Why You Need to Know Your Competition

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When you start a business it is important to assess the competitive landscape so you have a strong sense as to who is targeting the same customers as you, what resources they have at their disposal and the bases on which they intend to compete i.e. product features, service quality, price, focus etc.


If you are drawing up a business plan, an understanding of the wider context will help you compete effectively. There is little sense in entering a market with an inferior product, without a known brand and lacking a solid distribution channel, if the space is already occupied by a behemoth with a brilliant product and ample marketing resources.

On the flip side, the absence of meaningful competition can be a signal that the market is immature, or demand is weak. On the odd occasion, however, the lack of competition can be due to some significant innovation on the part of the entrepreneur, or when some true visionary sees an opportunities before everyone else. It is hence worth getting a lot of impartial, and independent feedback to ensure you are not falling into the former camp where demand is weak and the odds of success remote, when you think it is because you are a true visionary!

Definition of Competition

Defining your competition is an important consideration, as you need to be careful not to define it too narrowly. If you fall into this trap it is likely that competitive or substitute offerings can enter the market unexpectedly and disrupt it significantly, catching you off guard as it were. Instead it is better to define the competitive landscape more broadly, taking into consideration close substitutes which may be providing better solutions to the same target market. (For a more in depth look at this point it is worth researching Theodore Levitt’s seminal 1960, Harvard Business Review paper, Marketing Myopia).

How do I figure out who my competition is?

One simple way is get a good sense as to who your competition is, is to ‘Google’ the three or four groups of keywords you would like to be found for. Practically every commercial entity wants to dominate the Google serps landscape for their chosen keywords so are likely to have optimised their sites to appear high in the rankings.

You can also gauge from the number of PPC adverts how competitive the landscape is. An absence of these will suggest an immature market with weak demand (or perhaps the fact the keywords you have used for your search are not relevant). For example, in the business planning software industry where Palo Alto Software participates, words we like to appear at the top of the rankings for include, generic terms like; business plan, business planning, as well as product category words like business plan software and brand words like Business Plan Pro and LivePlan.


The most well known framework people use for strategic development (including competitive analysis) is Michael Porter’s Five Forces. By using the framework you can map out the various competitive tensions at play so as to assess the attractiveness (or otherwise) of the industry you are looking to compete in. Similarly, his generic strategies framework can help entrepreneurs assess which marketing strategy is worth focusing on as a basis for competing.

In Summary

It is a lot easier to monitor competitors these days using social media tools like Twitter, and Google. However, ‘knowing your competition’ does not equate to copying what they do. After all, it is not easy to discern if various components of their make-up are effective or not. Casting an eye at where competitors and those with substitute offerings are deploying resources is a worthwhile pursuit, but that is all it should be. The primary goal for businesses is to drive shareholder value after all, and this is best achieved by focusing on meeting the needs of your target audience better than anyone else does, and consistently innovating so as to ensure your proposition always stacks up favourably against the wider competition.

Alan GleesonAlan Gleeson
Alan Gleeson
Alan Gleeson is the General Manager of Palo Alto Software Ltd, creators of LivePlan and Business Plan Pro. He holds an MBA from Oxford University and is a graduate of University College, Cork, Ireland. Follow him on Twitter @alangleeson
Posted in Business Plan Writing