Strategic Business Planning - In What Market Do You Compete?

One of the keys to successful strategic business planning is a clear understanding of the boundaries of your market and also the factors that influence your business within that market. Unfortunately, many management teams are unable to answer fundamental questions in regards to the market they operate within. So how can they possibly be focused on growing the business and making it more successful?

Try a simple test. Ask five people within your business on the spot to tell you in ten seconds the answer to one of the following questions.

• What do we do in our business?
  
• What are we really good at?
  
• Who are our customers?
  
• Why do they keep coming back?

The answer to these questions provides you with the information your business needs to compete in your chosen market in order to win and succeed.

Defining the boundaries

When you begin to think about defining the boundaries of your business, think about drawing a circle around a marketplace in which you intend to compete. You can then clearly look inside that circle to see:

• Who are your customers;
  
• What are their needs;
  
• Who you are competing against;
  
• What is the basis of competition; and
  
• How you are going to compete and win.

Key questions to ensure you understand your market and its boundaries.

The following questions will help you draw that circle and understand what is happening within your market.

1. How would you describe the market in which your business competes, in terms of the:
   
   • products and/or services it delivers;
     
   • geographical boundaries in which they are delivered;
     
   • demographics of the customers who purchase them;
     
   • value/benefit/purpose which they receive.
   
   
2. Looking inside that market describe the influence or impact that each of the following attributes has on the potential profit you can make:
   
   • basis and intensity of competition (eg price and highly intense);
     
   • number of suppliers (people you buy from);
     
   • number of buyers (people you sell to);
     
   • availability of alternate/substitute products/services;
     
   • ease of entry and exit of new competitors to the market.
   
   
3. List the factors you believe are going to have the greatest influence on the market in the next five years and why (e.g. technology, changing consumer preferences or demographics).

The answers to the above three questions combined together create a map which defines the market in which you compete, the intensity of competition and influences on profitability from within the market, and those key agents that will determine what happens in the market over the next five years.

Understanding the market in which you compete and the influences on that market is a great starting point to working out how best to compete in that market to be successful.

Richard Shrapnel, Director, Pitcher Partners. For futher information Phone: (03) 9289 9005 or Email: rshrapnel@pitcher.com.au
First published: 8 September 2004.
Last updated: 5 October 2005.