By Andrew Hupert

China markets are getting MUCH more competitive. Where is the competition coming from? Overseas firms selling into China ? Existing local firms? Other Chinese firms that are starting to expand into your territory? New local companies? Other local companies that have been around for a long time but have started to compete with you recently? YES to all of these.

RULE #1. If ANYONE wants to buy your product, then you have COMPETITION.
There is a special name for companies that don’t do FORMAL competitive analysis because they think they have no competition: BANKRUPT COMPANIES!

If you are a profit-seeking business, you have competition. The only kind of company that has absolutely no competition is the company that makes a product absolutely no one wants to buy. The rest of us have some kind of competition. It may be INDIRECT competition, but it still affects our business.

BPC has heard of a company in HK that makes toilets out of GOLD. Surely, this is a unique product with absolutely NO competition, right?
Wrong. They have competition. In fact, they have 3 kinds of competitors.

Direct: Other makers of toilets.
Indirect: Makers of other super-luxury goods.
Potential: Companies that don’t make golden toilets now, but would start if the market for golden toilets develops.

Competitive analysis tells us:

Who is in our business
What products compete with ours
What are the prices of other products
WHO THE CUSTOMER REALLY IS

We have to understand HOW CUSTOMERS VIEW OUR PRODUCT.

Question: Nike – Is the company in the sports-equipment industry….or the apparel industry?

Market Segments
How is market divided? All markets are divided up into SEGMENTS, based on what kind of consumers buy what kind of products.
Example: The Shanghai business training market. If you want to improve your business skills in Shanghai, you have a lot of choices. Different people will choose different options, according to their needs, tastes, budget, and preferences. If you are competing in this market, you may divide it up into segments such as:

MBA programs
EMBA programs
Certification
Business English
In-house training
Skills-training institutes
Seminars

How to conduct competitive analysis
We start by answering these questions:

What is our product?
Who is our market?
Who else sells to our market?
Why do people buy our product?
What else can they use instead?
Who is the customer?
Can we develop a PROFILE of our customer?
How many different TYPES of customers do we have?

Competitors
There are three main types of competitors you need to worry about.

Direct – These are the people trying to take your customers away from you right now.
Example: Nike and Reebok
Indirect — You might not see these companies as competitors, but when your customers have a limited budget they may choose to spend money somewhere else. Your customer may buy a new sweater instead of a sweatshirt. He may buy a new cellphone instead of an MP3 player.
Example: Nike and Baleno
Potential — The most dangerous competitor is the one you don’t know about yet. Competitors can come from different regions or countries or from different industries.
Example: Nike and NewCompanyX or Nike and AustrialliaCompanyX

China Question: Who may enter the market and become a competitor in the future?
Answer: EVERYONE!

Andrew Hupert, Best Practices China