Small businesses may face a particular difficulty in identifying their directly competitive selling channels, not usually in identifying where target buyers buy competitive products.

 

A local one-man architect business, Life Designs, provides residential home design and competes indirectly with all architectural design firms and home building suppliers. These include large firms who do both industrial and residential designs and suppliers of home-building kits (e.g., log houses and A-frames). However, Life Design's direct competition is a small group of similar firms that specialize only in local area home designs and remodeling. This small one-person architectural company does not have the time or resources to compete with any firm outside his local city area at the present time. And some potential target customers may not be interested in having anyone but a larger, nationally known firm work on their home design.

Small companies should make a list of any competitors in their marketing area that could compete directly with them for the same list of potential customers. The list of competitors should then be divided into different distribution channels, if applicable.

In the architect example, a list of competitors broken down by different local distribution channels includes:

• competitors who advertise in local city and county magazines, newspapers, and real-estate flyers, subdivided by home-design only firms and home-design + industrial-design firms
• competitors who work with contractors and developers in the local county
• the local university's architectural design department

Architectural competitors who advertise in local city media may be local, regional or national. In some cases, these competitors solicit home design business from wealthy industrial design clients they are doing work for. Other competitors have contracts to design and modify development-tract homes for local developers. And some competitors work with contractors to design home remodeling/addition projects. The local university is active in publicizing student residential design projects that result in several new home and remodeling/addition jobs each year.

The development of a list, broken down into competitive distribution channels, can also be assigned estimated dollar sales per year to create market segments. Sales estimates can be gathered by reviewing secondary research data, networking, and attending trade and association events, and by speaking with local government and business organizations (e.g., chamber of commerce and city, state, and federal housing departments, particularly the agency that issues local building permits).

Next, Life Designs worked on assessing company strengths and weaknesses, along with external environment opportunities and threats.