Competitors and suppliers — common mistakes

In case studies, identify the specific factors that make rivalry intense. For example, instead of just stating 'rivalry is high', state 'rivalry is high due to the presence of three equally-sized supermarkets in a slow-growing town, leading to frequent price promotions'.

Do not confuse differentiation with simply having a different product. True differentiation must be valued by customers and be difficult for competitors to imitate. Explain why the point of difference (e.g., superior battery life) is a competitive advantage.

This is a common misconception. While price is a key competitive factor, businesses also engage in 'non-price competition'. They compete fiercely on product quality, brand image, customer service, and innovation. A strategy of differentiation, for example, aims to make price less important by offering a unique value that customers are willing to pay a premium for. Focusing solely on price can lead to destructive price wars that damage profitability for the entire industry.

Not necessarily. A supplier's power is not determined by its size, but by the importance and uniqueness of what it supplies. A small, specialist firm that is the sole provider of a critical, patented component for a large manufacturer has immense power. The large manufacturer's high switching costs (in terms of finding or developing an alternative) give the small supplier significant leverage to dictate prices and terms.

Ignoring competitors is always a high-risk strategy. Even with a strong, unique product, a business must constantly monitor the competitive landscape. Competitors will try to imitate the product, develop superior alternatives ('leapfrog' the technology), or find new ways to meet the same customer need. A lack of competitor analysis can lead to complacency and a sudden loss of market leadership when a rival makes a disruptive move.