What is Competitive Analysis?
A competitive analysis is the analysis of your competitors and how your business compares. By evaluating the strengths and weaknesses of your competition, you can begin to formulate how to give your company an advantage. Such an assessment is usually part of a company’s business or marketing plan, and provides context for growth plans.
Types of Competitors
The types of competitors evaluated include:
- Direct – Businesses that sell the same types of goods and services you do, to the same market. Such as gift shops, convenience stores, or florists, for example.
- Indirect – Businesses that sell substitute products or services, or items that can be used in place of yours. If you own a bakery, an indirect competitor might be a restaurant. If you run a scrapbook supply store, an indirect competitor could be a craft store.
- Potential new entrants – Although you can’t predict the future, any news you’ve picked up about new businesses entering your market should be taken into account as you analyze your current and future competition.
Questions to Ask
To prepare your competitive analysis, consider these questions about each one of the competitors you have identified:
- Strengths - What is it that this competitor does particularly well? What are they known for? What area of their business is superior to yours? Consider their pricing structure, their inventory selection, level of customer service, and convenience and how it compares to yours.
- Weaknesses - Where does your competition fall short with respect to your company? Where do they struggle to be competitive against you? From your perspective, these are opportunities you should explore to try and win some of their customer base.
- Marketing - What does their marketing plan consist of? Where are they investing their marketing dollars – and are they getting results? What can you emulate? What can you do even better?
- Financial resources - How strong are your competitors’ financial reserves? Are they struggling or on solid footing?
Where to Find Information
Now that you know what to ask about your competitors, it’s time to start information gathering. Some of the best places to turn to for details on your competition’s operations are:
- Google - Of course, start by typing in each competitor’s name and reading what kinds of articles and reports come up about them. You might find legal findings or old news articles that shed some light on how the business operates.
- Site visit - Don’t just research from afar, go shop your competition. See what they stock, who they employ, and how they sell. Estimate the size of the space, the amount of foot traffic they get, and – from that – how much they make a day.
- Marketing materials - Gather as many examples of their marketing tools as you can, either by registering at their website, requesting information, or taking note of local ads.
- Local newspaper articles - It’s amazing what you can learn about local companies from articles that run in the area newspaper. Have they won any awards? Announced any job openings? Talked about expansion plans.
Compile all the information you find into a report that summarizes where you have an advantage over each competitor, and where you have opportunities for improvement. This exercise can help solidify your business’ position in the marketplace, or help you gain some market share.