How do new competitors affect your business?

Answer 1

There is a term called Market Share. Some say that all market shares are limited. They all have a finite number of buyers and potential buyers.

So, if that is true that means that there exists a group of buyers that equal 100% of all your market. If there are market leaders that own over 30%, depending on the market, they are concerned about erosion of their share of the market. In other words how much of the total market being serviced by existing clients will be lost to a new company? If there is 100% someone or a company already in existence is going to lose some of their shares. Just how much depends on how well the existing company competes with the new company in areas such as Price, Product. Promotion etc......

On the flip side a new company could come into a market and do a terrible job only to help the exisiting companies by their clients realizing how terrible the new company is compared to their old company and they switch back to their old company and stay there for ever. Also on the positive side is that a new competitor can stimulate awareness of existing companies by the new companies efforts in ads.

For example if a new "Cola" company started playing ads on TV, Radio and Magazines your mind just might be made to think of the Cola you grew up with or always purchase.

Next, the worst situation. The new company has new innovations and or is coming into the market and they are using a Penetrating effort to get all the possible Share of the market they can get. Such as the new company has a better product, the latest devices and has brought something NEW to that Market.

They are going to kill the existing market. A decent example is when shaving cream was put into cans compared to the old bar soap shaving products or the tubes of shaving cream. The Spray Cans had an old product but a new innovation and they Killed the competitors with their old bar soap products with a lather brush. The existing companies were gone in a heart beat.

The existing companies should always learn to keep a close eye on compeitors to keep in step with new innovations in their market.

And when a new company comes in and is penetrating they are going after the existing clients that are not totally Brand Loyal and are trying to save money. That means existing companies can not over price their products and expect their clients to continue to pay much higher prices with little or no added benefit compared to the cheap company.

Lastly, what if the new company is an innovator and they not only begin to take your clients but also begin to take your employees as well? This is just one reason for continued market research to improve products, develop better methods of using the products and making that product better for your clients and offering the best value to your clients with your products.

Competition generally makes the life of the people better because of the above. The only example I can think of when a competitor came in and ended up making the life of their clients worse and remain in business is a large well known discounting company that would come into a town open a store, compete with the local stores and put them out of business and when sales dropped or a level wasnt reached for sales the company would close that store and that meant that the clients who had been well served in the past now had to travel 50-150 miles to purchase items that they had purchased from the discount store before. Which does not happen that often but does happen.

Now that I have almost touched the surface of your question I .