Are the five forces with you?The market is more and more competitive. There are new competitors, the usual economic forces and, increasingly, saturation in the replacement window market. And they’re all putting on the pressure.
The window market isn’t going to disappear, but it makes sense to look at the opportunities for diversification too. Conservatories; composite doors; kitchens; roofline; flat roofing; flooring or hard landscaping. One or more of them could strengthen your business.
Michael Porter is the competitive strategy guru. For more than 20 years he’s been helping big corporations assess new markets and industries. His ‘five forces' model provides a valuable framework when you are choosing a direction for the future. And what works for global multinationals can work for you too.
Porter identified ‘five forces’ you should consider before entering a new market: barriers to entry; ease of substitution; buyer power; seller power and rivalry within an industry.
Firstly, what are the barriers to entry? Is it hard for others to follow when you succeed in conservatories, hard landscaping or whatever it is you see as an opportunity?
Is it easy for someone or something to take that new opportunity away from you? How can you get closer to your customer so it’s harder for a competitor to substitute something else? Markets are not about ‘products or ‘services’: they’re about benefits and gaps and solving customer pain. Think carefully about what you are trying to achieve. Are you selling ‘a conservatory’ or ‘an enhanced lifestyle’?
And then there’s buyer and seller power. Get the balance right. We hear about many small suppliers who get caught out in contracts with major supermarket chains. It could be the same in your new market. Don’t get so close to one customer that you neglect a whole order book full of smaller (but maybe more profitable) ones – especially if it can bully you into low margin and onerous conditions.
Finally, there’s competition (the degree of rivalry in the industry), and don’t forget that you are competing with whatever customers spend their money on, not just the product you are trying to sell. So make your offer different. Being the best is good, but being something else that has meaning to your customers can do the trick too.
You may not have the research and marketing resources of Ford or IBM. What you do have is a unique knowledge of your local markets. Work your database – but remember that, though it may be useful for related opportunities (e.g. another home improvement market) it’s unlikely to be much use if you decide to get into the motor industry!
Research opportunities – but don’t get paralysed by analysis – and use the ‘five forces’ model to support your thinking. Then take an overall view and combine it with your commercial instincts and intuition.
It’s your future: make the most of it.