Internal Factors (Strengths and Weaknesses): These are aspects that you have control over.
- What people, expertise, and capital do you have on hand that can be mobilized?
- Do you have an organizational structure that inhibits creativity and promotes bureaucracy?
External factors (Opportunities and Threats): These are aspects that you do not have control over.
- Are there more attractive financing rates at the moment or technological advances to aid in your manufacturing or marketing efforts?
- How have laws or taxes changed over the last year? Is there political unrest?
They have low labor costs, an open and flexible collaborative environment, access to expertise, capital equipment, and inexpensive financing, but most importantly, they have a potential niche, domestically produced gourmet cheese at a lower cost than the competition.
- New entrants and barriers to entry
How easy, or difficult, it is for potential competitors to enter your market space?
What other products/services can someone use if not yours (e.g. cell phone vs. land line)?
- Supplier Power
Is there differentiation of inputs or more commoditization? Do you have the option to switch between suppliers of inputs or is there only a small number or providers?
- Buyer Power
How dependent are your customers on your product? How informed are your customers? Are your customers a small consolidated group that can exert influence on your decisions or are they more decentralized and can be replaced by others easily?
- Industry Rivalry
How sustainable is your competitive advantage and does it support long-run margin retention? What level of M&A activity is there (e.g. consolidation)? What does the labor pool look like and how is it affecting salary/wage levels?
This list is not exhaustive but knowing the answers to these simple questions will allow you to build a business model that is not only self-aware but also engaged with the relative position of its competition.
STORY: Jared and Rachel look at each other. Several minutes go by. One makes a hand gesture, but no verbal articulation. Ten minutes later Jared says “I don’t want Pedro from the corner store to take my cheese idea; we have to protect this thing.” Rachel makes her grandmother agree not to share their recipe with Pedro. They visit the store and see where he gets his cheese from. It’s from that town in France with the funny nasal pronunciation. The customers were almost always young mothers with healthy foods in their baskets and they all seemed to come from the same brand.
The solution – OPPORTUNITY.
Well congratulations to you! You have now answered a market need and have created a defensible position that will allow you to remain competitive against other players in the industry and retain margin ensuring profitability. Now, to make it a success, you need to create a strong and integrative marketing plan that will tailor the answer to your particular target market and their particular desires. Only at this point, where your customer accepts the product as something that they need and desire, and that only you can provide, is it that you have created a true solution, prior to that it is just another product/service. Differentiation is everything.
STORY: Jared and Rachel are super happy. They have brought their cheese to life. It is superior to the competition in every way. Now, they need to make customers aware. They quickly convince Uncle Randy to post flyers on the windows of every single local store, market, and light post where mothers of young children gather. That will be their true solution, their differentiated niche. They are going to provide better tasting, healthier, gourmet cheese that is also more affordable, and has a name that’s easy to remember. Le Slim Cheez.