2.5.2 The competitive situation
According to the Entrepreneurial Toolkit (2005), if you are entering an existing market, you will be up against competitors. Some may be firmly established and capable. If your market is new and attractive, you can be sure that it will attract other entrepreneurs like yourself.
How are customers currently satisfying the need you have identified (for example, with a landline phone instead of a cell phone)?
How would a smart competitor respond to your entering the market (for example, by reducing price, making product improvements)?
What are the strengths and weaknesses of the main competitors (for example, high quality, poor customer service, high price)?
Are the barriers to market entry high or low? Low barriers usually mean that competitors will continue to enter the market until returns (profits) are driven to a low level. If the barriers are high, how will you overcome them?
Have current competitors shown themselves to be capable of making quick adjustments to become responsive to customer needs?
What is the single worst thing that a competitor could do to your business prospects (chances) – for example; drop the price by 20%? When you have answered this question, think about how the worst thing would affect your chances of success and how you would respond. This will make you think about a number of strategies (plans) you will need to make to gain the competitive advantage.
2.5.2 The competitive situation