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9 Types of Competitive Threat

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A competitive threat is competition that hasn't occurred but has potential to occur. In other words, it is a risk of competition. As with any risk, a competitive threat has a probability and impact and may be treated. The following are the basic types of competitive threat.

New Competition

The potential for new firms to compete for your customers. This includes startups and established firms that may expand into your market.

New Products

Improvements to the products and services of competitors. For example, a high speed train company that launches a safer, faster, easier to operate and more efficient model may suddenly gain significant market share.

New Business Models

A new way of capturing value that competes with your business model. For example, streaming media services that can be accessed over an internet connection as opposed to being tied to the content available from your local telecom company.


The ability of competition in different markets to attract your customers. For example, restaurants may take business from supermarkets if they can convince customers to eat out every night.


The potential for a price war. For example, an airline that is charging $1000 for a flight suddenly drops the price to $400 sparking reduced prices from competitors until the route is unprofitable for everyone.

Customer Experience

Improvements to customer experience. For example, the four major airlines in a nation all have reasonably low customer satisfaction. One gets a new CEO and suddenly their customer satisfaction is improving every quarter. The other three airlines start having to discount more tickets to sell seats as customers begin to prefer the better customer experience of the improving airline.


There are two nightclubs in a college town with both spending $400 a week on promotion. Suddenly, one starts spending $4000 a week on promotion to become the more popular spot. This results in an escalating competitive battle that damages both businesses.


The potential for the competition to recruit your most valuable employees.

Intellectual Property

The potential for the competition to develop superior intellectual property such as trade secrets and patents that allow them to outperform you.
Overview: Competitive Threat
Related Concepts


This is the complete list of articles we have written about competition.
Captive Market
Competitive Environment
Competitive Factors
Competitive Parity
Competitive Pressure
Competitive Threat
Cost Competition
Fair Competition
Greed Is Good
Imperfect Competition
Market Change
Market Economy
Outrun The Bear
Perfect Competition
Substitute Good
More ...
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