Competitive analysis: methods, steps, examples

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The purpose of the "Competition" section of the business plan is to facilitate the choice of tactics for competitive struggle and to help avoid repeating other people's mistakes. Typical mistakes include trying to enter an oversaturated market.

A lethal analysis of competitors' activities can force a change in strategy and make adjustments to current activities in order to better resist rivals. Knowledge of the competition increases the validity of an enterprise's strategy.

It is advisable to get answers to the following questions in this section of the business plan:

  • Who is the largest manufacturer of similar products (services)?
  • What is their product (service)? (Key characteristics, quality level, service, design, customer opinion.)
  • What is the state of their business: stable, on the rise, decline (reasons)?
  • What is the volume of sales, income main competitors?
  • What is the level of prices for the products (services) of the main competitors? Pricing policy?
  • Do competitors pay a lot of attention to advertising?
  • The level of financial condition of competitors.

After completing and analyzing the table below, you can try to identify the strengths and weaknesses of yours and your competitors.

If the advantages over a competitor are only 30% higher, this means that the goods and services of this company have low competitiveness; within 30-50% - relatively stable position in the market; 50-70% - successful competition in the market, and over 70% - control over the market for this product (service).

Building a strategy to ensure competitiveness can be based on only one of the types of competitive advantages: either attracting customers at a relatively low price in comparison with competitors, or meeting the demand of the most demanding customers requiring exceptional quality. It is impossible to combine these two types of competitive advantages.

The business plan should indicate which strategy to ensure the competitiveness of the company. It is clear that the choice of strategy depends entirely on the potential of the given enterprise (quality of equipment, raw materials, availability of qualified management and working personnel, etc.).

When assessing the merits of your own and your competitors, it should be noted which group of advantages they belong to: low or high order. Low-order advantages are associated with the possibility of using cheap labor, materials (raw materials), energy, etc.

Every company always has competitors. But many people new to business, overexcited by their business ideas, often fail to perform adequate competition analysis, which always leads to disastrous results.

Competition analysis is a mandatory section of a business plan. Know your competitors by sight!

The statement that the company has no competitors is most often a gross mistake. Your investor will simply take such a business plan out of the way. It will become clear to him that you are not at all guided by market realities.

You shouldn't be afraid of rivals, but you shouldn't ignore them either. Competitor assessment must be objective. You do not need to react sharply either to your own successes or to the temporary successes of your rivals.

Qualitative assessment of competitors will give you the opportunity to better evaluate the quality of your product or service and convey to potential investors a sense of confidence in your superiority.

Feel free to learn from the competition. The main principle of competition is a quick and adequate response to consumer demands. Studying your opponents will help you to act as competently as possible in a competitive environment.

When conducting a competition analysis, keep in mind that you only need to evaluate competitors that are targeted at your target market. If you have a Japanese restaurant in the center of Moscow, then you can ignore the nearby McDonald's. You have different target customers.

When performing a competitive analysis, you should focus on the following key points:

• Who are your main competitors. • The basis of your rivalry. • What are the main differences between your company and its competitors. • Who is able to compete with you in the future. • What prevents new players from entering the market.

Competitive Positions

Competition Analysis in Business Planning: Take the Top!

Business Plan Sections Market Analysis Marketing (January)

The competitor analysis section can be the most difficult section to compile when writing a business plan because you need to research them before analyzing your competitors. Here's how to write a competitor analysis section of a business plan. (See this Simple Business Plan Template for a complete template that you can use to create your own business plan.)

First, find out who your competitors are

The first step in preparing your analysis is to identify who your competitors are.

This is not the hard part. If you are planning to start a small business that will operate locally, chances are you already know which businesses you are going to compete with. But if not, you can easily find out by doing an internet search for local businesses, looking at an online or printed local phone book, or even driving through the target market area. The main question for you will be one of the bands; if your business plan is centered around the idea of ​​opening a bakery, how far will customers be willing to drive to get fresh buns or bread?

Your local business may also have non-local competitors that you need to be aware of.

If you sell office supplies, for example, you may also be competing with major retailers hours away and online office supply companies. You want to be able to identify all possible competitors at this stage.

Then find out about him

Next, you need to collect information about your competitions, which you need to analyze your competitors. This can be the hard part. While you can always approach your competitors directly, they may or may not want to tell you what you need to know in order to put together this section of your business plan.

  • what markets or market segments your competitors serve;
  • what benefits your competitors;
  • why customers buy from them;
  • as much as possible about their products and / or services, pricing and promotion.

If you are wondering "How to conduct a competitor analysis in practice?", then you should definitely read this article. Using our sample competitor analysis, you can assess the competitiveness of your company. This example of a competitive analysis includes 10 basic steps that must be taken when analyzing a company's competitive environment. At the end of the article, you will find a convenient template with tables that will help you structure all the information obtained during the work.

Preliminary work

Before proceeding to the comparative analysis of competitors, do some preliminary work. First, clearly identify your competitors (see Choosing Competitors Correctly). Secondly, define the objectives of the competitive analysis, so as not to analyze the "extra" information that will not answer the necessary questions. Third, conduct a survey of consumers in the market to form an understanding of what the target audience has about your product and about competitors' products, assess the level of knowledge and loyalty.

We recommend that you read the article "Important points of the competitive analysis of the enterprise", which contains all the necessary information about the main stages and principles of the analysis of the company's competitive environment.

Estimate the overall level of intra-industry competition

The more intense the level of competition in the industry:

  • the faster the market environment changes
  • the more important mobility and quick response to changes
  • the higher the level of required costs, staff qualifications and expectations from the product
  • the more difficult it is to find a free market niche and a successful competitive strategy
  • the higher the risks of reducing long-term profit
  • the higher the level of development and market saturation

At the first stage of the competitive analysis, determine the number of players, the rate of market growth, the dynamics of the emergence of product groups and new products in the industry. Conclusions at this stage should be made regarding the intensity of competition, the prospects for its tightening and forecasts of changes in the market for the next 3 years. You can use the following competitor analysis table to make this assessment.

It is better to collect data on the above indicators for 3-5 years, but in the absence of such information, 1-2 years will be enough. Objective: clearly understand the trend and correctly predict the future position of the market.

Map your competitors

The Competitor Map will help to highlight those players who are the driving companies of the market, determine the rules of the game in the industry and can become examples of successful solutions and strategies.

It is easy to build a map, it is enough to determine the market share and sales growth rate for each competitor:

This article contains the definition of competitive analysis and its examples. The article also contains a description of the methods and stages of the analysis of the competitive environment and the analysis of competitive positioning using the example of a website.

Understanding Competitive Analysis

Competitive analysis is a set of tools that help to study and understand the goals of competing firms and identify their weak and strong points relative to them. Analysis of the competitive environment allows you to build a company's strategy in such a way as to maximize its strengths and existing opportunities, while at the same time reducing risks and weakening existing threats from competitors.

There are a number of typical business situations that require competitive analysis:

  • developing a marketing plan;
  • developing a sales plan;
  • defining a product mix and sales policy;
  • pricing taking into account the pricing policy of competitors;
  • product entry to the market: determination of its key consumer properties, taking into account the current and possible future state of the competitive environment;
  • selection of channels and methods of product promotion, taking into account the used communication competitors' politician.

The following fundamental principles should be adhered to when conducting a competitive analysis:

  • before starting the process, it is necessary to clearly define its goals, since without proper goal-setting, all further actions may not have the desired effect;
  • choose a certain segment of the competitive environment for yourself and identify the main competitors in it, whose activities will be the object of competitive analysis;
  • be sure to conduct a marketing analysis of the main competitors.

To conduct a productive competitive analysis, it is necessary to collect the most complete and reliable information about competitors, which is obtained from the results of marketing research of their activities using the following tools:

  • questionnaires and customer surveys;
  • visits to points of sale in order to analyze the quality of retail outlets, assortment policy and principles of product display;
  • online sources;
  • surveys and surveys of industry experts;
  • finding sources of inside information;
  • industry reviews and open reporting forms;
  • public events with the participation of competitors - conferences, exhibitions, seminars.

Competitive Analysis Methods

Currently, there are quite effective methods of competitive analysis, including:

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