“You can’t look at the competition and say you’re going to do it better. You have to look at the competition and say you’re going to do it differently.” – STEVE JOBS
⏱️ Reading time: about 9 minutes
Knowing your competition isn’t about paranoia; it’s about awareness. Whether you’re the market leader or the new kid on the block, your competitors define the field you’re playing on. Even if you’ve created something brand new, that advantage only buys you time before others show up to imitate or outdo you.
Your job is simple: stay alert, stay creative, and stay ahead.
In this section of my 5 Step Guide to Running a Successful Business, we’ll dive into how to understand your competitors, learn from them, and then differentiate yourself; not by copying, but by innovating.
Here’s What We’ll Cover
✅ How to set yourself apart and gain a competitive edge
✅ The different types of competitors
✅ How to analyse and map your competitors
Why You Must Know Your Competition
Knowing your competition is part of your business due diligence.
It’s not just about who’s currently in the game; it’s about who might enter it. The real threat often isn’t the company next door, it’s the one you haven’t noticed yet, building a better, smarter version of what you sell.
It’s a rough world out there. Many players don’t play by the rules, and some will flat out copy your work. Don’t waste energy being bitter about it. Take it as a compliment. It means you’re doing something right.
The secret? Never stoop to their level. Customers can always tell the difference between an imitator and a leader. Make sure the leader is you.
1. Understanding the Different Types of Competitors
To build a smart strategy, you must first understand who your competitors really are. Let’s break it down:
Direct Competitors
Direct competitors are the ones that are there when you think of a particular product. They often have the same audience as you, offer an identical or similar product to you and are similar in running their business and marketing strategies. Let’s say for example, Macdonalds and Hungry Jacks; both cater for burgers, and their customer is hungry.
Indirect Competitors
Indirect competitors are the ones who don’t solely sell your main product. So there is a pizza shop opposite MacDonalds. They don’t sell the same product, but they cater to the same hungry customer.
Replacement Competitors (Phantom Competitors)
Replacement competitors are often the ones that I perceive to be the most dangerous. They can make your product or service redundant simply by offering or providing a new solution to your product. A great example of this is that good old fashioned digital camera that every household had and took with them on outings and holidays. Those devices could no longer compare or compete with the emergence of smartphones in the market. It was not only the constant improvement of their technology but the convenience alone of an all-in-one device that was highly beneficial. Replacement competitors are also known as “phantom competitors”.
Secondary Competitors
Secondary competitors often offer a higher-end or a lower-end version of what you are offering. They usually target a different audience than you do. Think of the no-name brands of running shoes sold for $15 at a store. They target a consumer who is not willing or cannot afford the $150 branded running shoes. This audience is different and targeted differently. They are still your competitor but are known as “secondary”.
Power of Suppliers
The Power of Suppliers is a threat that is most commonly overlooked. Check to see who your suppliers are in the market and if they are competing with you. They may often trade under a different name so that they will not be evident to you initially. They may not yet be in the market but will shortly follow if your success is more significant than theirs or if they wish to take a share of the retail marketplace. As part of risk management it is always advisable to source your product or materials from several suppliers.
| Type | Description | Example |
|---|---|---|
| Direct Competitors | Offer similar products/services to the same audience. | McDonald’s vs. Hungry Jack’s |
| Indirect Competitors | Different products, same customer need. | McDonald’s vs. local pizza shop |
| Replacement (Phantom) Competitors | New solutions that make yours obsolete. | Digital cameras vs. smartphones |
| Secondary Competitors | Higher-end or lower-end alternatives targeting a different audience. | Nike vs. $15 no-name shoes |
| Power of Suppliers | Suppliers who may compete against you, often under a new name. | Wholesaler launching a retail brand |
💡 Key Takeaway:
Before you can win, you have to know who’s in the race.
Don’t just identify who sells what you sell; identify who satisfies the same need your product meets. Your biggest threat may be invisible until it’s too late.
2. Competitor Analysis: Learn Before You Leap
Analysis – Before you start your business, you should take the time to collect and analyse information about your market which would include competitors. A SWOT analysis is beneficial in this instance, and you could also get an external organisation to do this for you as they would be able to go through and explain their findings in detail.
When we learn about our competition there are many factors that we need to consider and what would set us apart from them.
Some of the things we need to know about our competitors are:
Pricing – beware of price wars. They create illogical reactions where no one comes out a winner. On the contrary, it can result in enormous losses.
The difference in the product and its durability or quality. You don’t have to be cheaper than your competitors. You must be different.
After sale service – Warranties or guarantees offered, refund policies and exchanges.
Target audience – perhaps there is a gap or niche market there for you. This is where you need to do your market research and think outside the box. Understanding your target market is critical. Who else could benefit from your product that your competitor has overlooked? Niche is great.
Different Market Places – If your competitor is advertising only on Google, you should look at advertising on Google, Bing, and Yahoo. If they are selling on eBay, you should be selling on eBay and Amazon. If they are on Facebook, you should be on Facebook and Instagram. Always find marketplaces where your competitors are absent. Going online and becoming part of the digital world is an absolute must for all businesses.
Accessibility / Customer Service (especially in the online world) – phones, emails, physical address. Consider downloading whatsapp for business. If they are offering a high level of customer service, don’t copy it; just find a way of improving yours and exceed theirs.
Location – see their exposure, how much traffic runs through – even check what their parking is like, do they offer accessibility to disabled?
Communication, how long does it takes them to respond, and how courteous are they?
Reputation– look at their branding and how they are viewed. Are they online? Social? What is their reputation as an employer?
Social Media – Look at their social media; how are customers engaging, and what are they saying? Can you see a gap that you can fill? Social Media can be one of the best tools to analyse your competitors.
Established – How long have they been around? What is their expertise like?
Size – How big are they? How many employees do they have? Do they use subcontractors or freelancers in certain areas to reduce their overheads? Do they outsource some of their business tasks? We certainly did, which contributed to our profitability. Consider upskilling your staff. It has great benefits and keeps you one step ahead of competition.
Value – Do they offer more value? If yes, where? In the product or in the service? What kind of selection do they have?
Marketing – Look at their marketing and see how engaging they are.
Success & Errors – Find out what your competitor is doing or has already done and has or has not succeeded.
Learning from other people’s mistakes is paramount and can save you an absolute fortune. Understanding what makes them successful and what works is equally important.
Surviving Economic Downturns – Recession proof your business and stay a step ahead of your competition. Know what to do in tough times without going into a price war which has no winners.
💡 Key Takeaway:
Analyse both strengths and weaknesses. What your competitors do poorly is your biggest opportunity.
Maintain a Good Relationship with Competitors
Here’s something most entrepreneurs forget: your competitors aren’t your enemies.
Your competition does not have to be your enemy, so you should not view them as such. Develop your relationships!
During our toughest days (including the COVID lockdowns) some of our biggest business breakthroughs came through collaboration with competitors. We shared stock, referrals, and ideas to survive.
👉 Pro Tip: When talking to competitors, do less talking and heaps of listening; insight and information are Gold.
Never burn bridges. You never know when you might need to cross one again.
Similar businesses can often enter into strategic partnerships or joint ventures to strengthen their outreach and audience or scale their business.
Set Yourself Apart: Your Competitive Advantage
Competition doesn’t kill business. Complacency does. To truly lead your industry, you need to stand out, not blend in.
Differentiate yourself well when dealing with competition. In addition to the above analysis, you need to be able to close the gap or lead the way as much as possible. This is where your reviews matter, customer experience matters, and word of mouth as it forms part of your “goodwill”. This is an important intangible asset to any business.
Innovation is vital in staying ahead of your competition.
Don’t copy. Learn from your competitors and be different. You are running in the same field, and knowing what works and what doesn’t work, is the smart way.
You should, ideally, create new products or services that keep you a step ahead, but make sure to assess the risk of cannibalisation in business.
Be culturally aware of your markets and communicate to customers in their language and tone. Heck, learn a second language if you have to. It’s a super power!
Consider your carbon footprint and become a leader in your industry by prioritzing sustainable practices.
Attract and retain talent. For example, offering a 4 day work week can be a compelling differentiator for prospective employees.
Create a killer online presence / website. Learn technology and how it can place you at an advantage. Simple things such as having CDN’s in place where your site loads faster and gives the user an enhanced experience can make all the difference.
These sorts of things will give you the competitive advantage you are looking for. Competition makes you better!
Customer Experience: The Ultimate Differentiator
Customers will happily pay more for an experience that makes them feel valued.
That’s exactly how we built our business. We didn’t sell products ; we sold solutions. We showed customers how our product solved their problems. That made the product awesome by default, and it’s why we could charge premium prices.
Great experience = returning customers = long term success.
4. ACCC regulations
A quick but vital reminder: always play by the rules.
The ACCC (accc.gov.au) sets out some guidelines on anti-competitive conduct, unconscionable conduct, misuse of market power, and pricing conduct, to name a few.
You don’t want to win a market battle only to lose in court.
Final Words
Competition keeps you sharp. It forces you to evolve, adapt, and become better.
Knowing your competitors is not about obsessing over them, it’s about understanding the game and choosing how you play it.
Never copy. Always improve. Let your work, your ethics, and your innovation do the talking. Because when you lead with quality and integrity, the market notices.
Knowing your competition is step four in my 5 basic step guide on how to run a successful business.
Let’s check out the other 4 steps below and see more information on each:
It’s essential to understand these 5 steps and their content as they are the foundation of running a successful business. Practical real-business life information that every business owner needs to know.
I also have a bonus step on how to sell your business. I have included this as this can form part of your exit strategy as it did mine.
✍️ About The Author
From building a thriving company to mastering the frequent flyer game, Cranky Boss has learned that in both business and travel, the journey teaches more than the destination. A Melbourne Business Awards finalist with a knack for building strong teams and keeping things real, Cranky Boss shares the wins, the mishaps, and the occasional “OMG” moments along the way.
Today, Cranky Boss brings real stories, sharp insights, and a grounded perspective from the boardroom to the boarding gate.
Read more about Cranky Boss →
✍️ Quick Facts
Miles flown: Closing in on one million | Hidden talent: Turning frequent flyer points into first class tickets | Coffee strength: Dangerously high | Office pet peeve: Speakerphone calls | Business mantra: Culture first, profit follows | Superpower: Understanding people before they speak.
