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Competitor analysis takes an in-depth look at competitors to understand their motivation and predict what actions they may take in the future. The analysis compares the competitors to other participants in the same industry and your company.
What it is: The competitor analysis tries to define a competitor, their capabilities and weaknesses, and their motivations. It develops a definition of their capabilities, customers, products, and services, as well as how they are similar to and different from your company and the others in your industry.
What it does: The competitor analysis will help you understand their historical actions, what they are doing now, and what might they do in the future. Because your company does not act in a vacuum, it is critical to know what your competitors might be planning or how they will react to your actions. Knowing what can they do and what they will likely do will help you formulate your strategy and implement your plans. Entrepreneur Magazine offered the following reasons to complete competitor analysis:
Understand your business’s competitive advantages and disadvantages in your industry.
Gain an understanding of your competitors’ business strategies.
Discover an informed basis to develop strategies to achieve competitive advantage in the future.
Forecast returns that may be made from future investments (i.e., How will competitors respond to a new product or pricing strategy?).
Doing a competitor analysis holds several benefits for the growing enterprise:
How it is used: Knowing your competitor's size, capabilities, products, services, and objectives can increase your ability to succeed in the market. You can avoid getting behind in research, product introduction, and new product features and services. It is important to understand how your competitors are trying to impact the customers in the marketplace and how you can act in advance or react to those moves.
Where: In competitor analysis, you need to decide both who and what you will analyze.
Obviously, you want to look at the largest competitor in the market, the one with the largest revenues and greatest market share.
Consider the competitor with the highest profitability and highest-priced products. You must pay attention to the most differentiated player.
Look for the competitor with the lowest cost position and monitor their profitability and the sources of their low-cost position.
Look for the competitor who is experiencing the greatest market share growth. Even if they are a smaller player today, they have identified something that is making more customers switch to purchasing from them, so they must have found something important in the industry.
Look for the most aggressive competitor. Why are they trying to grow, and how will they retain the customers they win through their aggressive actions?
Look at any competitor that has recently changed its strategy and is trying to change its position in the industry.
Consider competitors that are closest to your customers geographically, in the products they provide, or in the markets where the customers compete. Competitors that are most like you are your nearest competitors and the most likely to be able to take your current customers.
Consider competitors that sell substitute products: different from what you and others in the industry sell, but products that may replace your products..
Consider potential entrants that may try and enter your industry through acquisition, building capacity, a supplier moving downstream, another country, or by converting existing capacity of other products to products that compete with you.
Competitor overview and profile: Who are they? How long have they been in your industry? How are they perceived in the marketplace? How much revenue and market share do they have? What is the nature of their advantage? etc.
Competitive advantage: What are the sources of their competitive advantage? How unique is it? How sustainable is it? How important is it to the customer?
Financial resources: What debt to equity position, available cash, resources for financial decisions, cash flow, etc. do they have?
Staff: What resources does the company have to help it grow, meet its current demands, and develop new competitive products and services?
Products and services: What products do they have? How do they compete? What advantages do they have? What are the known weaknesses in product performance? How are product introductions made? etc.
Service: How do customers respond to their service? How consistent are they in providing service? What services do they offer? What advantage do their services give them? etc.
Target markets: Which markets do they target and focus on? How successful are they in their targeted markets? Are they targeting any new markets?
Market share: What is their market share? Is it growing or shrinking? Is it more concentrated in certain segments of the market?
Pricing: Do they price for profit or market share? Do they use penetration pricing, skimming, or status quo? Are their prices higher or lower than yours? How sustainable is their pricing?
Cost position: Do they have an advantaged raw material position? Do they have scale advantage? Do they have a technology position that gives them lower variable or fixed costs? etc.
Customers: Where, geographically, are their customers? Are they concentrated by end use or industry? Are their customers loyal or just price buyers? How do they attract or retain customers?
Financial data: Provide income statements and balance sheets. If available, show multi-year revenue growth, cash flow, and what is happening to their cost position.
Brand recognition: How is their brand viewed in the market place? How sustainable is their brand? What are they doing that is strengthening or weakening their brand?
Location: Where are their corporate headquarters? Where are manufacturing plants, distribution points, terminals, sales offices, research facilities, etc.?
Distribution Channels: How do they distribute their products? Do they have any advantaged positions or channels? How do their positions affect their cost or brand image?
Marketing strategies and tactics: How do they attract customers? How do they convert them into customers? How do they retain customers? How do they monetize existing customers?
Logistics: How do they move their products and deliver them? Where are they stored? Are there issues with how they move and store their products? etc.
Overall strengths: What are their strengths? What are they based upon? How sustainable are they? Can they be easily copied? How important are the strengths to the customers?
Overall weaknesses: What are their weaknesses? What are they based upon? How difficult are they to overcome? Can they be easily covered up? How important are the weaknesses to the customers?
Available opportunities: Is there something happening in the market or industry that could give them a unique advantage in the future?
Threats: Is there something happening in the market or industry that could give them a unique disadvantage in the future?
Selecting which competitors to analyze can be a very important task:
Competitor analysis can cover many topics that can vary in importance from industry to industry. Some topics that are commonly covered include:
Why: If we do not know what our competitors are doing and what they are capable of, we may leave ourselves defenseless against their future moves. We may not recoginze the opportunity to take advantage of weaknesses or openings in the market place or industry.
Where it shouldn't be used: There is little or no risk in doing a competitive analysis when you are an active participant in an industry. But if you are looking to buy out someone in the industry or looking to enter the industry, you may not want to openly complete a competitor analysis that could give away your motives before you are ready for them to be public. In this case, you might want to use a consultant to cover your activities.
Any restrictions: Be careful not to believe everything you hear or find. There can be significant misinformation in the industry. Look for corroborating evidence to support your findings. Be particularly careful of what companies say about themselves and their intentions on their own web site. Often, website information is a wish for the future and not evidence of capabilities or accomplishments.
Warnings: Evidence has indicated that people in a company misjudge the level of their own company's and their competitor's capabilities and positions. We often find that employees are directionally correct about their company and the competitors, but they are attitudinally wrong. This means that they can often accurately identify the weaknesses and strengths, but they think their own strengths and the strengths of their competitors are stronger than the customers think. They also think that the weaknesses of themselves and their competitors are weaker than the customers perceive.
Identify your customers and determine which to analyze: See the topic “Selecting which competitors to analyze can be a very important task” and select the companies to analyze.
Gather data on the competitors you selected:
Visit websites and social media pages.
Look for annual reports and federal filings, including financial, environmental, sustainability, etc.
Review company publications and press releases.
Look in local papers for tax abatements offered to encourage business start-up, construction, and other local information about the number of people employed, revenue in community, etc.
Talk to customers through salesmen, focus groups, surveys, etc.
Look for published reports about the competitor.
Talk to industry experts and people familiar with the company.
Talk to former employees of the competitors.
Buy their products, visit their sites and stores, order their product information, etc.
Determine which types of data you will collect (consider topics from the list above under "Competitor analysis can cover many topics that can vary in importance from industry to industry")
Collect data from many of the sources outlined in the demonstration videos and additional resources. Some examples include:
Analyze the data:
Utilize one of the templates or examples on this page to lay out the comparative information so you can analyze the competitors’ information against each other.
Avoid using emotion; base the analysis on evidence and facts.
Whereever possible, calculate differences in cost, price, assets, revenue, etc. to compare the competitors.
When you can not compare quantitative data directly, use a prioritization table like the one found in the templates below to compare qualitative information.
Interpret the results
Find each competitor’s strengths and opportunities related to specific market segments and applications.
Find each competitor’s weaknesses and threats related to specific market segments and applications.
Identify where each competitor currently wins and where they will lose (use a SWOT analysis to help).
Use industry analysis and Porter's Five Forces analysis to understand the impact of different competitive positions in the industry.
Determine the sustainability of each competitor's advantages and disadvantages.
Predict what strategic initiatives each competitor may initiate in the near future based on the other analyses you have completed.
Determine what defensive actions you should take based on the analysis.
Determine what offensive actions you could take based on the analysis.
Present results
PowerPoint presentations are a common choice to show all topics of the competitive analysis.
The templates in this document are also good presentation formats.
Competitor Analysis Template: Competitive Analysis
There are many ways to show a competitor analysis. You can show the template you used to gather the data, but that may be too cumbersome and difficult to read. The template included here is an example of how you could build a competitor analysis presentation: MECLABS: Competitive Analysis Template
Competitor Analysis NYU Professor: NYU Competitive Analysis
This content is provided to you freely by Ensign College.
Access it online or download it at https://ensign.edtechbooks.org/projectbased_internships/competitor_analysis.
