How to deal effectively with business rivalry

How to Deal Effectively with Business Rivalry

Rivalry is one of Porter’s 5 forces of strategic industry analysis. And, when considering what you want to achieve and where you want to go with your business, be prepared to scrutinise the rivalry in the industry. There are occasions when entrepreneurs have opportunistically entered the market with not much aforethought to the competition – they seem to have just ‘happened upon’ a product or service that has been right for the market at that time. These occasions are rare. The majority of business owners have to initially and continuously measure the threat of rivals and find ways to take advantage and compete effectively.

Porter’s generic competitive strategies: differentiation, cost leadership, and focus can help to determine where you might place yourself in the industry to increase your chances of success and profitability.

Before taking your product or service to market you may wish to ask yourself some questions, such as:

  • How many competitors are there in the industry you’re entering?
  • In what way are they different to you? Do they offer a difference in quality or price?
  • How diverse are they and how easily can they diversify further?
  • Can you impact on the existing customer loyalty of your rivals?
  • Do you have something different and unique to offer?
  • What about the costs involved in leaving a not very profitable or declining market?

Taking the time to positively address such questions can help gauge which competitive strategy to adopt to allow you to use your strengths to your advantage.

If you have a small business you may wish to stay clear of competing in an already overcrowded market where rivalry is high and often fierce. Small businesses normally have little financial capital or resources to compete with bigger players who are already established. Adopting a low-cost strategy in such a market would in all probability be futile.

If you spot a gap in the market, however, you will then be better placed to offer a strategy of differentiation or focus on a niche market or both. If you have something unique and different to anything else in the market then you will be in a great position to get ahead of your competitors. However, be sure that your product or service is difficult to copy as rivals will do their best to imitate.

You may also be able to create a product or service that serves a niche market. Small businesses can use their ability to develop personal relationships and foster customer loyalty to gain a competitive advantage over their rivals. They can also offer agility and greater flexibility than their larger rivals which means they can adjust quickly if need be.

Whatever strategy you decide upon, closely monitor your rivals and stay alert to market changes to maximise the chances of success and profitability of your business.