Entrepreneurship Week 8 Competition

Culture Center – Main Library Invitation to attend 15 Science Festival SQU 2 – 6 April 2017 Culture Center – Main Library From 8AM -2AM & 4PM – 7 PM

Business Plan – Part 2 Competitive Analysis Name three companies that do something similar to your business. Describe the product and service of each company. Describe their sales channel. (Store, website, personal sales?) Describe the strength of each company – what does each company do that helps it be successful?

Existing Competitors New Entrants Suppliers Buyers New concepts Your Competitors Existing Competitors New Entrants Suppliers Buyers New concepts While you will be facing international competition, you will also be facing local competition. There will likely be more competition than you initially thought. One way to thoroughly review potential competitors is to use Michal Porter’s research on local competition

When people talk about competition, there is one name that comes up every time – Michael Porter of the Harvard Business School. He has written major books on how countries compete against each other, and he has written extensively on how companies compete.

Power of suppliers If there is only one supplier for your product, you are in a weak negotiating position on:- costs, and may have to accept their schedule for deliveries and their level of quality. In short, the fewer suppliers available to support you, the weaker your business position.

Power of customer If you only have one or two big customers, you have little bargaining power over price, delivery, or quality Customers can shift to other company and leave you

The threat of new entry Is always a risk New entry ( new business) can be more innovative and reducing cost better than your business Has more access to capital sources, customers, government and suppliers Probably has more production with low price per unit ( economies of scale)

Power of existing competitors It is the most current problem for new business You need to be creative and innovative in order to compete with existing competitors If you want to start a barber shop, a cold store, or a coffee shop and see them on every corner, you know you will have to do something very special to compete

Do you agree or not? The first way to compete with existing competitors is to reduce the price What are other options to compete with existing firms?

threat of substitutes Online shopping can substitute the traditional or the normal shopping way many stores are facing competition from on-line retailers Your business may be a substitute to a current business approach, give an example?

Sources of Competition - Example Clothing store Existing Competitors – another clothing store in the mall New Entrants – a new clothing store being built across the street Suppliers – dress designer decides to sell directly to customers – they open an on-line shop Buyers – customers decide to go directly to the on-line web site of the designer New concepts – Whole new approach to clothing takes place – use of plastic or new materials

Sources of Competition - Example Restaurant Existing Competitors – another restaurant in the area New Entrants – a new restaurant down the street Suppliers – Your best employee opens a restaurant of her own Buyers – customers decide to drive to a different area to eat New concepts – Someone invents a new kind of food – giros or organic chicken

Name one competing company for your business

How to response to competition Identifying the competition: You need to find them so you can study them

Studying the competition For instance by:- How do you study them? Almost all businesses have a website, so you can begin there. What do they say about themselves? The point of the website is to attract customers. How are they doing that? What do they think makes them special? As you review the web sites of other companies, look for a pattern. Do these competitors think price makes them special? Delivery? Some special products? Their brand? Location? Is there a feature that seems to matter most in the industry? Are some features, like free delivery or money back guarantees standard?

Determining your competitive advantage Lower cost/lower price Innovative products Niche products ( offer specific or special products) Personal service Partnerships

Competitive Responses Your competitors will use one of these 7 strategies Lower costs - High barriers to market entrants – high costs to start a business High switching costs – customers have long contracts New products or services – Special products or services – Alliances ( clusters) - Size – no room for the competition

Competitive Strategies Low costs Low costs means cost to you – not your customers If you buy clothes for 5 OMR, that is good for you If you sell clothes for 5 OMR that is bad for you. Keep your costs low and keep customer prices high If you give away free gifts or products, you are lowering your prices – that is BAD

Competitive Strategies Ways to have Low costs Some companies have lower costs. Maybe they have low labor costs because they use family members, or they buy materials at a discount. Maybe they are just more efficient. Remember McDonalds. With fewer menu items they were able to keep their costs lower – lower than any other restaurant in America. If you had a restaurant, how would you keep your costs low? If you had a clothing store, how would you keep your costs low? If you sold perfume, how would you keep your costs low?

Competitive Strategies High Barriers to entry Some businesses are very expensive to start. What would it cost if you wanted to start an oil company? What if you wanted to start manufacturing cars? Starting a restaurant can be expensive too. You need a building, equipment, parking, employees, food, table service. How could you cut the start-up costs of a restaurant? How could you cut the start-up costs of a clothing store?

Competitive Strategies High Switching costs Some businesses make it very hard to change to another company. Cell phone providers are typical here. You sign a two year contract. So, you will not go to another cell phone company for two years. Switching costs will be lower for a restaurant. Maybe there are no costs. But a good restaurant will try to keep customers by frequent purchase systems, or by keeping customer information that makes ordering more simple (“I’ll have my regular meal.”) How could you create switching costs for a restaurant? How could you create switching costs for a clothing store?

Competitive Strategies New Products or services Customers may be attracted to a business because it has something new. It might be a restaurant that has new soups, or a perfume shop that has a new French brand. Maybe it is the first grocery store to carry groceries out to your car. What new products could you provide for a clothing store? What new services could you provide for a clothing store? What new products could you provide for tourists? What new services could you provide for a tourists?

Competitive Strategies Special Products or services Customers may be attracted to a business because it has something special. It might be a restaurant that has a large parking area and is close to the highway. Maybe the service is especially friendly, or the interior is very attractive. If it is very special you will go there more often, and you might be willing to pay more for food there. How could you create special products or services for a clothing store? How could you create special products or services for an ice cream shop? BUT – what are minimal products and services? What do you expect to find at a restaurant? What would make you NOT go there?

Competitive Strategies Alliances Often times a gas station will also have a small restaurant with it. They think you will be more likely stop there if you have two reasons to stop (gas and food) and not just one reason (gas). What kind of alliance would work for an ice cream shop? What kind of alliance would work for a children’s clothing store?

Competitive Strategies Size Sometimes a competitor is so big, they are almost impossible to beat. If you try to complete with Lulu Hypermarket, you will lose (only Carrefour is big enough). For Lulu, size gives them large volumes and economies of scale. Their costs are lower, and their products are more numerous. You cannot compete with them on price or volume. So how do you compete? You differentiate – products or service. A cold store may be closer to your house, and it may be quicker (just a short walk into the store and a short walk inside the store). How can a clothing store compete with Carrefour?

Business Plan – Part 2 Competitive Analysis Name three companies that do something similar to your business. Describe the product and service of each company. Describe their sales channel. Describe the strength of each company – what does each company do that helps it be successful?

Competitive Strategies Which of these 7 competitive strategies does McDonalds use? Lower costs - High barriers to market entrants – high costs to start a business High switching costs – customers have long contracts New products or services – Special products or services – Alliances - Size – no room for the competition If you were starting a restaurant in Nizwa, how could you compete against McDonalds?

Competitive Strategies Which of these 7 competitive strategies does Lulu Hypermarket use? Lower costs - High barriers to market entrants – high costs to start a business High switching costs – customers have long contracts New products or services – Special products or services – Alliances - Size – no room for the competition If you were starting a clothing store in Nizwa, how could you compete against Lulu?

Competitive Strategies Which of these 7 competitive strategies does Lulu Hypermarket use? Lower costs - High barriers to market entrants – high costs to start a business High switching costs – customers have long contracts New products or services – Special products or services – Alliances - Size – no room for the competition If you were starting a cold store in Nizwa, how could you compete against Lulu?

Competitive Strategies A flower shop exists in the Nizwa Mall. Which strategies do you think the store owner probably uses? Lower costs - High barriers to market entrants – high costs to start a business High switching costs – customers have long contracts New products or services – Special products or services – Alliances - Size – no room for the competition If you were starting a flower shop in Nizwa, how could you compete against the mall flower shop?

Competitive Strategies Carrefour in Muscat has a very large perfume counter. Which strategies do you think Carrefour probably uses to sell perfume? Lower costs - High barriers to market entrants – high costs to start a business High switching costs – customers have long contracts New products or services – Special products or services – Alliances - Size – no room for the competition If you were starting a Perfume shop in Muscat, how could you compete against Carrefour in perfume sales?