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As an entrepreneur, you will have to worry about a lot of things to endure that your business succeeds. One of these things that you will need to be concerned about is what type of market you wish to enter. If you aren’t careful and try to enter a market that’s too competitive for you, you will flounder and fail.
What is a competitive marketplace
A competitive marketplace is a market that has a large number of businesses vying for influence in a particular market niche. For example, if you wanted to enter the toy market and there were 1,000 other companies already established in that market that would be a competitive market. Companies in these markets are all in direct competition with others for market share. Because of this, they are all seeking to eke out any advantage they can get over their rivals. This can be in the form of undercutting prices, cutting on manufacturing costs, unique marketing campaigns etc.
Dangers of trying to enter a competitive marketplace
Trying to enter a competitive market can be very risky, especially for smaller brands. Some of the major problems with trying to enter these markets include:
- The knowledge difference between you and your competitors. The businesses that are already deeply entrenched within that market will have numerous years of experience over you. While you will need to learn the intricacies and nuances, they will already know everything and be at a huge advantage because of it.
- Market space will be very tight. Brand loyalty is one of the most important things you want out of your customer base. Ensuring that you have a consistent set of users of your products provides a floor of how poorly you can do. Since a significant amount of the customers within a market place will have their own brand loyalties before you arrive, convincing them to come over to you will likely be extremely difficult or nigh impossible.
- Standing out from the crowd will be difficult. Almost every single conceivable strategy will have been tested and tried by your myriad of competitors. Remember, you’re entering a solved market and are playing catch up with everyone else. You might think that you’ve found some innovative strategy to get customers, only to discover that it doesn’t work and everyone else already figured out that it doesn’t work.
Reasons to try and enter a competitive marketplace
Despite the hardships faced when entering a marketplace that’s very competitive, some companies still try to do so. Why? Here are a few reasons why people might try on enter these markets:
Large customer bases
Usually, the reason why marketplaces become so competitive and full of rivalling businesses is due to how much money can be made in that market. Some industries like toys, computing, and pharmacy are worth billions of pounds every year due to the sheer volume of customers purchasing items in that market. This means that even with only a very minute market share, it can still translate into thousands of customers.
Technology and science constantly change the way we interact with and perceive the world around us. Many of the industries and products available now hadn’t even been dreamt up 20 years ago. New trends and items constantly spring up from these developments. If a company feels that they have developed the next big thing then they may make a massive push onto the market using that product. Like how Apple forced its way into the home computer market with the Macintosh, or Sony forced its way into the videogame market with the PlayStation. The payoff for success is enormous and can create an industry giant almost overnight.
Constant supply of new customers
Some markets will only appeal to very specific age ranges. Usually, this applies more to child-centric industries. In these more volatile marketplaces, brand loyalty has a much lower impact. Being able to acquire new customers constantly is far more important. These newer customers will be basing their decisions off of very limited information. Because of this, they will often go for whoever makes the best first impression to them. Being able to make that strong first impression, as well as constantly adapting and keeping up to date will be the key to succeeding in this hostile marketplaces.
Developing a strong niche
Markets are very broad, especially the larger ones. You will have many categories and subcategories for products in any given market. As well as diverse variations on products. For instance, furniture can cover home furniture, business furniture, pre-built, DIY, chairs, tables, cupboards etc. You can often think about large markets like this as a sort of ecosystem. Each product fulfills a different consumer need within that market. Just like how the various animals in an ecosystem all have different roles and use different resources.
By doing enough market research and exploring you can occasionally find underutilised niches within any given sector of a market. Niches often have very dedicated customer bases due to the rarity of the products within that niche. Niches do have smaller customer bases but also much less competition and becoming one of the best sellers within a niche is a monumentally easier feat than doing the same for a broad market. If you are up to the task of fulfilling the necessary research, then you could find and dominate your own niche.