Competitive Analysis

Competitive Analysis

Before writing the competitive analysis, first identify both direct and indirect competitors. You can locate listings of local businesses, search the Internet for online competition, and seek out mail order businesses that might offer competition. However, the best way to create a strong competitive analysis is to visit your competitors, study their prices, understand their customer base, and uncover the services they offer.

Talk to other customers and determine from friends and neighbors their likes and dislikes about these competitors. Engage vendors and seek out information in business journals. Explore online — be a test customer and order a product to get a sense of the company's customer service, examine return policies, and determine the company's protocol when problems occur.

Gathering a solid base of information is the first step to creating a strong competitive analysis. The next step is analyzing the information and using it to your advantage. List the strengths and weaknesses of each competitor. Then look for areas where you cannot compete and areas where you can provide something that they cannot. For example, an online clothing retailer can offer a much larger selection than an in-store retailer with limited space because they do not carry a full inventory. However, in-store customers can try clothes on, and by offering the latest in luxurious dressing rooms or a monthly fashion show where customers can see the latest clothes up close and personal, you can differentiate yourself from the online retailer.

Competitive Analysis

The competitive analysis of a business plan should include carefully researched data on your competitors. It is not enough to simply list your competition. You need to show how they operate their businesses and identify their strengths and weaknesses. You need to explain your strategy to gain the competitive edge from this information. As you write your competitive analysis, ask yourself the following questions:

  • Have I thoroughly listed all of my direct and indirect competitors? Missing a major player in the industry can reflect poorly on your business plan.

  • Have I done my homework and gathered accurate facts and figures on my competitors? Don’t be afraid to show strong competition.

  • What are the strengths and weaknesses of my competitors? Include both in your competitive analysis. Remember, their weaknesses may be your strengths.

  • What target markets are my competitors reaching?

  • Is there a segment of the market that my competitors are overlooking? This could provide a potential niche market for you.

  • Are there services that my competitors are not providing for their customers that I could provide?

  • How much of a market share can I anticipate?

  • Am I pricing goods or services competitively in regards to my competition? Make sure to explain why you are able to price higher or lower than your competition. Undercutting competition with price is not always favorable.

  • Do I have the finances required to build a business in a competitive market? The more competition you have, the longer it may take to become established in the market.

  • What is my competitive advantage?

The key to your competitive analysis is to differentiate yourself from your competition with a strength, or several strengths, that will attract customers. An unfortunate reality may be that there is too much competition from well-established, respected businesses for you to find or carve your own niche. It's better that you determine this while doing your competitive analysis than after spending a great deal of time and money on a business that cannot gain a competitive share of the market.

Analyze Your Products

Marketing Fundamentals

Competitive Advantage

Competitive advantage is often perceived as difficult to define – something that companies talk about, but cannot effectively measure.

Three easily defined measurements in our opinion provide an effective indication of competitive advantage:

Gross profit higher than the industry average – this is one of the traditional measures of competitive advantage and has been shown to be the most important driver for continuing success and failure in established companies. Limited analysis of competitive companies can identify whether this is being achieved.

Growth higher than the market. A competitive company will, all other things being equal, grow more quickly than the competition. The simplest method of identifying whether this is the case is to compare company growth with market or segment growth – again data which is easy to find.

Customer satisfaction levels higher than the competition. Achieving higher margins and higher growth will demand effective product/ service and customer fit. The higher the level of customer satisfaction compared with the key competitors, the greater the chance of achieving higher than average growth and higher than average gross profit. Customer satisfaction reviews should be a key monitoring element for all enterprises. .

How to analyze your competitors:

  • Competitor is in a better location than my company to serve the market.

  • Competitor's annual sales are greater than my company's.

  • Competitor's founders, board members, and management have more industry experience and better connections than my company does.

  • Competitor has the financial backing of a major corporation, shareholders, or a great amount of venture capital.

  • Competitor's strengths are my company's strengths.

  • Competitor's strengths are my company’s weaknesses.

  • Competitor's product line meets the needs of a similar market to my company’s product line.

  • Competitor's product line is similar to my company's in functionality and appearance.

  • Competitor's price structure is similar to my company’s price structure.

  • Competitor's marketing activities are similar to my company's.

  • Competitor has suppliers similar to my company's.

  • Competitor has distribution channels similar to my company's.

  • Competitor's cost of production is less than my company’s.

  • Competitor is expanding faster than my company is.

One common and useful technique is constructing a competitor array. The steps include:

  • Define your industry - scope and nature of the industry

  • Determine who your competitors are

  • Determine who your customers are and what benefits they expect

  • Determine what the key success factors are in your industry

  • Rank the key success factors by giving each one a weighting - The sum of all the weightings must add up to one.

  • Rate each competitor on each of the key success factors

  • Multiply each cell in the matrix by the factor weighting..

Some businesses think it is best to get on with their own plans and ignore the competition. Others become obsessed with tracking the actions of competitors (often using underhand or illegal methods). Many businesses are happy simply to track the competition, copying their moves and reacting to changes.

Competitor analysis has several important roles in strategic planning:

  • To help management understand their competitive advantages/disadvantages relative to competitors

  • To generate understanding of competitors’ past, present (and most importantly) future strategies

  • To provide an informed basis to develop strategies to achieve competitive advantage in the future

  • To help forecast the returns that may be made from future investments (e.g. how will competitors respond to a new product or pricing strategy?

Competition Is A Way Of Life

Competition is a way of life. We compete for jobs, promotions, scholarships to institutes of higher learning, in sports-and in almost every aspect of your lives. Nations compete for the consumer in the global marketplace as do individual business owners. Advances in technology can send the profit margins of a successful business into a tailspin causing them to plummet overnight or within a few hours. When considering these and other factors, we can conclude that business is a highly competitive, volatile arena. Because of this volatility and competitiveness, it is important to know your competitors.

Questions like these can help you:

  • Who are your five nearest direct competitors?

  • Who are your indirect competitors?

  • How are their businesses: steady? increasing? decreasing?

  • What have you learned from their operations? from their advertising?

  • What are their strengths and weaknesses?

  • How does their product or service differ from yours?

Competitive Analysis

Start a file on each of your competitors. Keep manila envelopes of their advertising and promotional materials and their pricing strategy techniques. Review these files periodically, determining when and how often they advertise, sponsor promotions and offer sales. Study the copy used in the advertising and promotional materials, and their sales strategy. For example, is their copy short? descriptive? catchy? or how much do they reduce prices for sales? Using this technique can help you to understand your competitors better and how they operate their businesses.

Digital marketing makes conducting a competitive analysis easier than it has ever been. While in the past, your best opportunity might have been to dive into the SEC filings of a public company, and perhaps sign up for their mailing list and buy some data from a business information vendor, now much of the information you need to know is publicly available … even metrics.

You can use social media and product review sites to see what customers think of your competitors, as well as obtain some real metrics on how many followers they have. You can also use sites like Compete and Alexa to get a very rough (and let me emphasize, very rough) look at the traffic numbers and patterns for your competitors’ sites.

And, don’t overlook the power of search …

Organizations must operate within a competitive industry environment. They do not exist in vacuum. Analyzing organization’s competitors helps an organization to discover its weaknesses, to identify opportunities for and threats to the organization from the industrial environment. While formulating an organization’s strategy, managers must consider the strategies of organization’s competitors. Competitor analysis is a driver of an organization’s strategy and effects on how firms act or react in their sectors. The organization does a competitor analysis to measure / assess its standing amongst the competitors.

Competitor analysis begins with identifying present as well as potential competitors. It portrays an essential appendage to conduct an industry analysis. An industry analysis gives information regarding probable sources of competition (including all the possible strategic actions and reactions and effects on profitability for all the organizations competing in the industry). However, a well-thought competitor analysis permits an organization to concentrate on those organizations with which it will be in direct competition, and it is especially important when an organization faces a few potential competitors.

How to give Your Small Business a Competitive Advantage

Todayís small businesses face an uphill struggle. In addition to being in an intensely competitive marketplace, businesses must confront obstacles that larger firms donít face, including a lack of financial resources, an increased need for visibility, a lack of brand recognition, and a shortage of qualified sales people. To compensate, small businesses must find a way to ratchet up their marketing communications programs.

What small businesses need is a dynamic, cost-effective way of marketing products and services, one that helps them battle competitors and capture market share. Enter the new contender in the marketing arena - video communications. Simple and easy to use, video communications, which includes video email, video on demand and video broadcasting, is helping to level the playing field for a growing number of small businesses. In fact businesses that have integrated video into their marketing strategies have reported a 300%-400% increase in responsiveness to their marketing message.

Video communications represents the next wave of marketing communications. Itís so powerful itís revamping the way businesses communicate with customers and each other. With video communications, buyers can see that you stand behind your product and/or service. They also can relate to you as a person. And because they can SEE and HEAR you, they can connect with you on more than one level, creating credibility, excitement, and most importantly of all, trust.

Video communications also helps small business challenge companies with bigger marketing budgets, large sales forces, or better brand recognition, without the need for a large financial investment and it helps businesses distinguish themselves from the competition by promoting their unique selling proposition through a medium with the impact of television

Video communications is Ideal for both on and off line businesses, consultants, and professional services. Simple and easy to use, video communications puts a human touch back into the process of communicating with consumers, enabling sales reps, consultants, and professionals to generate ďface timeĒ with consumers, clients, and businesses without spending a great deal of time and money. In fact from just a few dollars a week businesses can integrate the power of video technology into their current marketing strategies.

Video communications offers numerous advantages over main stream marketing. In addition to increasing visibility and adding a personal touch to your e-mails and Web sites, video communications:

  • generates qualified sales leads

  • increases brand recognition

  • provides uniformity of messages

  • establishes credibility with customers

  • generates higher retention rates

  • shortens sales cycles

  • increases click-through rates

  • improves sales conversion figures

Video communications super-charges sales and profits with minimal cost and effort. And thanks to its effectiveness itís growing increasingly popular with small businesses that are looking for a marketing edge. More important, itís ideal for todayís time conscious and tech savvy consumers, whose interest in electronic devices, like ipods and mobile phones, continues to grow. As personal rich media goes mainstream, consumers will expect businesses to communicate this way. Those companies that donít will struggle to remain competative.

How to Remain Competitive in a Down Market

The real estate market was hot for so long that many agents who entered the real estate industry during this time period do not have any experience with a buyerís market. Until the recent real estate market crash, the market definitely favored sellers. Homes sold quickly and in many cases homes sold for prices above the listing price. As a result, buyers learned they had to move quite quickly. In fact, it became quite routine for buyers to waive inspections and other basics in a bid to move forward as quickly as possible. These buyers were quite well aware that it was common during this time for sellers to receive multiple offers. In some cases this could easily escalate into a bidding war.

As the real estate market continues to drop; however, the rules have changed and buyers are now holding the power. Whereas they once wanted to move quickly, they now have the luxury of taking their time. In order to succeed in the current market, agents must be certain they understand the elements of this market.

While it was quite possible to make a large sum of money by simply showing a few properties back when it was a sellerís market; that is no longer the case. You must be prepared to face the realities of the existing market in order to survive it.

One of the realities that should be faced is the fact that homes in the current market will typically take at least six months to sell. In some cases, it may take much longer to sell properties. Compare this to homes that sold in a matter of hours or days when it was a sellerís market, and it quickly becomes apparent how much the market has changed. There are steps that can be taken combat this problem including ensuring that properties have the most exposure possible, especially web exposure. Consider offering virtual tours and using multiple, high-quality photographs. You might also think about increasing commission fees to buyerís agents who make your listings a priority.

In addition, as you face the reality of the current market you must also make sure that sellers face it as well. Many sellers continue to operate under the idea that they will be able to achieve the same level of prices that were typical not that long ago. As a result, many buyers are unrealistic about the prices they hope to achieve. It is critical that you gently introduce sellers to the reality of the current market. At any given time, the current market has about a six month back load of inventory. Even in markets which have not experienced as much of a downturn as other markets, it is essential for properties to be priced accurately or they will usually remain on the market.

As the market shifts, you may also find that you need to shift your marketing plans. Specifically, it should be understood that most areas are now in a buyerís market. This means, that more time will need to be given to developing buyer leads in order to liquidate the bulk of inventory that is currently on the market. This is not to say, of course, that you should not take new listings; however, to balance out those listings you must work to bring in buyers as well. One great place to look for buyer leads, especially first-time buyers, is actually rental properties. During a down market, there are usually more renters than homeowners.

Most people do not rent out of choice. If they can see that it is to their advantage to buy and can be provided information that will help them to see how buying can be a reality, most people will choose home ownership over renting. Consider offering seminars that are free of charge at your office on the topic of home ownership. Print up fliers and provide advertisements in the local newspaper.

The main objectives of doing competitor analysis can be summarized as follows:

  • To study the market;

  • To predict and forecast organization’s demand and supply;

  • To formulate strategy;

  • To increase the market share;

  • To study the market trend and pattern;

  • To develop strategy for organizational growth;

  • When the organization is planning for the diversification and expansion plan;

  • To study forthcoming trends in the industry;

  • Understanding the current strategy strengths and weaknesses of a competitor can suggest opportunities and threats that will merit a response;

  • Insight into future competitor strategies may help in predicting upcoming threats and opportunities.

Industry / Competitive Force






Current Rivalry




Numerous competitors



Few competitors



Equally balanced competitors



One or a few strong competitors



Industry sales growth slowing



Industry sales growth strong



High fixed or inventory storage costs



Low fixed or inventory storage costs



No differentiation or no switching costs



Significant differentiation or significant or switching costs



Large capacity increments required



Minimal capacity increments required



Diverse competitors



Similar competitors



High strategic stakes



Low strategic stakes



High exit barriers



Minimal exit barriers






Potential Entrants




Significant economies of scale



No or low economies of scale



Cost disadvantages from other aspects



No other potential cost disadvantages



Strong product differentiation



Weak product differentiation



Huge capital requirements



Minimal capital requirements



Significant switching costs



Minimal switching costs



Controlled access to distribution channels



Open access to distribution channels



Government policy protection



No government policy protection






Bargaining Power of Buyers




Buyer purchases large volumes



Buyer purchases small volumes



Products purchased are significant part of buyer’s cost



Products purchased aren’t significant part of buyer’s cost



Products purchased are standard or undifferentiated



Products purchased are highly differentiated and unique



Buyer faces few switching costs



Buyer faces significant switching costs



Buyer’s profits are low



Buyer’s profits are strong



Buyer has ability to manufacture products being purchased



Buyer doesn’t have ability to manufacture products



Industry’s products aren’t important to quality of buyer’s products



Industry’s products are important to quality of buyer’s products



Buyers have full information



Buyers have limited information






Bargaining Power of Suppliers




Supplying industry has few companies and is more concentrated



Supplying industry has many companies and is fragmented



There are no substitute products for supplier’s products



There are substitute products for supplier’s products



Industry being supplied is not an important customer



Industry being supplied is an important customer



Supplier’s product is an important input to industry



Supplier’s product is not an important input to industry



Supplier’s products are differentiated



Supplier’s products aren’t differentiated



There are significant switching costs in supplier’s products



There are minimal switching costs in supplier’s products



Supplier has ability to do what buying industry does



Supplier doesn’t have ability to do what buying industry does






Substitute Products




There are few good substitutes



There are several not-so-good substitutes



There are no good substitutes



A strong Business Plan may not guarantee success; but it could certainly prevent failure!

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