How to Conduct and Prepare a Competitive Analysis | Edward Lowe Foundation

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Digital Library > Defning and Serving a Market > Competitive intelligence

“How to Staying on Your Strategic

Course
Conduct and Prepare a Competitive Analysis”
An in-depth invesigation and analysis of your competition allows you to assess your Digital Library > Building

competitor’s srengths and weaknesses in your marketplace and helps you to choose and and Inspiring an

implement efective srategies that will improve your competitive advantagei Organization > Strategic planning
“Staying on Your Strategic

WHAT TO EXPECT An in-depth invesigation and analysis of your competition is one of Course” A lot of companies have a

the mos important components of a comprehensive market analysis. A competitive srategic plan, but don’t deploy it

analysis allows you to assess your competitor’s srengths and weaknesses in your properly, says Dale Crownover,

marketplace and implement efective srategies to improve your competitive advantage. president and chief executive

This Business Builder will take you through a sep-by-sep process of competitive analysis, ofcer of Texas Nameplate Co., a

helping you to identify your competition, determine and weigh their attributes, assess their Dallas-based manufacturer of

srengths and weaknesses, and uncover their objectives and srategies in your market equipment nameplates that

segment. generates about $4.5 million in

annual revenues. Identify your

WHAT YOU SHOULD KNOW BEFORE GETTING STARTED [top] drivers. Get sarted

What Types of Organizations Should I Consider as Competitors? Read More …

 Read More ...

Any business marketing a product similar to, or as a subsitute for, your own product in the 

same geographic area is a direct competitor. Firms ofering dissimilar or subsitute products How Ben & Jerry’s Iced Early
in relation to your product or service are considered indirect competitors. Indirect Rival to Survive

competition would exis between the manufacturer of butter and a manufacturer of “How Ben & Jerry’s Iced
margarine selling to the same cusomers. Early Rival to Survive”
When ice cream entrepreneurs Ben
Another example is the manufacturer of eyeglasses who competes indirectly with contact Cohen and Jerry Greenfeld frs
lens manufacturers. Stated in other terms, indirect competition will satisfy the cusomer’s expanded beyond their Vermont

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How to Conduct and Prepare a Competitive Analysis | Edward Lowe Foundation

need with a particular product or service, although the product or service used may be home, they received a chilly
diferent from yours. If a frm has similar products and disribution channels, but has reception.Haagen-Dazs, which
chosen to operate in diferent market segments, they are not at this time your direct owned the high-end category,
competitor. However, it’s important to monitor the marketing activities of such frms threatened to withdraw its product
because they may decide to move into your market segment, jus as you may decide to from any supermarket disributor
move into theirs. Take a moment and identify your direct and indirect competitors: also ofering Ben & Jerry’s. Cohen
and Greenfeld realized that their
Why is a Comprehensive Competitive Analysis an Important Part of a Marketing larger rival could outlas them in
Plan?
Read More …
To achieve and maintain a competitive advantage in reaching and selling to your target  Read More ...
market, you mus possess a thorough knowledge of your competition. An in-depth 
competitive analysis will provide you with the following: Europeans Move to Web

Digital Library > Operations

An undersanding of how your exising and potential cusomers rate
and Technology > Internet
the competition. 
“Europeans Move to Web”
A positive identifcation of your competitor’s srengths and weaknesses. 
Europe’s information and
A mechanism to develop efective competitive srategies in your target market.
communication technology grew

Do I Need to Analyze All of My Competitors? 12% in 1999, beating that year’s

U.S. growth rate of 8.1%, reports

There are several markets where it is relatively easy to name every competitor. These are the European Information

concentrated markets where only a handful of competitors exis. If this is the scenario for Technology Observatory (EITO).

your product or service, you will need to develop an analysis for each competitor. The seel This trend is expected to continue

indusry and automobile indusry are examples of these types of markets. through 2001. Half of the European
Union’s population will be Internet

If you are selling in a market with many competitors, your job of analyzing the competition users by 2003 vs. 20% currently,

becomes a little more difcult. Since it is unrealisic to collect and maintain information on esimates

dozens of competitors, you will be able to save yourself valuable time, without sacrifcing
the integrity of your competitive analysis, by using the old 80/20 rule. In fragmented Read More …

markets with many competitors, it is mos probable that 80% of the total market revenues  Read More ...

are accounted for by 20% of the competition. It’s the 20% you would examine mos 

closely. Carving Out Core Values

Creating and living your

For insance, in the computer indusry, the personal computer market, is represented by core values can propel your
hundreds of clone manufacturers with the majority of the market being captured by a company into high gear.
handful of manufacturers such as Compaq, IBM, and Apple. When using this approach it is
important to keep abreas of your market for new and upcoming players who through some  Read More ...
variable, whether it be new technology or an aggressive advertising campaign, may 
become a dominant player.
CEO Confdential: Sabotage!

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How to Conduct and Prepare a Competitive Analysis | Edward Lowe Foundation

Do you have a personal or

What Means are Available to Limit and Control the Competition?
professional issue you’d like
to get of your ches? Here CEOs
Marketers of diferent brands of products will often pursue a particular market segment.
can unburden themselves while
Market Segmentation, which is the means of breaking down larger markets into smaller
helping others facing similar issues.
ones requiring diferent marketing mixes, is a means for srengthening and focusing your
attempt to limit and control the competition. There are however, a broad range of srategies
 Read More ...
a business can employ in a competitive environment — from price changing and new

packaging to improving cusomer service and new product development.

CONDUCTING AND PREPARING YOUR COMPETITIVE ANALYSIS [top]

Conducting and preparing your competitive analysis will follow these seps:

Conduct Research
Gather Competitive Information
Analyze Competitive Information
Determine Your Own Competitive Position

Conduct Research

Professional marketing research, such as focus groups and quesionnaires, can provide you
with valuable information about your competition. While a marketing research frm can
save you time and legwork, it can be quite expensive and simply not a possibility for new
and growing businesses. Much of the information you need in order to profle your
competitors is readily available to all business owners. As your business grows and
expands, you should consider supplementing your own research eforts with some formal
research conducted for you by an outside frm. Before you begin seeking out the sources
lised below, keep in mind that you need to obtain answers to the following quesions:

Who are my top three competitors? 

On what basis am I able to compete? 
What is the range of products and services they ofer? 
Are their products or services aimed at satisfying similar target markets? 
Are my competitors proftable? 
Are they expanding? Scaling down? 
How long have they been in business? 
What are their positive attributes in the eyes of cusomers? 
What are their negative attributes in the eyes of cusomers? 
How do current cusomers view us compared to the competition? 
How can I disinguish my company from my competitors? 

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Do they have a competitive advantage; if so, what is it? 

What is their marketing srategy? 
What is their promotional srategy? 
What are their pricing sructures? 
Do they operate in the same geographic area? 
Have there been any changes in their targeted market segments? 
What is their size? Revenues? 
What is their percentage of market share? 
What is their total sales volume? 
What is their growth rate? 
How do they rate on:
cusomer service?
quality of product/service?
hours of operations?
pricing, incentives?
employees?
resources?
 

How do current cusomers rate the following features of your business compared
to your competition.Rate the following as: fair, good or excellent.
Our Company / Competition

___________ /__________ Price

___________ /__________ Quality

___________ /__________ Durability

___________ /__________ Image/syle

___________ /__________ Value

___________ /__________ Name Recognition

___________ /__________ Cusomer Service

___________ /__________ Cusomer Relations

___________ /__________ Location

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___________ /__________ Convenience

___________ /__________ Other

Gather Competitive Information

Secondary sources of information are recommended as an excellent sarting point for

developing a competitive and indusry analysis. Secondary sources include information
developed for a specifc purpose but subsequently made available for public access and
thus alternative uses. For example, books are secondary sources of information as are
articles published in journals. Marketing reports ofered for sale to the general public also
are considered secondary sources. Although, they have been created for a purpose other
than your current need, they are sill excellent sources of information and data. With the
ever increasing speed of document identifcation and retrieval through electronic means,
secondary sources are not only an inexpensive source of information but are readily
available soon after publication. Sources of information include:

AdvertisingNot only does advertising copy tell you a competitor’s price and
other product information, it provides an indication of your competitor’s entire
promotional program and budget. When reading a competitor’s advertisement be
sure to note the following: publication, frequency, special ofers, product features
and benefts highlighted. If your competitor suddenly places an advertisement in an
indusry publication that neither of you are currently selling to, it’s an indication
that they’re trying to reach a new market segment. It’s also important to notice the
design and tone of your competitor’s advertisements. What kind of image do they
convey? How does your own image compare? Are their advertisements in color
while your own are black-and-white? Even if they’re not, a clever advertising
campaign can communicate that your competitor is an innovative, fresh company.
 

Sales BrochuresSales brochures provide a wealth of product information. You

can learn how your competitor is positioning their product and company and what
features and benefts they’re using to sell their product. Try to obtain all new sales
brochures and literature your competitor publishes. Signifcant changes in the
content will indicate that new srategies are being employed.
 

Newspaper and Magazine ArticlesArticles in newspapers and magazines are a

source of information you can use to get an idea of what your competitor is
planning for the future, how their organization is run, and what new product

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information or innovations they have. Journaliss may also uncover and reveal
unfattering information about your competitor that may prove valuable to you. Be
on the lookout for product reviews in magazines; they will reveal a competing
product’s srengths and weaknesses. Visit a college or public library. The reference
librarian will show you how to fnd pertinent articles online much more quickly and
easily than you’ll fnd them by browsing.
 

Reference Books and DatabasesThe publications lised in this section are

available at mos public and college libraries that have business resources. Ask a
librarian to help you fnd them, as many are likely to be online and not lised in the
library catalog.
Government sources that you should examine include:
Census Bureau sources of satisics on your business, such as the
Quarterly Financial Report for Manufacturing, Mining, and Trade
Corporations, County Business Patterns, the Annual Survey of
Manufactures and the Economic Censuses. 
State agency publications such as indusry directories, and
satisics on local indusry employment, production, and equipment
capabilities. Find likely sources through the State and Local
Government on the Net Web site. 
Local competitive data from the City Clerk’s ofce, the County
Clerk’s ofce and the Chamber of Commerce.
 

Commercial data sources include:

Dun & Bradsreet Million Dollar Database directory. This
database includes over 1,600,000 businesses with a net worth of $1
million or more. Data can be selected alphabetically,
geographically, by line of business, and ofcers and directors. 
Ward’s Business Directory of U.S. Private and Public Companies
(annual), provides profles of over 100,000 companies (small and
mid-size companies as well as large corporations, mos privately
held) across the U.S. Profles include assets, gross earnings,
revenues, and other pertinent information. 
Financial ratios that can be used to compare your company’s
performance with competitors’ performance are published in
Almanac of Business and Indusrial Financial Ratios by Leo Troy,
the Dun & Bradsreet Indusry Norms and Key Business Ratios, and
RMA Annual Statement Studies.

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Online versions of these products not only make their pertinent satisics easy to
fnd. They often permit you to download data so you can combine it with other data
to produce your own satisics.

Annual ReportsIf your competitor is a publicly-held company, many of its

reports to the U.S. Securities and Exchange Commission are available on the SEC-
Edgar Web site. Annual reports provide fnancial information, including sales
volume, revenue increases, and their total market share. 10-K reports provide sill
more detail, and are supplemented by the quarterly 10-Qs. 8-Ks show signifcant
events such as acquisitions and board membership changes when they occur
between 10-K and 10-Q flings.
Annual reports from privately-held corporations are sometimes available through
friends, relatives, and business acquaintances who own sock in a competitor’s
company.

Your Sales Force Your sales saf probably has more access to competitive
information than anyone else in your organization. Cusomers often show
salespeople sales literature, contracts, price quotes, and other information from
competitors. Part of a salesperson’s job is to get cusomers to discuss problems they
have with a competitor’s product. Cusomers will also reveal your competition’s
product benefts, srengths, and cusomer service programs.
Insruct your sales force to ask for copies of any competitive literature if and when
that’s possible. Your entire sales saf should keep a record of all competitive
information they discover — even if it’s jus a rumor or gossip. Devote a regular
portion of each sales meeting to a discussion of the competition.

Other EmployeesYour employees working in other areas of the company also

become exposed to competitive information. They interact with others in their
indusry area and often learn what your rival is doing or hear gossip and rumors.
Make sure your entire saf knows they should share any information concerning
the competition immediately.
Former employees of a competitor can provide you with insight on: your
competitor’s new products, marketing srategies, how-to improve productivity and
employ other resources more efectively, and what your competitor’s general

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working environment is like.

Trade Associations Mos professional trade associations compile and publish

indusry satisics and report on indusry news and leaders through trade association
magazines and newsletters. Mos trade associations also sponsor trade shows and
other professional meetings. This is an opportunity to see frs-hand what your
competition is producing. It also provides the opportunity to discover new players
who may soon become your competition.
 

Direct ObservationIf you own a fower shop, you should visit all of the fower
shops in your geographic region. Act as a prospective cusomer; ask quesions. You
can learn about their selection and service and compare it to your own.
Do not use an alias or disguise to gather intelligence from competitors. It
may seem like a trivial deception, but it is dishones, and could come back
to haunt you. 
If you produce a product that is disributed to retail outlets, visit
the sore locations and note the following:
how much sock is present versus your competitor’s 
the placement of your product on the shelves versus your
competitor’s 
if your competitor is supplying any point-of-purchase display
materials
 

If you and your rivals have similar products and prices, then it’s
especially important for you to know how you compare on cusomer service
issues. Call an 800-number and pretend to be a cusomer with quesions and
problems. 
If you sell products through a catalog, you not only want to be on your
competition’s mailing lis; you should order a product from them to
determine how long it takes to arrive, the method of shipment, and how it
was packaged. 
Buy your competitor’s products. Products can be evaluated and reverse
engineered to provide meaningful information about your competitor’s
capabilities and weaknesses, technological innovations, manufacturing coss
and methods.
 

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Your Competitors You probably see the owner of a rival organization at trade
shows, association meetings, and perhaps even socially. You can garner a great
deal of information through a simple, friendly conversation. People like to talk
about themselves and share their success sories and concerns with business
associates.
Assign someone to check the competitions’ Web sites regularly for pertinent
changes and news. (And take a good look at your own: Do you say anything there
that you’d jus as soon not have your competitors see?)

Your Business Network Make it a point to interview your cusomers, suppliers,

and indusry experts about your competition’s product and service.
 

Analyze Competitive Information

Once you’ve gathered all of the competitive data you have been able to locate, it’s analysis
time. You should analyze to determine product information, market share, marketing
srategies, and to identify your competition’s srengths and weaknesses.

Product Evaluation

You should know from your sales saf and cusomer feedback what product features and
benefts are mos important to your cusomers and potential cusomers. A product’s or
service’s competitive position is largely determined by how well it is diferentiated from its
competition and by its price.

Make a lis of product features and benefts in order of importance, and prepare a
table to show whether or not each of your competitors fulfll them.For example,
Medium-sized companies that purchase copier machines may look for the
following product benefts and features when making buying decisions:

Competing Company: A B C D

Features:

1. Auto paper feed

2. Auto enlarge or reduce

3. Collates

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4. Staples

5. 24 Hour Repair Service

6. Warranty

Benefts:

1. Easy to operate

2. Saves money

3. Good print quality

4. Dependable

5. Fas

Price: $

Other factors you may want to evaluate include:

Quality 
Durability/Maintenance 
Image/Design/Perceived Value 
Social Image/(politically correct)
 

Next, indicate with a check mark which of your competitors has which features.
Features are fairly sraightforward, either a product has a feature or it doesn’t.
Benefts, on the other hand, are not as simple and should only be recorded based on
cusomer feedback. For example, company B may claim in their company literature
that their copier is fas, but a user may feel otherwise. Or, company B may indeed
have a copier that by indusry sandards is fas, but you may have a copier that’s
even faser. 
Now, evaluate your competition’s product or service. How does your product
compare to your closes competitor’s product? What features and benefts are
unique to your product? To theirs? The more unique features and benefts your
product has, the sronger your market position will be. For example, if you produce
and market an ofce copying machine that saples collated copies together and your
closes competitor doesn’t have this feature, you have an advantage. You can then
sell the same market segment the beneft of added convenience and time saved.

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However, your competitor may have developed a feature that you don’t have on
your copier that gives him/her a selling advantage. 
Evaluate your competitor’s price. Jus because you have the same products as
other businesses, doesn’t mean everyone has the same price. Your own production
coss greatly impact your pricing. If your price for a similar product is higher than
your competitor’s, then your market position is weaker; and if it’s lower, then your
competitive position is better.A temporary price decrease by a competitor might
indicate nothing more serious than a transient need to move excess inventory.
However, a trend of lowered prices may indicate that your competition is doing it
to gain market share and improve production coss. It could also mean your rival is
in fnancial trouble and has been forced to lower prices. It’s in this type of situation
that rumors and gossip become helpful. If there are rumors that a company is in
fnancial trouble and you discover price fuctuations, it’s more likely that there are
problems.
Be sure your analysis includes product/service charges added to the purchase price,
such as insallation or additional equipment required.

Cusomer preference of products is only part of the analysis. There are internal operational
factors which can provide a competitive edge as well. Your competitors’ products may not
have the high quality of yours, but they might ofer free delivery; or their employees might
be extremely motivated and committed to gaining market share. You need to learn how
they are doing on the inside. Some factors to consider:

Financial resources — Are they able to withsand fnancial setbacks? How are
they funding new product development and improvement? 
Operational efciencies — Are they able to save time and cos with clever
production and delivery techniques? 
Product line breadth — How easily can they increase revenues by selling related
products? 
Strategic partnerships — What kinds of relationships do they have with other
companies in terms of product development, promotion or add-on sales? 
Company morale/personnel — What is the motivation, commitment and
productivity level of the employees?

Market Share

The mos widely used measure of sales performance is market share. A competitor may not
provide the bes product or service; however, if they generate a signifcant amount of sales
to the market, they may:

Defne the sandards for a particular product or service. 

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Infuence the popular perception of the product or service. 

Devote resources to maintaining their market share.

To determine your company’s market share on a percentage basis, the following formula
should be used:

Current Market Share = Company sales Indusry salesYou should then compute each of
your competitors’ market shares. It will give you a clear idea of how your sales volume
compares to your competition’s. If you don’t have total indusry sales fgures you won’t be
able to fgure out your market share, but you can sill get a good idea of your competitive
position by comparing the sales volume fgures. For example, say las year Company A
sold $3 million dollars worth of copiers, Company B sold $5 million, and you sold $4
million. It’s obvious that Company B has the larges share of your market and is your
greates competitor.

Competitive Objectives and Strategies

For each competitor in your analysis, you should try to identify what their market
objectives are and determine what types of srategies they are using to achieve them. Are
your competitors trying:

To maintain or increase market share? 

To maximize short-term or long-term profts? 
To introduce technologically improved products into your market? 
To esablish themselves as the market leaders? 
To protect their market share under attack by srong competition? 
To develop new markets for exising products?

Once you have identifed what your competitors are trying to achieve, you will need to
determine what type of srategy they have employed so you can eventually counteract with
a srategy of your own. There are many specifc srategies companies can employ. Some
possible srategies your competitor’s may be employing are:

Reducing their prices. 

Advertising in new publications, or advertising more frequently. 
Buying out a competitor to increase market share and cusomer base. 
Improving a product with a new innovation.

It’s important to note your competitor’s actions over time. For example, if one of your
competitors is consisent with pricing, product features, promotion, and their market share
it may mean that they’re not exploring or exploiting additional market opportunities. Or, if

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one of your competitors has a decline in sales volume it may mean they will be employing
new marketing srategies in the near future and should be monitored closely.

Identify the Competitions Strengths and Weaknesses

In order to develop efective competitive srategies, you need to make a realisic assessment
of your competitors’ srengths and weaknesses, as viewed by the market. You need to ask
yourself what each of your competitors do very well, better than your own company? Then,
ask yourself in what areas are each of your competitors weak. Consruct a simple chart.
The copier company’s might appear like this:

Strengths and Weaknesses of Competitors

Competitor: Strengths Weaknesses

A. Superior cusomer service

3-year warranty Higher price

B. Quick innovator

Unique features Higher price

Limited

disribution

channels

C. Large market share

Lower price

Comprehensive Slower product

No

ad campaign

Viewed as market leader by market direct access to

segment parts

Other Factors to Consider

Shakeups. As you analyze your competitive information be on the look out for
broad management changes or changes in ownership. This is an indication that
major policies and marketing shifts are on the horizon and you should anticipate
changes. It may be a good opportunity to court your competitor’s sar employees.
People often change jobs during management shakeups. 
New Players. Your competitive analysis should include any new players, even if
they haven’t yet captured a signifcant piece of the market. New companies often
bring new ideas and innovations to the marketplace and can quickly become major
players. Don’t underesimate anyone. 
Future Competition. In your competitive analysis, you need to make a few

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predictions about what the competition is going to look like in the future.
Competitors are consantly coming and going in the marketplace. Ask yourself:
Who are my competitors likely to be? If you are introducing a new widget, how
long before the competition catches on? Forecasing future competition will give
your potential invesors the confdence in the long term viability of your
business.Barriers to Entry. Companies whose competitive edge depends on new
technology, new manufacturing techniques or access to new markets need to be
aware of the common barriers new competition faces when trying to gain entry into
the marketplace. They include:
Patents. Patents provide protection for new products or services. 
Market Saturation. Saturation reduces the chance of competitors
gaining a foothold in the market 
High sartup coss. This is a difcult obsacle for small competitors. 
The need for signifcant expertise, or manufacturing and engineering
difculties. This makes it difcult for competitors to have the knowledge to
compete.

Determine Your Competitive Position in the Marketplace

By now it should be fairly clear to you if you are a: market leader, one of several followers,
or new to your marketplace. Once you have identifed and analyzed your competition, and
undersand your competitive position, you are ready to do the following:

Identify and discuss key areas of competitive advantage and disadvantage.

Review the competitive environment for your product or service. Comment on both
similar and subsitute products or services. 
Summarize the major problems and opportunities facing your frm which may
require action. Issues which should be considered include types of market
penetration, disribution coverage, product line needs, price revisions and/or cos
reductions. 
Integrate your analysis of the competition with demographic analysis of your
market to develop and implement a marketing srategy that will srengthen your
market position.

A FINAL WORD [top]

Schedule a competitive analysis on a regular basis, as you do for inventory and other
business functions. Depending on what market you’re operating in it could be every two
months or once a year. Consider employing a college sudent for the summer or create
sudent internship positions to fulfll the task. You mus remember that your competitive
research and analysis is never fnished. This is on-going, rather than a one-time process.

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Your competition can change quickly, new players can emerge tomorrow, the economy
may upswing or downswing at any moment. It’s only when you clearly undersand your
competition that you can evaluate your own market position. Only then can you exploit
their weaknesses to your competitive advantage and seek to improve your own marketing
eforts.

CHECKLIST [top]

___ Have you identifed your direct and indirect competitors?

___ Do you know how the cusomers in your target market rate your product in
comparison with your cometitors’?

___ Have you compiled the intelligence you have gathered on each competitor in a format
that fosers comparison of features and market posions?

___ Do you have srategies for building on your srengths and minimizing your
vulnerability where you have weakenesses? Do you have srategies for minimizing the
value of your competitors’ srengths and taking advantage of their weaknesses?

___ Have you communicated the competitor information and your srategies to every
worker who needs to know? In research and development? In production? In marketing and
sales?

___ Have you esablished procedures for keeping your indusry and competitor profles
current?

RESOURCES [top]

Books

Competitive Intelligence for the Competitive Edge, by Alan Dutka. (NTC Business Books,
1999). Brief discussions of competitive intelligence activities are followed by extensive
real-life case-sudy examples.

Web Sites

“Do You REALLY Know What The Competition Is Doing? ” by Darrell S. Mockus.
Journal of Business Strategy 24:1 (January-February, 2003), 8-10.

“Spies Like Us,” by Carole Ashkinaze. Business Week (July 12, 2000), F4+.

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How to Conduct and Prepare a Competitive Analysis | Edward Lowe Foundation

“Face-to-Face: Spies Like Us,” by Stephanie L. Gruner. Inc. 20:11 (Augus 1998), 45 (7).

“Spy Away ,” by Mark Henricks. Entrepreneur 28:3 (March 2000), 98.

Fuld and Company.

What Is CI?. Society of Competitive Intelligence Professionals.

“Competitive Intelligence vs. Espionage,” by Fred White. ThomasNet Indusrial

Newsroom, May 22, 2007.

Writer: Susan MaGee

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