Not only internal factors but also external factors can affect a company’s business. Business competitors or rivals can be aspects of a more productive, innovative, and valuable business driver.
For this reason, you must understand the importance and types of business competitors, as well as ways to compete fairly in the business world. When deciding to enter the business world, you must have considered the market conditions and the level of competition.
From the time and conditions in which the company was present, business potential as well as added value over competitors can be seen. Let’s see the complete information about business competitors below.
Definition of Business Competitors
Business competitors often referred to as rivals, are parties that seek to fulfill the needs and wants of the same target market. This competitor is an external party that can profit from the losses or failures of other businesses.
In addition, competitors usually also aim to distract customers. Even though it has the potential to become a threat to a business operation, business competitors can increase the competitive feeling of the market.
This impacts a company’s productive, creative, and innovative efforts to develop a winning strategy. For this reason, competitors are indirectly an external factor in the success of a business strategy in the market.
3 Types of Business Competitors
After knowing the understanding and importance of competitors in a business, you need to identify the types of competitors. Understanding the types of business competitors can support the analysis process to make business decisions. Below are 3 types of business competitors you need to know about.
1. Direct Competitor
The first type is direct business competitors, these external parties will aggressively offer similar products or services to the same target market. This type of competitor moves directly to take customers and market share from a business. Usually, they are involved in a price war or marketing dominance.
You can see this direct business competitor competing in the technology market. Various cell phone brands targeting the younger generation that actively uses gadgets will continue to fight price wars by offering competitive features. Then, the market share of instant noodles is now innovating to create unique flavors to capture the market.
2 . Indirect Competitors
Indirect competitors are parties that provide products for different market segments but fulfill market wants or needs similar to the company.
It can be said that companies and competitors of this type have the same business objectives, but with different supply methods and market segments. The two are interchangeable, albeit imperfectly.
What are examples of indirect competitors? You can see this type of competitor in the transportation business. Each mode of transportation functions equally to meet customer mobility needs, but with different segments.
For example, the competition between rail and air modes, although they have different market segments, can substitute each other.
3. Future Competitors
The last type of business competitor is a potential party to enter the market or can be called a future business competitor. This type of competitor usually waits for the right time to enter the market. For example, a robotics company has the potential to become a competitor to current IT companies.
3 Healthy Competitive Strategies
While competitors can be a supporting factor for business success, they can also become a boomerang for business failure. When dealing with business competitors, you need to use the right competitive strategy. Check out below the 3 healthy competitive strategies you can use to face business competitors.
1. Cost Leadership
The first healthy competitive strategy is cost leadership. A company can use low-cost production to maximize profits. This strategy usually prioritizes the number of products or services sold in the market to increase profitability. You can also sell your product or service below the market price to attract customers.
Cost leadership works with lower margins, cost efficiency, and sales volume. Implementing this strategy can help you maintain the profitability of your business when you face price wars in the market.
Differentiation is a competitive strategy that promotes innovation and uniqueness compared to other competitors. With the concept of differentiation, companies are not afraid to charge higher prices because they offer unique and high-quality products. The revenue target and profitability of this strategy are no longer related to a large number of products or services sold.
3. Narrowing Market Segments
The next competitive strategy is to narrow market segments or commonly known as the focus strategy. The concept combines cost leadership and differentiation but focuses on narrower market segments. No longer prioritizing competition in key markets, a focus strategy can increase your company’s customer loyalty.
However, there are drawbacks to this strategy that you need to consider. Narrowing the market segment also means that the volume of products or services sold is low. The attractive offer is the low competitive price, as there are no major competitors in the main market targeting a narrow segment of your market.
That was complete information about competitors you need to know. When running a business, external factors can support your business development. For this reason, it requires a special strategy, especially marketing to optimize business development.