The Basics of Competitive Analysis
Analyzing your competitors is one of the key elements of strategic management, and it enables you to determine the strengths and weaknesses of the companies with which you compete. Conducting this analysis systematically will help you minimize the risk of other companies doing damage to your business’ position in the marketplace. With a proper knowledge of your competitors, you will be able to recognize and take advantage of opportunities as they develop.
The main elements of competitor analysis are gathering competitor intelligence, and using the obtained information to predict their behavior and to develop strategies to achieve competitive advantage in the future.
The first stage of competitor analysis is identifying your competition. Your direct competitors are those companies within your area of service with the product/service offerings most similar to yours. There are also businesses with only one or two products/services competing with your company’s offerings, and you have to determine whether they can potentially damage the financial health of your company.
Make a list of all your current competitors, and research any that might enter the market in the next year. You should also create a summary of each competitor’s products, including location, quality, advertising, staff, distribution methods, promotional strategies, customer service, etc. Try to find out as much as possible about your competitors’ strategies and objectives in order to understand them.
Next step is analyzing the strengths and weaknesses of your competitors. You have to determine what are their key advantages in all the main areas of business operations. It is equally important to understand the weaknesses your competitors have in these same areas. Learn how you can capitalize on their weaknesses and meet the challenges represented by their strengths. After that, you should determine what your own company’s strengths and weaknesses are. This will help you to understand and use your strengths to improve your company’s position in the marketplace, and also inspire you to work on your shortcomings. As a final stage of competitor analysis, you should build a strategic plan that reflects the findings.
Following is the list from SBA (http://www.sba.gov/) that suggests some ideas for gathering the competitive intelligence:
- Internet: The Internet is a powerful tool for finding information on a variety of topics.
- Personal visits: If possible, visit your competitors’ locations. Observe how employees interact with customers. What do their premises look like? How are their products displayed and priced?
- Talk to customers: Your sales staff is in regular contact with customers and prospects, as is your competition. Learn what your customers and prospects are saying about your competitors.
- Competitors’ ads: Analyze competitors’ ads to learn about their target audience, market position, product features, benefits, prices, etc.
- Speeches or presentations: Attend speeches or presentations made by representatives of your competitors.
- Trade show displays: View your competitor’s display from a potential customer’s point of view. What does their display say about the company?Observing which specific trade shows or industry events competitors attend provides information on their marketing strategy and target market.
- Written sources: Use general business publications, marketing and advertising publications, local newspapers and business journals, industry and trade association publications, industry research and surveys, and computer databases (available at many public libraries).