Competitive Threats

Competitive Threats

Competitive Threats Jonathan Poland

A competitive threat is a potential source of competition that has not yet materialized, but has the potential to do so in the future. It is a risk of competition that can be evaluated based on its probability and potential impact. Like any other risk, a competitive threat can be managed or mitigated through various strategies and tactics.

Some common ways to address competitive threats include keeping a close eye on the market and staying informed about potential new entrants or emerging technologies that could disrupt the industry, continuously improving and innovating to maintain a competitive edge, and building strong relationships with customers to foster loyalty and reduce the likelihood of them switching to a competitor.

In summary, a competitive threat is a potential source of competition that has not yet materialized, but has the potential to do so in the future. It can be managed and mitigated through various strategies and tactics, such as staying informed about market developments, continuously improving and innovating, and building strong relationships with customers. The following are the basic types of competitive threat.

New Competition
The potential for new firms to compete for your customers. This includes startups and established firms that may expand into your market.

New Products
Improvements to the products and services of competitors. For example, a high speed train company that launches a safer, faster, easier to operate and more efficient model may suddenly gain significant market share.

New Business Models
A new way of capturing value that competes with your business model. For example, streaming media services that can be accessed over an internet connection as opposed to being tied to the content available from your local telecom company.

Substitutes
The ability of competition in different markets to attract your customers. For example, restaurants may take business from supermarkets if they can convince customers to eat out every night.

Pricing
The potential for a price war. For example, an airline that is charging $800 for a flight suddenly drops the price to $500 sparking reduced prices from competitors until the route is unprofitable for everyone.

Customer Experience
Improvements to customer experience. For example, the four major airlines in a nation all have reasonably low customer satisfaction. One gets a new CEO and suddenly their customer satisfaction is improving every quarter. The other three airlines start having to discount more tickets to sell seats as customers begin to prefer the better customer experience of the improving airline.

Promotion
There are two nightclubs in a college town with both spending $500 a week on promotion. Suddenly, one starts spending $5000 a week on promotion to become the more popular spot. This results in an escalating competitive battle that damages both businesses.

Talent
The potential for the competition to recruit your most valuable employees.

Intellectual Property
The potential for the competition to develop superior intellectual property such as trade secrets and patents that allow them to outperform you.

Management Decisions Jonathan Poland

Management Decisions

Management decisions are decisions that pertain to the direction and control of a company or organization. These decisions may cover…

What is Cost Overrun? Jonathan Poland

What is Cost Overrun?

A cost overrun occurs when the actual cost of completing a task or project exceeds the budget that was allocated…

Business Impact Risk Jonathan Poland

Business Impact Risk

Business impact risk refers to the potential negative consequences that a business may face as a result of certain events…

Product Features Jonathan Poland

Product Features

A product feature is a characteristic or aspect of a product that contributes to its overall functionality and performance. Product…

Procurement Risk Jonathan Poland

Procurement Risk

Procurement risk is the risk of financial loss or other negative consequences that may arise from the process of procuring…

Bank Derivatives Jonathan Poland

Bank Derivatives

Bank derivatives are financial instruments whose value is derived from an underlying asset, index, or other financial instruments. They are…

Expectancy Theory Jonathan Poland

Expectancy Theory

Expectancy theory is a motivational concept that suggests people are motivated by their beliefs about the relationship between their efforts…

What is a Product Line? Jonathan Poland

What is a Product Line?

A product line refers to a group of related products that are marketed together as a single unit. Product lines…

Integration Risk Jonathan Poland

Integration Risk

Integration risk is a type of risk that arises when two or more entities, such as businesses, systems, or processes,…

Learn More

Business Efficiency Jonathan Poland

Business Efficiency

Business efficiency refers to the effectiveness with which a company or organization converts inputs, such as capital, labor, and materials,…

Business Development Skills Jonathan Poland

Business Development Skills

Business development is a term that is often used to refer to sales jobs. However, it can also refer to…

Added Value Jonathan Poland

Added Value

The total combined industries of consumer goods and services.

Test Marketing Jonathan Poland

Test Marketing

Test marketing involves testing different marketing strategies or variations on customers in order to gather data and evaluate their effectiveness.…

Brand Switching Jonathan Poland

Brand Switching

Brand switching refers to the act of a customer switching from a brand that they were previously loyal to, to…

Diversified Real Estate Jonathan Poland

Diversified Real Estate

Real Estate Investment Trusts that acquire, develop, manage, and dispose of diversified property holdings that have no specific portfolio composition.…

Pricing Power Jonathan Poland

Pricing Power

Pricing power refers to a company’s ability to increase prices without significantly impacting demand for their products or services. This…

Risk Acceptance Jonathan Poland

Risk Acceptance

Risk acceptance involves consciously deciding to take on a risk, often because the potential reward outweighs the potential negative consequences…

Organizational Structure Jonathan Poland

Organizational Structure

Organizational structure refers to the formal systems that define how an organization is governed, directed, operated, and controlled. It is…