy may seem daunting. Fortunately, there are several strategies that can be employed effectively by small businesses looking to gain an edge in their respective industries.
These strategies include creating a sustainable competitive advantage over your competition through innovative products or services; leveraging relationships with suppliers; creating economies of scale through efficient use of resources; utilizing data-driven decision-making; and focusing on niche markets or segments where the competition is weaker.
How to Research Your Small Business Competition
When starting a small business, it is important to know your competition. Researching the current competitive landscape in your industry can help you create a strong competitive strategy for your business plan. Knowing who makes up your competition and what they are offering in terms of products and services will give you an idea of how to differentiate yourself and stand out from the crowd. Additionally, understanding the strengths and weaknesses of each competitor will inform decisions about pricing, operations, marketing, and more.
To begin researching your competitors, start by searching online for other businesses in the same industry as yours. Gather information about their size, target market and customer reviews. Please take note of their promotional strategies such as website design, social media presence or advertising campaigns. Also, consider which channels they use for marketing themselves – this may provide insight into where you should focus your own efforts.
Research and Analysis
Research and Analysis are essential components of any business plan. Effective research helps a business identify its competitors, target customers, and overall market conditions. A thorough analysis of the data gathered through research provides insights into potential strategies to help a business achieve its goals.
To create an effective competitive strategy for a business plan, it is important to understand the current market landscape, customer needs and preferences, as well as the strengths and weaknesses of competing businesses.
Through careful research and analysis, businesses can develop a tailored strategy that takes into account their own capabilities and those of their competitors in order to gain an edge in the marketplace. This includes identifying unique opportunities for growth or innovation that may be overlooked by others.
Additionally, properly analyzing data from customer surveys or other sources can provide valuable insight into how best to position products or services for maximum appeal.
Your research into the competition never stops. It should be an ongoing part of your business journey. Failing to innovate and adapt will lead to possible failure.
How to research your competition
Researching your business competition is a crucial part of developing an effective and comprehensive business plan. Knowing who the competitors are and what their strategies are can help you develop an effective competitive strategy of your own. There are several steps you can take to research your business competition.
First, use the data from the market survey you conducted to identify potential competitors in the field or industry that offer similar products or services. Once identified, research each competitor’s background, such as their history, financial information and customer base.
You should also look at how they brand themselves and any pricing strategies they use to attract customers.
Additionally, research any promotional materials or advertising campaigns they may have used in the past and if those campaigns were successful for them.
Strategies and Tactics
Successful business plans often include strategies and tactics that enable an organization to gain a competitive edge in the market. Strategic planning is about looking at the bigger picture of where your business will be in 5 or 10 years, while tactical planning focuses on short-term goals that are used to achieve longer-term objectives. A well-developed strategy will help you differentiate your brand from competitors and make sure you stay ahead of changes in your industry.
As part of any competitive strategy, it’s important to have a clear understanding of what sets your business apart from others operating in the same space. Knowing how customers view you compared to other companies can help identify areas where further improvement may be necessary. Tactics provide structure and direction for day-to-day operations, enabling businesses to capitalize on opportunities as they arise while managing risk effectively.
Sustainable Competitive Advantage
Sustainable competitive advantage is a key concept when developing a business plan. Achieving this goal requires businesses to establish an edge over their competitors that is difficult or impossible to replicate. It can be based on several factors such as technology, price, customer service, product quality and marketing strategies.
Businesses must continually strive to differentiate themselves from their competitors in order to succeed. This requires a well-thought-out strategy that incorporates the various elements of sustainable competitive advantage into the business plan. Companies must focus on creating long-term value for their customers by providing superior services or products and continuously improving them so they remain ahead of the competition.
Additionally, businesses need to develop unique selling points that are not easily copied by other organizations. This could include using innovative technologies, offering customized solutions at lower prices or providing premium customer services that cannot be matched by rivals.
Build Relationships with Suppliers
A key element of a successful business is developing strong relationships with suppliers. Establishing positive relationships will help ensure that your company has access to the materials and services it needs. Additionally, good supplier relationships can lead to increased efficiency, improved product quality, and lower costs. To build successful partnerships with suppliers, here are some tips:
First and foremost, be honest in all dealings with your suppliers. Make sure they know what you need and when you need it. Give them clear expectations up front so they can provide the best service possible. If there are any changes in the order or timeline, make sure to communicate these promptly as well. Also, be open to negotiating terms such as payment schedules or delivery times whenever possible.
Creating Economies of Scale
Creating Economies of Scale is an essential part of any successful business. It allows businesses to optimize resources, minimize costs and maximize efficiency when competing on a larger scale.
Businesses can benefit from economies of scale through cost savings by producing more products at lower unit costs, utilizing bulk purchasing benefits or by leveraging their size to negotiate better prices with suppliers. By taking advantage of these cost-saving opportunities, businesses can reduce their overall expenditures while increasing profits margin.
Additionally, they can increase their efficiency and competitiveness in the market by specializing in certain areas or developing new technology that would allow them to produce goods faster and cheaper than competitors.
Data-driven decision-making is an essential part of any successful business. In a competitive marketplace, it’s important to have the ability to make informed decisions quickly and accurately. To do this, data must be collected from various sources – both inside and outside of the organization – and analyzed in order to identify trends, anticipate customer needs, and develop strategies that will put your company ahead of the competition.
Data-driven decision-making requires an understanding of predictive analytics techniques such as regression analysis and machine learning algorithms that can help you make sense of large datasets. You also need to be able to use data visualizations like charts and graphs to gain insights into customer behaviour or market trends. By leveraging these tools, you can create a competitive edge for your business by optimizing decisions based on current market conditions rather than relying on intuition alone.
Focus on Niche Markets
When crafting a business plan, the competitive strategy should include an analysis of other companies in the industry and the target market. A key to success is focusing on niche markets that offer potential profits. By having a clear understanding of which customer segments have unmet needs and can be satisfied with a unique offering, businesses can create and sustain a competitive advantage.
Niche markets are typically underserved by larger companies as they are too small or specialized for them to target. This provides an opportunity for smaller businesses to gain market share by providing tailored products or services specifically for this group of customers. Additionally, niche markets require fewer resources in terms of marketing campaigns, advertising budgets, product development costs and more than larger consumer groups because the focus is on a particular segment with specific requirements.
Appendices for Competitive Strategy
An effective competitive strategy is essential to success in any business. For businesses interested in developing a comprehensive business plan, understanding the role of an appendix can be just as important. Appendices for competitive strategy enable businesses to provide deeper insight into their strategic objectives and plans for implementation.
The appendices should provide a detailed description of the company’s competitive position, industry trends, and potential threats or opportunities that could interfere with the company’s goals. This information can help create a better-informed plan and allow investors to evaluate the strategies proposed by management.
The appendix should also include research conducted on competitors and any strategies they may have implemented that were successful or unsuccessful. Including this information will help inform decision-makers of potential risks, threats or opportunities that may be faced along with strategic solutions for addressing them.
Putting It All Together
Once you’ve researched this section thoroughly, it’s time to get it into the business plan. Choose 3 of the closest competitors and describe each of them including products, services, prices, customer service, address etc.
Then list their advantages and disadvantages.
Now it’s time to compare your business to theirs. Outline the business characteristics similarly to how you listed your competitor.
Next, list what your advantages and disadvantages will be.
Be realistic. Your investors want to know that you don’t have unrealistic expectations for starting your new business.
Here is an example of a Competitive Strategy from my Classic Business Plan Template.
That's All Folks...
The Competitive Strategy section of a business plan is an important tool in helping your business succeed. When done right, it will help you identify and modify your own strategies to stay ahead of the competition. It should include a comprehensive analysis of your competitors and their strengths and weaknesses. Additionally, it should include information on how you will differentiate your products and services from those of the competition. Finally, don’t forget to include an action plan for implementing your strategic goals.
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