Too often you will hear small business owners saying that they’re far too busy running their businesses to properly take note of what their competition is doing. As a business owner you are always going to be ‘too busy’. The reality is that competitive analysis is a far-sighted, strategic process that should not be ignored or put on the back-burner because it can be a fundamental driver of your business growth and development.
Competitive analysis can powerfully enable:
- the establishment and maintenance of your competitive edge
- improvements to your products and services
- achievement of standards of best practice in your industry
- innovations in products, services and in your business as a whole
- more targeted and effective marketing communications
Competitive analysis, which involves an in-depth analysis of your key rivals, provides a wealth of business intelligence that will help you develop vital aspects of your business and position yourself effectively in a crowded market-place.
Business experts generally define four steps in competitive analysis process. However, it should be noted that competitive analysis is not a once-off exercise. With the speed of change in today’s business environment, it is even more important that competitive analysis is embedded as a continuous business process.
Step One – The information-gathering phase
This involves finding out everything that you can about clearly defined competitors. You need to compile a list of those who compete with you, and they’re not necessarily just the guy around the corner selling much the same as you. You need consider other businesses providing what you do that may be web-based or they may be large corporations that have a department that sells much the same as you. You also need to think about whether you have any web-based competition. Depending on the nature of your business, you may even have competitors who provide customers with the same as you, but don’t charge for it. It’s also important to list those who are not direct competitors now, but could easily diversify and become competitors.
Once you have identified your competition, you need to start gathering information on who they are, where they operate, how they operate and who they appeal to. This is a multi-faceted effort that may involve ordering their products so that you can assess their product quality and service standards; as well as evaluating their websites and marketing collateral so you are clear about how they position themselves and the strengths that they communicate. If like you, they are dependent on rare talent, then you may want to investigate social media channels such as LinkedIn to discover who they employ. You may involve their customers in an independently run focus group so that you gain insights into what customers think of them as compared to what they think of you.
Step Two – The analysis of their strengths and weaknesses
This is the first part of a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. It can help to set up a template for this exercise. List all your competitors and determine the evaluation criteria. These may include product quality, product range, price, convenience, value, service standards, delivery, staff, expertise, professionalism, reputation, location, scope of marketing and advertising, quality of marketing and advertising etc. Then determine a rating scale and ascribe a value for each criterion for every competitor. Make sure that you can articulate the reasons for each rating you give. Using a table format, now map the strengths and weaknesses of each competitor.
Step Three – The analysis of their opportunities and threats
While a business can usually do something about their strengths and weaknesses, opportunities and threats refer to factors that are generally outside of any business’s control. The opportunities and threats to your competitors are most probably the same as what you face. These may include technological changes, market changes, economic conditions, the regulatory environment or conditions of crime that do or are likely to confer an advantage or a disadvantage on the business. Once again, plot the threats and opportunities for each of your competitors on a table.
Step Four – Defining where you stand
Now that you have a clear idea of your competitions’ strengths and weaknesses, you need to make the comparisons with your current position. It can be helpful to use the same evaluation criteria and plot your own strengths and weaknesses as you did theirs. This will enable you to see where you lag behind and what you are doing well in relation to the competition. Interrogate the results of your analysis: What can you learn from your competitors? What can you change to do as well, or better than them? What do you need to stop doing in order to be more competitive? What do you need to start doing in order to get ahead of them? How can you distinguish your product and service offering from theirs? Are there customer segments that they target, and you don’t? What are your business strengths that you can build on? Do your competitors have weaknesses that you can exploit?
Your answers to questions like these will help you arrive at the decisions you need to take for your business to operate more effectively and develop more strategically. The intelligence that you have gathered and formulated through the process will help you to avoid the mistakes others have made, emulate best practices and direct the kind of innovations and expansions that will help your business get ahead. On-going competitive analysis is what will help you stay ahead.