In evaluating the market position of your company, this month’s topic begins by understanding your business through the utilization of a SWOT analysis.1 The threats for this purpose focus on your competition. Some common potential threats related to competitive positioning are as follows:

  • Risk of losing a large client
  • Innovation
  • 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 of 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.

 

SWOT Analysis

 

Creating this SWOT analysis for your business will allow you to assess how your company is 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 the SWOT analysis in setting strategy.

Threats Relative to Competitive Analysis

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 should be addressed to increase the stability of your company.

Risk of Losing a Large Client

One common threat is the lack of diversification in the client base. If a company is dependent on a large client, the loss of that client can immediately put the position of the company in jeopardy. 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 may outsource certain activities to cut costs, others bring these activities back in-house to cut costs – especially if it has employees with excess capacity who can perform these activities. To compete with the potential in-house situation, it is vital that your company maintain its proprietary information and provide excellent customer service. You might consider conducting a customer survey to learn what is most important to them so that your company can make those things a priority in your customer service. 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, some competitors may choose to act irrationally when in difficult economic circumstances. Normal business pricing tends to erode when a company is on the verge of collapse. Since cash is of critical importance to them to survive, the collapsing company may choose to price under cost. If your client is under pressure to find cost savings, the temptation is high for your client to switch to your competitor with the lowest price. In the current economic environment, it is important to be aware of the behavior patterns of a competitor in survival mode or on the verge of collapse.

The focus for keeping your client during price wars should include: special attention to client relationship and pricing, good management of company cash flows, and identification of potential competitors in survival mode. If the client switches to a competitor that subsequently goes out of business, the situation becomes difficult and unpleasant for all parties involved. Therefore, it is important to price according to the client relationship, have a clear understanding of your Cost of Goods Sold, anticipate potential price reductions, and maintain excellent client service.

Being aware of your competitors and their activities in your market will enable you to identify those which may be a particular threat to stealing your clients. Online tools, such as Google Alerts, can be a quick and cost-effective way to track any competitor’s moves. Notifications can be sent to your in-box on a daily or weekly basis whenever your competitor is mentioned online. 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 not only selling to new clients but also retaining your current clients.


Normal business pricing tends to erode when a company is on the verge of collapse.


Threat of Innovation

Innovation continues to impact and change our markets. It is important to be aware of what changes are taking place in your company’s market and the implications to your business. In out-sourcing and going offshore, 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 companies have started utilizing professional websites, bulletin boards, blogs, email, social platforms and networking sites and apps – such as Facebook, Linked In, You Tube, Instagram, Reddit, WeChat, Twitter, etc. – there remains an unclear picture to some companies as to how these online tools can 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, or targeting a market with specific attributes, need to be evaluated against your company’s 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.

Speed of Communication:

Smart phones and other devices have increased the speed of communication as email, phone, Internet, and social networking sites are available instantaneously, along with numerous applications. This has accelerated the speed of the client service model. Understanding the speed of responsiveness expected from clients, and their preferred mode of communication, is important in maintaining good client relationships.

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 your company’s products fresh and creates reasons for continuous contact with current and former clients and 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.

Loss of Human Capital

As Baby Boomers retire many 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 employees. 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. Some companies are using innovative approaches to employee training and retirement to minimize the impact on their business.

As Millennials enter the workplace, there is a change in work orientation and attitude that needs to be addressed.4 As with Generations X and Y which preceded them, developing a culture that acknowledges the changes in generational work orientation and aligning it with your company’s vision and mission to build effective teams is a challenge. It is important to creating career paths for high-performing employees that need to be retained. Staff training and development should be viewed as an investment, even though there is always the potential risk of employees leaving for opportunities elsewhere.


As Millennials enter the workplace, there is a change in work orientation and attitude that needs to be addressed.


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 may initially be about something other than a 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:


1 The SWOT analysis is credited to Albert Humphrey.

2 http://en.wikipedia.org/wiki/SWOT_analysis

3 http://money.cnn.com/magazines/business2/business2_archive/2006/04/01/8372803/index.htm

4 Peters, Kim and Lewis-Kulin, Sarah. “This is the Secret to Holding Onto Millennial Employees.” Fortune, 27 June 2017. http://fortune.com/2017/06/27/best-companies-millennials/

If you are interested in learning more on how to run your enterprises more systematically, please click the button below to sign up for Cathedral’s newsletter and have the Topic of the Months delivered straight to your inbox.