---
name: competitive-strategy
description: Analyze competitors using Porter's Five Forces, positioning maps, and competitive response frameworks. Use when assessing market position or strategic threats.
domain: mindset
---

# Competitive Strategy

Framework for analyzing competition and defining positioning. Covers Porter's Five Forces, positioning maps, competitive moats, and response strategies.

## When to Use

- Entering a new market or segment
- Responding to competitive threats
- Defining product positioning
- Investor diligence or board strategy
- **When NOT to use**: Early-stage pre-PMF (focus on customers, not competitors), or hyper-growth (move fast, don't react to every competitor move)

## Porter's Five Forces

### 1. Threat of New Entrants

**Question**: How easy is it for new companies to enter?

**Barriers to entry**:
- **Economies of scale**: Advantage for incumbents with volume
- **Network effects**: Value increases with more users (hard to challenge)
- **Capital requirements**: High upfront cost deters entrants
- **Switching costs**: Hard for customers to leave (retention moat)
- **Regulation**: Licensing, patents, compliance costs

**Example**: Search has high barriers (Google's scale + AI training data). Local pizza has low barriers (anyone can open).

---

### 2. Bargaining Power of Suppliers

**Question**: Can suppliers dictate terms?

**Supplier power is high when**:
- Few suppliers (e.g., only 2 chip foundries)
- No substitutes (unique technology or raw material)
- High switching costs for you
- Supplier can forward-integrate (become your competitor)

**Mitigation**: Diversify suppliers, backward integrate, reduce dependency.

---

### 3. Bargaining Power of Buyers

**Question**: Can customers dictate terms?

**Buyer power is high when**:
- Few buyers (concentrated or single buyer)
- Low switching costs (can leave easily)
- Undifferentiated product (commodity)
- Price-sensitive buyers (low margins)

**Mitigation**: Differentiate (make switching costly), build loyalty, expand customer base.

---

### 4. Threat of Substitutes

**Question**: Can a different solution solve the same problem?

**Examples**:
- Zoom substitutes: Phone calls, in-person meetings, Slack Huddles
- Netflix substitutes: YouTube, TikTok, reading, gaming
- Uber substitutes: walking, biking, public transit, owning a car

**Key**: Substitutes don't look the same but serve the same need.

**Mitigation**: Make your solution the best option (speed, price, quality).

---

### 5. Industry Rivalry

**Question**: How intense is competition?

**High rivalry when**:
- Many competitors (fragmented market)
- Slow growth (everyone fighting for share)
- Low differentiation (commodity)
- High fixed costs (pressure to fill capacity)
- High exit barriers (can't leave even when losing)

**Examples**: Airlines (brutal), SaaS tools in a hot category (intense), luxury brands (relatively low, brand matters).

**Mitigation**: Differentiate. Build moats. Find a niche.

---

## Positioning Maps

**Purpose**: Visualize competitive landscape.

**Example** (CRM space):

```
^ Premium
|              HubSpot          Salesforce
|              (SMB)            (Enterprise)
|
|        Pipedrive          Zoho
|        (Solo dev)         (Cost-driven)
+------------------------->
                Low --> High --- Complexity
```

**How to build**:
1. Pick 2 dimensions customers care about (price, complexity, speed, quality)
2. Plot competitors on 2×2 grid
3. Mark where you are (and where you want to be)

**Key**: Find whitespace (unoccupied quadrant) and differentiate.

---

## Competitive Moats

| Moat | Definition | Example |
|------|------------|---------|
| **Network effects** | Value grows with users | Facebook, Uber, Airbnb |
| **Brand** | Trust premium (willing to pay more) | Apple, Nike, Coca-Cola |
| **Switching costs** | Hard to leave your product | Salesforce (custom workflows) |
| **Scale economies** | Volume advantages in cost | Amazon, Walmart |
| **IP/regulatory** | Patents, licenses, compliance | Pharma, telcom, casinos |
| **Data network effects** | More data → better product → more users | Google Maps, Waze |

**Goal**: Build 2+ moats. One is fragile; plural is durable.

---

## Competitive Response Framework

**When competitor launches something**:

1. **Is it a threat?**
   - Does it affect our core segment? (yes → respond)
   - Does it make our product obsolete? (yes → pivot or catch up)
   - Does it change customer expectations? (yes → adapt)

2. **Do we respond publicly?**
   - If major threat → Acknowledge, communicate plan
   - If minor → Ignore (don't amplify their launch)

3. **How to respond?**
   - **Copy**: If it's a clear customer need, build it
   - **Counter**: Differentiate (highlight our strengths)
   - **Ignore**: If it's a diversion from your strategy

**Guidelines**:
- Don't react to every competitor move (strategy over noise)
- Respond with speed when customer-facing (show you're alive)
- Let them make first mover mistakes (then learn and iterate)

---

## Common Rationalizations

| Rationalization | Reality |
|-----------------|---------|
| "We have no competitors" | Every solution has alternatives. If you can't name them, you don't understand the market. |
| "Competitors are irrelevant" | Customer expectations are set by the market, not just your product. |
| "We'll win on features" | Features are easy to copy. Moats (brand, network, switching costs) are durable. |
| "We need to copy every competitor feature" | Feature parity ≠ strategy. Differentiate or die. |

## Red Flags

- You can't name your top 3 competitors and their value props
- You say "no one is doing this yet" without knowing why
- You react to every competitor move (no consistent strategy)
- Your only differentiator is price (race to the bottom)
- You ignore substitutes (they may disrupt you before direct competitors do)

## Verification

- [ ] Porter's Five Forces analyzed (new entrants, suppliers, buyers, substitutes, rivalry)
- [ ] Positioning map created (2×2 grid with competitors and your place)
- [ ] Competitive moats identified (2+ durable advantages)
- [ ] Top 3 competitors profiled (strengths, weaknesses, strategy, market share)
- [ ] Response framework defined (when to respond, how)
- [ ] Substitutes identified (not just direct competitors)