Unless your industry is a monopoly, which if so please tell us your secret, you will have competitors. Competitors will impact upon your business’s success, so it is important to analyse them and their performance. Performing a competitive analysis when starting or during the running of your business, can give you an edge in your industry. It is thus essential for you to know what a competitive analysis is and how to perform one.
What Is a Competitive Analysis?
A competitive analysis is an evaluation of the competitors to your business. This analysis will evaluate their revenue, their offerings, their capabilities and other relevant factors that impact upon their performance. Crucially, a competitive analysis is not a static exercise, and should be ongoing throughout the operation of your business.
Why Are They Important?
A competitive analysis is important for several reasons. Primarily, it allows you to keep tabs or track of your competition. An ongoing analysis will allow you to monitor your competitors’ success and offerings. Furthermore, an analysis will allow you to insulate and protect your business’s market share from competitors’ offerings by accurately understanding their positioning and place within the market. Moreover, a competitive analysis can assist you in understanding your business’ positioning. You will also be able to be more adaptive and responsive to emerging industry trends. Through an assessment of your competition, you will be able to better formulate business strategy and plans for your business’s development. Fundamentally, by conducting this evaluation, you will be able to generate a competitive advantage for your business in the market.
How Do I Conduct a Competitive Analysis?
Primarily, you want to make sure the information you acquire from your analysis assists you in formulating your business’s strategy. The first thing you should is to categorise your competitors according to how they relate to your business. Are they a primary competitor in the sense they are targeting the same segment of the market as you? Are they in your industry but targeting a different consumer segment? Or are they only tangentially related to your industry? Thus, by understanding the nature of your competitors, you can better determine which competitors you have to prioritise your focus upon.
After conducting this preliminary analysis, you should attempt to analyse their strengths and weaknesses in comparison to your business. This can include their products, their market share, their marketing strategy and their strategic relationships. The more information you can acquire, the more likely you will be able to comprehensively understand their positioning within your market. Keep in mind that their financial reports are not the only source of information that can assist you in making a competitive analysis. Signing up to their newsletters and looking at their social media can give you invaluable insights into your competitors’ strategy and positioning.
Should I Include My Business in My Competitor Analysis?
Yes, the insights you generate from investigating your competitors are only useful if you compare their performance with your business’s performance. For this reason, it is wise to include a competitive position analysis of your own company. To analyse your business, consider assessing your business in respect to Porter’s Five Forces as follows:
- Supplier Power: For this force, ask yourself what power do your suppliers have in relation to you? Can you choose other companies, or are you restricted to your current suppliers?
- Buyer Power: You need to conduct an assessment into the strength your buyers’ bargaining power in relation to yours.
- Competitive Rivalry: Try to determine how competitive your industry is?
- Threat of Substitution: Can your customers shift to another product or service if your offering is not up to standard.
- Threat of New Entry: Are new businesses able to set up easily or are there high barriers to entry in your business.
Conclusion
Therefore, it is essential for you to conduct a competitive analysis of your business and its competition in your industry. Keep in mind, that everything you do must comply with the law, so if you are unsure whether you are entitled or allowed access to certain information, get in contact with a business lawyer for further advice.
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