Lesson 4.

3
Know Your Competition
Learning Objectives
4.3-1 Explain the importance of knowing
and understanding your
competition.
4.3-2 Prepare a competitive analysis.
4.3-3 Describe strategies for maintaining
customer loyalty.

Chapter 4 Entrepreneurship: Ideas in Action 6e

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 Impact of Competition

 Understand the competitors will help you define your

market.
 Know the types of competition.
 Direct competition: A business that makes most of its
money selling the same or similar products or services to
the same market as other businesses.
 Coca-Cola Company is PepsiCo!

Chapter 4 Entrepreneurship: Ideas in Action 6e

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 Impact of Competition (continued)

 Know the types of competition (continued)

 Indirect competition: A business that makes only a small
amount of money selling the same or similar products and
services to the same market as other businesses
 Small arts and craft store in Madison has some of the things you want, but unlike
Michael’s or Hobby-Lobby, it is rough, and you have to consider that indirect
competition.

Chapter 4 Entrepreneurship: Ideas in Action 6e

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 Impact of Competition (continued)

 Large retailers
1. Usually can keep larger quantities of products in stock. Winn-Dixie
carries a larger variety of frozen pizzas vs Busy Butt.
2. Do not rely on a single product line. So it will not go out of business if a
single product doesn’t sell.
3. Usually have more resources to devote to advertising. Large business’
have more money to advertise.

Chapter 4 Entrepreneurship: Ideas in Action 6e

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 Competitive Analysis

 Competitive analysis
 Identifying and examining the
characteristics of a competing firm
Competitive analysis process
1. Identify your competitors.
2. Summarize the products and prices
offered by your competitors.

Chapter 4 Entrepreneurship: Ideas in Action 6e

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 Competitive Analysis (continued)

4. List each competitor’s strengths and

weaknesses.
5. Learn the strategies and objectives of
your competitors.
6. Determine the opportunities in the market.
7. Identify threats to your business from the
competition.

Chapter 4 Entrepreneurship: Ideas in Action 6e

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 Maintain Customer Loyalty

 Listen and respond to feedback.

 Other strategies for maintaining loyalty
 Superior service
 More convenient hours than other businesses
 Easy return policies

Chapter 4 Entrepreneurship: Ideas in Action 6e

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 Maintain Customer Loyalty (continued)

 Other strategies for maintaining loyalty (continued)

 Store-specific credit cards
 Personal notes or cards for birthdays or to say thanks for
the business
 Frequent-buyer programs

Chapter 4 Entrepreneurship: Ideas in Action 6e

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 Summary of Review Questions 4.3
1. Business typically enter areas where there is competition. T/F
2. Secondary data resources and observation methods can help you learn about your direct competition.
T/F
3. Your indirect competition are those businesses that make most of their money selling products or
services that are the same as or like yours. F/T
4. One reason why small entrepreneurs can compete successfully with large retailers is because large
retail chains carry more than one product line. F/T
5. Your analysis of competitors should include their prices, location, and facilities. T/F
6. A competitor’s strength should be viewed as threats to your business. T/F
7. To retain customers, you will need to occasionally ask them for their opinions about your business
and respond to their feedback. F/T
8. Superior services and frequent-buyer programs are strategies you can use to maintain customer
loyalty. T/F
9. Buy-one/Get-one Free is a great strategy to get customers to your store. T/F
10.What was your number 1 show you watched the most during this time?

Chapter 4 Entrepreneurship: Ideas in Action 6e

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