Competitor Analysis

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In this article we describe the Competitor Analysis, often used in order to map out the external environment of a business.

In this article you can expect:

Summary of Competitor Analysis

Competitor Analysis is used in order to map out the external environment of a business. It is a component of Situational Analysis, CICD Analysis and External Analysis. The output from Competitor Analysis serves as input for SWOT Analysis. Individual competitors are analysed. Conducting an Competitor Analysis enables a business to respond to opportunities and threats that the business environment entails.

What is Competitor Analysis?

Competitor Analysis is a component of Situational Analysis and is used in order to map out the external environment of a business. What kind of influence do the competitors play on the business? The opportunities and threats that emerge from this serve as input for the SWOT Analysis on which the ultimate choice of strategy is based.

In Competitor Analysis, a look at individual competitors is taken. As discussed above, opportunities and threats are very important. The competitor’s weak points can serve as strong points and the same applies to the opposite. It is important to identify competitive advantages and to overcome or remedy one’s own weaknesses.

Why Competitor Analysis?

Conducting Competitor Analysis gives insight into the attractiveness of the market where the organisation is active. It also offers the possibility to identify opportunities and threats from external environment.

What does the Competitor Analysis consist of?

Without the clear and unambiguous structure, one can quickly forget to tie the right conclusions to the information gathered. It is therefore advisable to follow a clear structure. A step-by-step plan for conducting a good Competitor Analysis follows below.

Step 1 – Summing up one’s own product portfolio Briefly describe one’s own portfolio where the organisation is active.

Step 2 – Identifying the Competitors There are many different forms of competition. Such is alcohol-free beer and beer competitor, but also are drinks in general and even food competitors. It is therefore important to do a distinction between direct and indirect competitors. Direct competitors – organisations that offer comparable alternatieves Indirect competitors – organisations that do not offer the same sort of product or service but instead an alternative for the product category

Step 3 – Choice of Competitors Does an analysis have to be made of each competitor? This is a very time-consuming process with often little plus side. It is better to choose a number of important competitors and respond to them. Justify these choices with a good motivation.

Step 4 – Research the objectives & strategy What kind of strategy do the competitors follow? Which way do they go? Are the competitors aggressive or passive? Is there any attack to anticipate? In what manner does the competitor expect to growth in the coming years? Try to give an answer on these important questions. Do not hesitate to formulate and add additional questions. Research also the way the competitors bet on their marketing instruments. This gives a good insight into the present situation of the competitor. Does the competitor’s present strategy have the desired effect? This also gives a first look into the strengths and the weaknesses.

Step 5 – Key Factors in the market From where do the competitors gain their above-average results? Examples of this are a technological lead or qualitatively higher materials. Set a number of questions in order to determine the most important factors. Examples of this: Why does one buy at Company X? Why is company X succesful? Why is company X not succesful? What do customers find important? and the likes

Step 6 – Strength-Weakness analysis of Competitors Confront the key factors in the industry with the most important competitors. The outcome is a table with all strengths and weaknesses of the most important competitors in there, record also a weighting factor. Some factor is much more important than the other. After that, make an even (smaller) summarising table with scores 1 for very week and 10 for very strong and make along with it a sum-up of the most important competitors (max5).

Step 7 – Future Describe the expectation for the future. What is the competitor likely going to do?

Step 8 – Conclusion Describe the most important findings and conclude with the most important opportunities and threats that serve as input for the SWOT Analysis.

Conducting Competitor Analysis

Follow the steps described above and fill these in/out with relevant information.

Marketing Implications

Competitor Analysis is a marketing tool with which research can be easily done on the way a business can effectively respond to its environment. It is up to the marketer to put a good adjustment to work. Findings from the Competitor Analysis are often used as input for a SWOT Analysis and are a component of the Situational Analysis and the marketing plan.

About the author

Edwin Muilwijk