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What Happens When Your Current and Prospective Competitors Get Linked with Your Entrepreneurial Venture?

SWOT analysis forms a basic consideration for any given business venture irrespective of the business’ size and scope. What is most crucial within SWOT analysis is the identification of current and potential threats. Entrepreneurs look through a broad spectrum in order to anticipate external business threats long before they arise.

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This proactive approach enables the entrepreneur to devise strategies that do not only tackle the threats, but somehow transform them into opportunities too. External threats for a business are numerous, such as substitute products, new entrants, bargaining power of suppliers and/or buyers. However, industry rivalry continues to be most threatening for business’ successful existence.

As a matter of fact, each industry has its strengths and limitations. It depends on the entrepreneur how he utilizes the business resources to get the most in return. Likewise, industry rivalry is a constant factor that every entrepreneur has to deal with.

One must never be afraid of competition, as it keeps you on your toes. You just need to be strategic using your cognitive approach in order to benefit from competition Your objective must not be others’ failure, but yours’ success. Nothing can be more rewarding than approaching towards a win-win situation for all the concerned parties.

Read on to find out what entrepreneurs can do to transform business threats into business opportunities.

Franchising for Increased Exposure at Reduced Risk

Franchising is not a new concept, it’s been in the industry for a while now. Numerous service businesses benefit from franchising as they convert into national and international chains from merely local ones. For instance, McDonald’s, KFC, Pizza Hut, Subway, etc. operate globally through franchises.

Franchising your business means partnering with another business person (franchisee). It’s an arrangement whereby both the parties agree to work together for mutual interests under certain terms and conditions.

The brand name, goodwill, expertise, and market positioning of the actual business owner (franchiser) combines with the tangible resources of franchisee in order to commence franchiser’s business at a new location.

This way, franchiser’s brand operates at new physical locations and enters new market segments. Consequently, the benefit is apparent in terms of revenue streams, business expansion, and the experience to hit the untapped markets.

On the other hand, franchisee is relieved from devising and executing a business from scratch as he gets an established one. Franchisee makes the investments while following franchiser’s vision, mission, and business practices.

It’s a smart way to convert your potential competitors into your business partners.

Licensing Brings Royalty Against Intellectual Property

Licensing is effective in order to avoid the possibility of misuse of intellectual property. We’ve developed a lot in terms of technology. However, the system is still not 100% fool-proof. There are incidents of violation of intellectual property rights.

A successful and established brand reaches that position having so much on the back end – financial resources, hard work, and human energy are to name a few. Brand names, trademarks, patents, and even technology falls within the domain of intellectual property. These are intangible assets and thus protecting them from misuse is complicated.

Licensing is an arrangement whereby the licensor (pioneer of intellectual property) authorizes the licensee to use his intellectual property against an agreed upon royalty. This sort of arrangement spreads the risk among two or more parties and the copyright acts get stronger.

Entrepreneurs extend licensing rights only to those in the similar industry so that no training or transfer of expertise is required.

Mergers, Acquisitions, Co-Branding

Economic downturn, financial recession, and market failure can demolish even the stable ones. It’s just a matter of seconds how a gigantic entity falls down on the stock exchange and loses its market value at once. While the situation is distressing for one, it’s opportunistic for many.

For instance, strategic entrepreneurs acquire such business entities at highly reduced market value and then benefit from its tangible and intangible assets in the long-run. You too can cash out such an opportunity when available.

Likewise, merger is also a rewarding business setting where two brands combine together to form a single business entity. The assets and equity of both may or may not be very powerful when alone, but their combination may open road to success for the concerned parties. History reveals numerous successful mergers including Sony and Ericsson, Tata and Docomo, Daimler and Benz, etc.

Entrepreneurs should also seek for co-branding where two or more brands combine together for promotional purpose. Co-branding is usually for short-term but it yields high returns in most cases.

By applying any of the above strategies, entrepreneurs attempt to convert their competitors into business partners for short-term or long-term basis. Besides, the concerned parties tend to share business expertise with each other too. It doesn’t only help evade external threats but also build professional relationship with competitors.

Power of Alliance and Clusters

When there are only a few players in a given industry, they usually attempt to form alliance or cluster for mutual benefit and growth of the sector as a whole. The single most prominent example is of oil producing countries. However, that example is too huge and doesn’t fit into the scope of entrepreneurial ventures.

There are a few industries where the cost of entry is a tremendous amount of equity and massive capital expenditure such as airline, oil refinery, and the likes. Needless to say, only a few players exist in such industries. The concept of clusters work here as it strengthens the manufacturers’ or sellers’ position and they rule the market as per their strategic moves.

Small businesses may also form clusters and get powerful against the market leader. You can use these strategies and connect your competitors with your business venture for mutual success.

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