How to Conduct a Successful Competitive Analysis in 4 Steps
Knowing the intensity and nature of the competition is essential for a business creator. The study makes it possible to answer the following two questions: What place can the company occupy on the market? What are the opportunities to seize? Is it possible to develop on a competitive advantage?
This file explains why and how to do a competitive analysis :
Why do you need to do a competitive analysis?
First of all, the study makes it possible to identify the competition , direct and indirect, and to detect their strengths and weaknesses . A company must know its competitors and stay abreast of them. By summarizing your analyses, you will be able to work on the positioning of your offer, seeking if possible to differentiate yourself from your competitors.
This is a very important parameter, because to maximize your chances of success, you must avoid entering into a competitive war. A new company is generally fragile, so it will not be able to compete with competing companies. Moreover, if you offer an offer identical to that of your competitors, you will quickly orient yourself in a price war. This is a situation that will not create any value for your company, quite the contrary.
Your priority as a business owner / builder is to try to find a positioning that differentiates you from your competitors, which will allow you to bring value to customers and develop a competitive advantage .
Then, the study also makes it possible to measure the competitive intensity. The higher the intensity, the lower the chances of profit for a company and the less attractive the market. This is a very important element to check the viability of your project: is your market already saturated? Is there still room to settle there?
- Create your business online
- Make your business plan
- The basics of market research
The different types of competitors
Competitors are divided into several categories: direct competitors, indirect competitors and potential competitors.
A direct competitor is a company that offers an offer similar to yours. These are companies that you have certainly already identified.
An indirect competitor offers a different offer from yours, but meets the same demand. For example, a supermarket is an indirect competitor for a wine merchant, because you will find similar products there. Sometimes indirect competitors are more threatening than direct competitors.
In addition to your direct and indirect competitors, you also need to consider your potential future competitors . Here, the identification is more difficult, because it may be companies that have not yet invested in your market, or companies whose existence you do not yet know.
Doing a competitive analysis: the step-by-step approach
We explain below what are the different steps to do a competitive analysis.
Phase 1: identify your competitors
Your first job will be to identify your closest competitors , i.e. companies that can meet the needs of the customers you are targeting, in order to establish a list. You should focus your analysis on a limited number of competitors (no more than 5 ideally).
It is very likely that you have already identified them. Otherwise, you can find them through the Internet. Competitors already present are easily identifiable. We advise you to also be on the lookout for any potential competitors, which may correspond to companies planning to diversify (by setting up in your market) or future companies (new entrants).
Phase 2: collect information on each competitor
Then your second job will be to study each competitor . For this, you will have to:
- Analyze and collect a lot of information: the size of the company, its location, its offer, its commercial practices, its pricing and distribution practices, its communication, etc.
- Determine, based on his information, what are his strengths and what are his weak points.
In order to collect this information, you can:
- Carry out research on the Internet, without forgetting to consult social networks and sites where you can consult the opinions left by customers;
- Carry out field surveys by going to observe your competitors, and possibly pretending to be a prospect;
- Discuss with customers of your competitors to obtain their opinion.
To obtain a quality study that allows you to make good decisions, you must ensure the reliability of the information you collect.
Phase 3: Synthesize the information
When you have finished collecting this information, you can summarize it in a table to obtain a map of the competition. At this level, there are several analysis tools that you can use, such as:
- The SWOT matrix ;
- The competitive analysis grid , which corresponds to a table grouping together all the competitors, their strengths and their weaknesses;
- Porter's 5 forces method .
Phase 4: analyze the information and determine your positioning
The next step is to incorporate your own arguments against each competitor analyzed. Competitor by competitor, you must determine the additional added value that you can bring to customers thanks to your offer. Feel free to also highlight areas where your competitors are better than you.
At this level, it is on the weak points that you will have detected in your competitors that you will be able to detect opportunities , especially on the weaknesses which currently generate dissatisfaction among customers.
This will help you identify one or more competitive advantages , which will form the basis of your value proposition.
Article by: Amit Chauhan
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