Market Position: Your Threats Relative to Your Competition
In evaluating the market position of your company, this month’s topic begins by understanding
your business through the utilization of a SWOT analysis1. The threats for this purpose focus on
your competition. Some common potential threats related to competitive positioning are as
follows:
1. Risk of losing a large client.
2. Threat of innovation.
3. Loss of human capital.
SWOT Analysis
As a business considers their strategy, they will evaluate the chances of achievability. A SWOT
analysis helps in this evaluation. Using external and internal factors, the SWOT identifies the
strengths, weaknesses, opportunities, and threats that relate to the success for the strategy.
The chart below2 shows the typical format of a SWOT analysis. Strengths and weaknesses are
considered of internal origin, or attributes of the organization, while opportunities and threats are
considered of external origin, or attributes of the environment.
Creating this SWOT analysis for your business will allow you to assess how your company is
1
2
The SWOT analysis is credited to Albert Humphrey. http://en.wikipedia.org/wiki/SWOT_analysis
http://en.wikipedia.org/wiki/SWOT_analysis
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performing and what areas need attention. It is good to review this on an annual basis for
any changes that took place in the past year. Next month’s Topic of the Month will be
strategy and we will further explore the use of SWOT in setting strategy.
Threats Relative to Competitive Analysis
In order to compare the threats your business faces relative to the environment, please first
conduct a brief competitive analysis as outlined in our previous paper on Market Positioning,
also available online at (www.CathedralConsulting.com/Resources).
There are some typical potential threats relative to your competitive positioning including the risk
of losing a large client, the threat of innovation, and the loss of human capital. These threats
ought to be addressed in order to increase the stability of the company.
Risk of Losing a Large Client
One common threat is the lack of diversification in the client base. Should the large client the
company is dependent upon disappear, the position of the company would immediately be
degraded. There are several reasons the large client may choose to change the service
provider.
First, a client may choose to take your services in-house. While some companies are outsourcing to cut costs, others are bringing services back in-house as current employees may
have access capacity to undertake these activities. In order to compete with the potential inhouse option, it is vital that you maintain your proprietary information and excellent customer
service. You might consider conducting a customer survey to learn what is most important to
them so that the company can maintain those desirables as priorities. If possible, meet your
clients for lunch or visit their operations to learn more about how your company could serve
them better. In this digital age it is surprising what you might observe about retaining your client
through a simple face-to-face meeting.
Second, a starving competitor may choose to act irrationally. Normal business pricing tends to
erode when a company is on the verge of collapse. Since cash is of ultimate value to them in
order to survive, the collapsing company may choose to price under cost. Since the client needs
savings as well, the temptation is high to switch to your starving competitor. In the current
economic environment, it is very important to be aware of these company behavior patterns.
The focus for keeping your client in the midst of price wars should include special attention to
client relationship pricing, company cash flow management, and identification of potential
starving competitors. If the client switches to the competition that subsequently goes out of
business, it becomes a difficult situation for all parties involved. Therefore it is important to price
according to the client relationship, including anticipatory price reductions.
Additionally, in order to know the parameters for setting relational pricing, it is important to have
a clear understanding of your Cost of Goods Sold. This further indicates the need to develop
good cash flow management for the company to be aware of how it will weather a storm.
As mentioned previously, awareness of competitors will allow identification of which ones might
be starving or potential threats to stealing clients. Google alerts is a quick and cost-effective way
to track any competitors moves in the online world. Notifications can be sent to your in-box on a
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daily or weekly basis whenever your competitor is mentioned online. Again, this is not a
replacement for actively being aware of competitors’ movements, but rather an efficient
supplement. Awareness of your factors of differentiation, or unique selling proposition, is
important for selling to new clients as well as retaining the current clients.
Threat of Innovation
As innovation allows continual change in the market, it is important to be aware of what changes
are taking place and the implications to your business. In out-sourcing and going off-shore, we
saw that businesses that understood their market position did not suffer to the extent that
common thought now tends to believe.
Emerging threats that should be considered are the following:
•
Social Media/Networking: While many have jumped right in to the utilization of online
tools such as Facebook, Linked In, Twitter, etc., there remains an unclear picture of how
these should be best utilized to increase profits. Without a clear plan for utilizing these
tools to drive profits, they become the epitome of wasting time.
These tools and the functions they serve in allowing direct access to a larger pool of
people and companies does need to be evaluated against the targeted client base and
their emphasis on these innovations. If your company’s technology gets too far ahead, or
too far behind, the risk of losing clients increases.
3
•
Speed of Communication: Smart phones have increased the speed of communication as
email, phone, internet, and social networking sites are available instantaneously, along
with a variety of applications. These tools have accelerated the speed of the service
model. Understanding the speed expected from clients is important along with their
preferred mode of communication.
•
Technology: While technology seems to increase and change nearly at the speed of
light, a utilization plan to optimize the customer experience and implement cost-savings
is vital. Technology implemented correctly allows efficient client servicing. While many
features are available, it is often estimated that only 10 percent of features are utilized by
the average user of software programs such as Microsoft Office Suite.3 As a small
company, choosing to more fully utilize existing software can create competitive
advantage without necessitating the costs of additional purchases.
•
Product Innovation: Offering new products and services keeps the company’s products
fresh and creates reasons for continuous contact with former clients or prospects. A 10
percent change in the value of the product is typically significant enough to render it the
equivalent of a new product. It is important to be watching for competitors who are
making these incremental changes better. As older people may not be looking for new
products or different ways of doing things that are already functioning well, it is important
to remember that the younger generation is likely doing the purchasing. This again
emphasizes the importance of understanding the company’s position in the market prior
to setting strategy.
http://money.cnn.com/magazines/business2/business2_archive/2006/04/01/8372803/index.htm
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Loss of Human Capital
As Baby Boomers retire companies are facing a huge loss of human capital. While the younger
generation may be available to replace the positions, it is important that knowledge is captured
and transferred to the incoming staff as well. Client relationships that have been built and
established over time also need to be nurtured through the transition in order to be retained by
the company.
As Generations X and Y replace Boomers in the workplace4, there is also a change in work
orientation that needs to be addressed. Having benefited from prosperous years of parents,
incoming staff sometimes suffer from the lack of desire to work, or to work hard. Instilling a
culture that appreciates and values work as the company builds its team is a challenge.
Creating career paths are important for staff that need to be retained. Staff training must be
viewed as an investment, which takes into account the potential risk of staff choosing to move
on for other opportunities at another company.
Addressing Threats
•
•
•
Focus on the threats that are truly relevant to your company.
Determine to create a culture of true client orientation, including spending quality time
with them. Clients are happy to discuss what items they would like to see improved and
can give insights into competitor activities. Although it is usually not initially about the
price differential, price often becomes the reason for change.
Technology needs to be driven by a passion to use it for the benefits of clients first,
assisting staff second, and operational efficiency third.
Tutorials & Articles for Further Reading

This site provides a free template with assistance for performing a SWOT analysis on
your company. http://www.businessballs.com/swotanalysisfreetemplate.htm
Phil Clements is CEO of Cathedral Consulting Group, LLC and a Managing Director in the New
York Office. Sharon Nolt is a former Senior Associate in the New York Office.
For more information, please visit Cathedral Consulting Group LLC online at
www.cathedralconsulting.com or contact us at info@cathedralconsulting.com.
4
Welch, David. “The Incredible Shrinking Boomer Economy.” Business Week. 03 August 2009.
http://www.businessweek.com/magazine/content/09_31/b4141026524433.htm
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