Competitor Analysis is the process of finding out who your industrial competitors are, evaluating their working and policies, and comparing them with yours so as to gain a strategical advantage. In a world of ever-growing cut-throat competition, analyzing competitors and their strategies is very important to gain a competitive advantage.
What is Competitor Analysis?
When you start out in an industry, it is most likely that there already are a bunch of firms dealing in similar products and services. These are your competitors, that is, organizations you are looking to acquire market share(1) from, and organizations that look to acquire your market share.
To be advantageous in this cut-throat competition, you need to strategically evaluate your competitors’ policies and conduct, analyze their marketing and advertising, maintain a proper brand distinction, and offer customers motive to choose your products over your competitors. Competitor Analysis comes after Industry Analysis, which establishes under which industry you will be working, what are its profitability prospects, and how to start out strong in the industry. You can read more about it here.
The Importance of Competitor Analysis
Competition is the whole reason behind rising specifics of Selling Costs(2), Research and Development, PR, and other indirect expenses and services. Under theoretical Monopoly there is no selling cost involved, except maybe the minimum required for informational promotions.
This suggests that not only the actual sales and profits, but every single aspect of a business is dependent on competition. For example, under a Monopolistic Competition(3) (the most popular form of competition) market like that of toothpaste, inherently the generic product being sold is toothpaste, yet it is extensive promotional methods that cause such a profitability distinction among different brands. Therefore greater level of competition is encouraged.
On the other hand, under Oligopoly(4) markets like cement, telecommunications, or smartphones, competitors often act in harmony because one brand’s decisions greatly affect another’s. For example the shift in taste towards touchscreen smartphones initiated by the release of the first iPhone led to its competitors being forced to shift their focus in manufacturing smartphones. Nokia failed to deliver primarily due to its internal struggle, leading to its infamous downfall.
How to find out who your competitors are (Industry Analysis)
As mentioned above, Competitor Analysis is a follow-up of Industry Analysis. Followed by it, competitors can be identified as businesses dealing in products and services that can be substituted for those offered by you so that they fulfill a particular demand.
How to conduct Competitor Analysis (The Analysis Process)
To gain a competitive advantage, the first step is to list the strengths and weaknesses of your competitors across various fields of practices such as production, price, distribution, etc.
To follow, determine which competitor uses what techniques and strategies, rank competitors on the basis of profit reports, liquidity, solvency, and other survival/growth indicators.
This presents a ranking system showing advantages and disadvantages of routing through a particular process.
To do this you will need to profile your competitors. You will extract their theoretical market value and their products’, real or psychological. And then to gain an advantage you will need to offer superior value to the potential customer.
These days details of most of an organization’s functioning variables are transparently available on the internet. To follow, profile each or leading competitors in your industry based on their functioning variables like:
Things to keep in mind while analyzing competitors
One of the things to keep in mind while going about competitor analysis is potential competition. This includes potential new competitors/startups or other businesses looking to expand. Calculation of this is primarily done by calculating growth rate of number of businesses in a particular market based on the market’s past.
While evaluation is based mainly on past functioning, market is a very dynamic environment, therefore another factor be consider is the ever-changing competitor policies and market preference. To rapidly adapt and compensate to change is very important when it comes to maintaining a competitive advantage.
We can help!
Symphysis offers marketing consulting for businesses of all sizes. With the right analytics and targeting process we will give you a competitive advantage that attracts your target audience. For more information call or text @ +1 (425) 390-4738.