Get to Know Your Competition 7 shrewd strategies for forging alliances--and staying ahead of the pack.

Business is war and the competition is the enemy--right? Wrong. Though competition is a fundamental aspect of being in business, savvy entrepreneurs know that viewing competitors exclusively as adversaries is shortsighted and potentially damaging. A better strategy is to build alliances with your competitors and let them help you become better and stronger. Here's how:

Know who your competitors are. This sounds basic, but it's a mistake many business owners and salespeople make. If you have a retail store, your competitors are obviously other retailers who sell similar merchandise (both online and brick-and-mortar). But that's not all. You're also competing with the businesses that are meeting the needs of your customers with products and services you don't offer and haven't thought about offering, and the businesses that might make your products obsolete. You need to know who all your competitors are--not just the obvious ones, but the ones flying under the radar as well.

Find out everything you can about the competition. Don't get blindsided; pay attention to anything your competitors do. Set up intelligence files for each competitor. Look for articles about them in trade journals, newspapers and magazines. Study their websites. Use programs like Google Alerts to track what's said about them online. If possible and practical, shop them secretly on a regular basis to observe their operations firsthand.

Develop relationships with your competitors. Once you've researched your competitors, reach out to them. Join industry and business networking associations so and get to know the people who own and work for competing companies as individuals. You never know where those relationships might lead.

Be prepared to cooperate and collaborate when necessary. If something is going to have a strongly positive or negative impact on your industry, reach out to your competitors so you can join forces and take appropriate action. For example, you may want to unite to oppose or endorse pending legislation that could affect your companies.

Depending on your particular business, you may also find that competitors can serve as backup resources. For example, you might get an order that's too big for you to fill alone. If you have excellent, reciprocal relationships in place, you might be able to outsource part of the work to a competitor. Or if a competitor suffers a disaster of some sort that prevents that company from serving its customers, you can step in and help out. Not only is that good business; it's also the right thing to do.

Let your competitors make you better. When a competitor is beating you, do your best to figure out why--but don't use that as an excuse to accept defeat. Once you understand what your rival is doing that the market prefers, figure out what you could change to make you even more attractive than the competition. Don't simply copy everything your competitors do; take their best ideas, test them for effectiveness and improve on them.

Resist the urge to compete on price. It's tempting to cut prices to gain market share, but it's a strategy that doesn't work in the long run. There will always be a cheaper product, trying to undercut every competitor is a race to the bottom. Instead, focus on providing greater value.

• If you're not convinced holding firm on price is the way to go consider the arguments of " Get Past the 'Budget' Roadblock ."

Be prepared for the competition to play dirty. Fair competition is great; It forces everyone to give it his or her best. But all competitors don't play fair. There are always people who think that the best way to build their company up is by tearing others down or cheating in some way. When that happens, a fitting action in response is necessary. Don't delay legal action if it's appropriate.

The internet is a common place to find competitors pulling dirty tricks. Monitor what's said about you online and have a proactive online reputation-management plan in place in case you become the target of an internet attack.

• Keep your brand and reputation under control with, " Are you Losing Control of Your Brand Online? "

Competition is a natural part of being in business in a capitalist economy. You must be vigilant if you are to maintain and grow your market share, so let that work to your advantage. Your best competitive tactic comes from Sun Tzu, a Chinese general and military strategist from around 400 B.C. Tzu said, "Keep your friends close and your enemies closer"--and if you happen to turn an enemy into a friend, all the better.

JK Harris is the founder of Flashpoints Consulting, LLC and of JK Harris & Company , the nation's largest tax resolution firm. He's the author of Flashpoint: Seven Core Strategies for Rapid-Fire Business Growth , available April 2010 from Entrepreneur Press . Harris is a popular speaker and a successful business consultant advising mid to large-sized businesses around the world. For a free subscription to Flashpoints newsletter, plus a free copy of JK Harris' e-book, The Mindset of High Achievers, visit theflashpoints.com .