In a competitive business landscape, it’s absolutely vital that companies keep a close eye on what their competitors are up to. Analysing the activities, products, marketing and innovations of rival firms can provide invaluable intelligence to help shape your own business strategy and stay one step ahead. Here’s a look at what is a competitive analysis and why it should be an essential part of any business plan.
Know Your Rivals Inside Out
The first key reason you need to study the competition is simply to gain an intimate understanding of who your main rivals are and what they represent. These are the companies that sell similar products and services, who might appear on the same page when a client uses a search engine to find what they need.
You need to know their business models, product ranges, pricing, promotions, key personnel, marketing messages, strengths and weaknesses inside out. This will enable you to get under the skin of your competitor set and think about how to differentiate and stand out in the marketplace.
Identify Threats and Opportunities
Careful competitor analysis will highlight any threats that may challenge your business. For example, a rival firm may launch a new product or service aimed at your customer base or they may announce an aggressive pricing strategy. Knowing about these competitive threats early allows you to plan your response and defend your position. Likewise, competitor analysis can reveal valuable opportunities that you can exploit – such as an opening in the market not being targeted by rivals.
Benchmark Performance
Examining the financial statements, sales figures, market share and growth metrics of competitors enables you to benchmark your own company’s performance against theirs. This benchmarking helps identify any areas where you are falling behind so that you can focus efforts on improving and closing the gap with rivals. It also highlights areas where you match or exceed competitors, which can give your business a competitive edge.
Inform Strategy and Planning
All the intelligence gained from analysing competitors should feed into your overall business strategy and planning. You can shape your strategy to capitalise on identified weaknesses in competitor offerings or better respond to their strengths. Competitor analysis gives you insight to more effectively position your brand, products and marketing to stand out versus your rivals. It may reveal openings in the market you can target or highlight the need for new innovations to get ahead.
Understand Customer Perceptions
Looking at competitors helps you understand why customers may purchase from rival firms rather than your business. This enables you to think about ways to be more attractive to customers – whether through pricing, products, service quality, messaging or channels. You can also survey customers directly to find out how they perceive your brand versus competitors.
Learn from Their Mistakes and Successes
By scrutinising the activities and performance of competitors, you can identify mistakes they are making – and ensure you avoid the same pitfalls. At the same time, you can learn from successful initiatives adopted by rivals and see if they could be applied effectively within your own business. Essentially, your competitors provide a live case study from which your business can continuously learn and improve.
Adopt New Innovations Early
Leading competitors will often be the first to roll out new products, services, technologies and innovations within your industry. Keeping a close eye on these developments allows your business to potentially adopt innovations early before they become mainstream. This can give you a competitive first-mover advantage in embracing new opportunities.
Predict Future Strategy
Looking at recent competitor activities, product pipelines, hiring plans, marketing campaigns, patents filed and capital investments may provide clues about their future strategy and direction. By second guessing their next moves, your business can prepare an appropriate counter strategy in advance and stay ahead of the game.
Get Competitive Intelligence
While you can glean a lot simply by observing competitors’ public activities, specialist competitive intelligence can give more penetrating insights. Market research companies can uncover confidential info through investigative techniques about rival strategies. Networking with distributors, suppliers and employees may also produce valuable intelligence. Just ensure any methods used are legal and ethical.
Competitor analysis should be continuous to keep your business strategically sharp, inform decision making and secure a competitive advantage. Make monitoring and researching competitors an organisational priority. Those firms that turn a blind eye to what rivals are doing put themselves in great danger in an increasingly competitive world and will find it hard to achieve organic growth.
