As part of your initial survey of the market-place, you have by now identified your major competitors, the product and services they offer and the prices they charge.You now need to examine the information more carefully.
Do NOT be tempted to compete in price only as this is a recipe for disaster, especially in the smaller or medium sized businesses.
Larger enterprises have many ways of reducing costs, for example
- Large runs to reduce the ratio of fixed to variable costs
- Bulk buying to reduce the variable costs
- Use of more up to date and sophisticated machinery to speed up manufacture which can only deal with the larger volumes
- Larger companies also can sustain certain product lines, ‘lost leaders’, to gain a foothold in the market or to squeeze a competitor – making up for this loss on other product lines.
It is therefore important to review all areas for example:-
- Packaging & Presentation
- Personal Service – Tailor made to match the customers exact requirements
- After-sales service
On many occasions businesses are of the opinion that their product is unique but this is rarely true. Whether it be a work of art, an implement, or a machine your customers will be living life without it so it is essentially important to prove that in the future they can’t!!!
Next Article – Business Planning –Market Price
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