Business Competition: Definition, Types, & Examples - FourWeekMBA (2024)

In a business world driven by technology and digitalization, competition is much more fluid as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that, in the short-term, seem unrelated.

Why traditional comparable analysis frameworks might fail in a tech-driven business world

Among the most common and perhaps simple and effective frameworks to look at competition is given by Joshua RosenbaumandJoshua Pearl, authors of “Investment Banking,” offer us two main criteria to select our comparable companies:

• Thebusinessprofile.
• And the financial profile.

Under the business profile, we have things like sector, product & services, customers & end markets, distribution channel, and geography. In the financial profile, we can look at more specific aspects like size, profitability, growth profile, return on investment, and credit profile

So far, so good, but let’s integrate into this analysis also the VTDF Framework developed on FourWeekMBA.

Competitor Analysis Framework

We do want to overlap customer profile, technology, distribution, and financial model used by companies. While at the same time looking at how the technological model will affect an entire industry in the future.

We do believe that tech companies often operate at two intersections.

On the one hand, a first intersection is about applying existing technology to an existing market, thus creating more competition.

On the other hand, and this is the tricky part, there is usually a gradual, then sudden swift investment in new technologies that not only intersect current markets, they have the potential to create new ones, that not only might eat up an existing market, they might also end up creating a much bigger market.

From here the technological potential needs to be assessed early on to evaluate how much that technology can interpolate with an existing market but also eat that up.

Thus creating overlapping in the future, which might be hard to imagine today.

The great market reshuffling

To analyze how future technologies might reorganize markets, thus reshuffling and redefining entire industries it is critical to keep an open mind on what competition entails. Thus, in this kind of market cooperation and competition become very fluid (see the concept of coopetition).

There are fewer boundaries.

Key Highlights

• Fluid Competition in Technology-Driven Business: The rise of technology and digitalization has made competition more dynamic, as innovation can come from various sources. This bottom-up innovation approach challenges the traditional definition of market boundaries and requires a comprehensive analysis.
• Traditional Comparable Analysis Frameworks: Comparable company analysis is a method to understand the financial performance of a target company by comparing it to similar organizations. The framework involves business and financial profiles, considering factors like sector, products, customers, profitability, growth, and more.
• Integration of VTDF Framework: The VTDF (Value, Technology, Distribution, Financial) Framework, developed by FourWeekMBA, offers a holistic approach to competitor analysis. It involves overlapping aspects like customer profile, technology, distribution, and financial models. This analysis helps map competition facets for a tech business model, allowing a better understanding of a business’s position and future potential.
• Technological Modeling: Technological modeling supports sustained innovation and the development of both incremental and breakthrough products. The Barbell Strategy suggests a dual approach, combining continuous innovation with investments in technologies that can create significant leaps forward.
• Two Intersections of Tech Companies: Tech companies often operate at two intersections: applying existing technology to current markets to increase competition and investing in new technologies that can reshape existing markets or create entirely new ones.
• Assessing Technological Potential: Evaluating the potential impact of new technologies on markets is crucial. Assessing how a technology can interpolate with existing markets and potentially reshape or expand them is essential for effective competition analysis.
• Market Reshuffling: Future technologies can reorganize markets, reshuffling and redefining entire industries. In this context, competition and cooperation become fluid, leading to fewer defined boundaries. The concept of “coopetition” (cooperation + competition) plays a role in this dynamic market landscape.

Direct Business Competition Examples

Uber Competitors

Starbucks Competitors

Carvana Competitors

GoodRx Competitors

Coca-Cola Competitors

Pepsi Competitors

Disney Competitor

Peloton Competitors

IBM Competitors

Google Competitors

Airbnb Competitors

Salesforce Competitors

Nike Competitors

YouTube Competitors

Zoom Competitors

Tesla Competitors

Amazon Competitors

Non-Linear/Indirect Competition

In a business world, which is tech-driven, in the long run, competition becomes non-linear.

In short, niches that seemed completely disjoined from a market, end up creating whole new industries which might absorb existing marketplaces.

Let’s look at two examples.

Netflix vs. TikTok

As explained in the Netflix business model, there are two ways to look at its competitors.

One way is to guess the current customer base is overlapping.

In the Netflix-specific case, it means assessing the behaviors of paying members across the globe and whether they are switching to other streaming services or perhaps keeping various streaming services accounts.

This is fine to assess what content other streaming platforms are producing, and it helps steer the content development efforts for the company.

However, there is another way to look at it.

If instead of looking into customers, and members, what’s Netflix’s core asset?

Meaning what’s the thing that makes the company keep a long-term competitive advantage?

Based on that, we can reassess competition and perhaps looks into where attention is going, especially for younger generations, and we get this:

In short, the competitors’ map changes suddenly, and you start reassessing the company’s long-term strategy by looking at where attention is currently moving.

Why is this important?

Well, because you ask different questions. Rather than thinking about content, based on the previous thinking framework that Netflix had successfully rolled out in the prior decade.

You now look at it with a different eye and understand that Netflix, to thrive in this decade, has to change its content development framework or at least redefine it.

Non-Linear Competition: Tesla vs. Insurance Companies

Another interesting case is Tesla and its insurance business.

Now, if you look at Tesla as just a car company, you think those are Tesla’s competitors:

Thus, if you were a legacy company like Geico, this is your competitors’ map:

Yet, if you understand non-linear competition, you also know that Tesla is coming for the insurance business, as it can be a segment to ramp up its car operations.

And if you take into account that Tesla’s target is to sell millions of cars across the world, then, if you are Geico, you might want to change your way of looking at the competition.

Related Business Concepts

Non-Linear Competition

Coopetition

Comparable Analysis

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