Competitor Analysis

Competition is always a good thing. It forces us to do our best. A monopoly renders people complacent and satisfied with mediocrity.” -Nancy Pearcy


A Competitor Analysis is an assessment of the strengths and weaknesses of current and potential competitors.


Why is a competitor analysis important? 

Competition within a market is often a good thing. One extremely valuable benefit of competition is a persistent boost in innovation within the market. Competition from many different companies and individuals through free enterprise and open markets is based on the U.S. economy. 


When businesses are forced into a competitive relationship, consumers tend to see an increase in quantity and quality of goods and services. 


An analysis of the competition’s business strategies and branding may help to dictate operations within a company and how advertisements, branding, and project management are handled. 


For instance, if a service that outdoes the competition continues to be neglected by consumers, it may be time to promote awareness for that service through targeted advertising.


This again applies to how customers view a brand and affect how the workload is distributed if consumers aren’t interested in a product, shifting the focus to promote the product or decrease the time in the production of the product.  


What competition types are out there?

Some competition types aren’t considered beneficial. There are four types of competition in a free market system: perfect competition, monopolistic competition, oligopoly, and monopoly. Running a competitive analysis can help an organization decipher which of these competitive types, their service, or product business fits. 


First, perfect competition is a market structure where all firms are price takers that sell an identical product and the market share does not influence prices. An example of perfect competition would be the agriculture market, where many farms sell the same products and there are many different buyers. 


Monopolistic competition is characterized as an industry where many firms offer products or services that are similar but not perfect substitutes. 


Barriers to entry and exit in a monopolistic competitive industry are low, and the decisions of anyone firm do not directly affect those of its competitors. Some well-known examples of this competition are hairdressers, clothing, and restaurants. 


Oligopoly is a state of limited competition, in which a market is shared by a small number of producers or sellers. Oligopoly exists when there are two to ten sellers in need of selling homogeneous or differentiated products. It’s a form of imperfect competition and is usually described as the competition among a few. A few good examples of Oligopoly are the cold drinks industry as well as the automobile industry. 


And finally, a monopoly is a market structure characterized by a single seller selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute. One well-known example of this competition type would be Microsoft and Windows. 


Why is it important to run a competitor analysis?

When the market is booming with the competition, it is within a companies responsibility to attempt to gain market recognition whether that recognition be for their product or service. 


Competitor analysis is crucial when assessing the strengths and weaknesses of current and potential competitors. 


It gives significant insight into not just the competitors but also the consumers. With these insights, changes can be made to promote efficiency and advertising efforts. The first step in a competitor analysis is to identify the current and potential competition. 


There are essentially two ways to identify competitors. The first is to look at the market from the customer’s viewpoint and group all competitors by the degree to which they compete for the buyer’s dollar. The second method is to group competitors according to their various competitive strategies to understand their motivations.


Benefits of Competitive Analysis: 

Competitive analysis has many benefits when viewed in the right way. A competitive analysis should be known as a dynamic process in which a company understands the strengths, weaknesses, industry gaps, marketing trends, and how to promote new products and services with intent. 


Many businesses already gather information about their competition but don’t recognize this as competitive analysis. 


In our mind, the most important thing to take away is that any information about the competition is considered competitive analysis and to think about it in those terms.


There are a multitude of additional business benefits that can be gained by having insight into the competitive market, mainly if an organization tracks products, prices, staffing, research and development, and other aspects of the competition on an ongoing basis. 


There are quite a few benefits to be gained by having specific insight into the landscape of niche markets, especially if information is itemized. 


For example, suppose a company sells computer monitors, tracking the competitor’s products offered. In that case, price points, staff levels, social media traffic, and promotion scheduling might offer significant insight into their company over a year and even more insight over a five year period.


What can a competitor analysis do for companies? 

This analysis provides both an offensive and defensive strategic plan to identify opportunities and threats. Every marketing plan needs to gauge the market they are in and position themselves correctly into that particular market space. 


There are many advantages of conducting a competitor analysis such as economic climate tracking, market potential forecasting, and better customer targeting. 


How to run a competitor analysis? 

There are essentially two ways competitors can are identified. The first is to view the overall market from the customer’s perspective and group all competitors by how they compete for the buyer’s dollar. 


The second method is to group competitors according to their competitive strategies to gain better insight into what motivates the consumer. 


Once a business has grouped its competitors, they can start to analyze their strategies and identify the areas where they are most vulnerable. This can be done through an examination of competitors’ weaknesses and strengths. A competitor’s strengths and weaknesses are based on the presence and absence of critical assets and skills needed to compete in the market.


The strengths and weaknesses are to direct advertisements as well. While a competitor’s strength may seem like a leg up on the competition, this strength could lead to oversights and neglected products or services. 


For example –  A business owner is having a competitor analysis conducted within the automotive industry.  One competitor shines when it comes to painting cars and is well known for the service, though their other services, such as brake servicing, are lackluster. This allows the competition to focus efforts on brake servicing and direct advertising towards their services. 


To determine just what constitutes a key asset or skill within an industry, David A. Aaker, in his book, Developing Business Strategies, suggests concentrating efforts in four areas:


  1. The reasons behind successful as well as unsuccessful firms
  1. Prime customer motivators
  1. Major component costs
  1. Industry mobility barriers

According to the theory, a company’s performance within a market is directly related to critical assets and skills. Therefore, an analysis of strong performers should reveal the causes behind such a successful track record. 


In conjunction with an examination of unsuccessful companies and the reasons behind their failure, this analysis should provide a good idea of just what critical assets and skills are needed to be successful within a given industry and market segment.


For instance, in the personal-computer operating-system software market, Microsoft reigns supreme with DOS and Windows. It has been able to establish its dominance in this industry because of superior marketing and research and strategic partnerships with a large majority of the hardware vendors that produce personal computers. 


This has allowed DOS and Windows to become the operating environment, maybe not by choice, but of necessity for the majority of personal computers on the market.


Key questions to ask when preparing a competitor analysis:

  • Who are the competitors? (who are the leaders and a business’s industry?)
  • What products or services do they sell? (are they comparable?)
  • What is each competitor’s market share?
  • What is their strategy? (past, present, and future.)
  • What type of media is used for marketing their products or services?
  • How many hours per week do they purchase to advertise through the media used in this market?
  • What are each competitor’s strengths and weaknesses? (Businesses should clarify these as strengths and weaknesses that similar businesses do not have in common.)
  • What potential opportunities does this make available? (did they recently cut off a service? Add a product? Discontinue one?)

Taking action 

The competitor analysis is compiled, and now it’s time for the company to make use of it! 

At this point, businesses should consult the agency that conducted the analysis or the individuals within the company who compiled the information and line out a plan of action.

This plan should involve a social media strategy, an advertising plan, and an organization-wide action plan to transition based on the analysis results. 










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