Professional Documents
Culture Documents
Competitive Analysis
Competitive Analysis
(or wishes to operate), including strengths and weaknesses of the businesses with which you compete, strengths and
weaknesses of your own company, demographics and desires of marketplace customers, strategies that can improve
your position in the marketplace, impediments that prevent you from entering new markets, and barriers that you can
erect to prevent others from eroding your own place in the market.
Competitive analysis has long been a cornerstone of overall competitive strategy for multinational conglomerates and
"mom and pop" stores alike. Moreover, business experts note that competitive analysis transcends industry areas;
indeed, the practice is deeply relevant to all industries. For example, Folio contributor Bruce Sheiman provided a
synopsis of the importance of competitive analysis to the magazine industry that is fairly representative: "First, it is
critical to discover whether a competitor is encroaching on your proposed magazine's editorial or market franchise—
or, indeed, whether a competitor renders your magazine idea superfluous. Second, competition helps to define a
magazine's market position. I've seen business plans stating that the proposed magazine would have no competition.
This is naive. Every magazine has competition—and needs competition. Third, competitive magazines give you
benchmarks. By studying your competitors, you can learn much about developing your magazine's editorial,
circulation, and advertising strategies. And you can determine your revenue and profitability prospects." Competitive
analysis is of similar importance to muffler shops, office furniture manufacturers, photofinishing laboratories, and
countless other types of business enterprises.
Despite this, however, business experts say that while established businesses commonly practice competitive
analysis on a regular basis, new businesses too often are derelict in this area. "Every business has competition,"
wrote Rhonda Abrams in The Successful Business Plan: Secrets and Strategies. "Those currently operating a
company are all too aware of the many competitors for a customer's dollar. But many people new to business—
excited about their concept and motivated by a perceived opening in the market—tend to underestimate the actual
extent of competition and fail to properly assess the impact of that competition on their business."
ANALYSIS OF INTERNAL STRENGTHS AND WEAKNESSES Another important element of competitive analysis is
determining what your own company's strengths and weaknesses are. What aspects of the company's operation
convey an advantage in the marketplace? Is your sales force composed of bright, ambitious individuals? Does your
company have an advanced inventory management system in place? Do you have an employee with a talent for
advertising and/or marketing? Once a company has determined its strengths, it can go about the process of utilizing
those strengths to improve its position in the marketplace. Conversely, an examination of internal weaknesses
(uninspired product presentation, recalcitrant work force, bad physical location, etc.) should spur initiatives designed
to address those shortcomings.
ANALYSIS OF CUSTOMER NEEDS AND WANTS
Learning about customer needs and wants is an important part of competitive analysis as well. Customer priorities
should become your business's priorities. In addition, small businesses should take care that they not limit their study
to priorities that are already manifested in the marketplace. Indeed, new product development and new innovations in
service are essential to business success in any industry. Business owners and managers need to study—and thus
anticipate—future customer needs and wants as well those needs and wants that are currently being addressed.
STUDYING IMPEDIMENTS TO MARKET FOR YOU AND YOUR COMPETITION Businesses seeking to enter new markets
typically have to grapple with several different barriers. Some of these can be surmounted without inordinate difficulty,
while others may be so imposing that they preclude launching a campaign. Abrams cited several common barriers to
entry for new competition:
"Realistically, few barriers to entry last very long, particularly in newer industries," concluded Abrams. "Even patents
do not provide nearly as much protection as is generally assumed. Thus, you need to realistically project the period of
time by which new competitors will breach these barriers."
BUILDING STRATEGIC PLANS TO IMPROVE MARKETPLACE POSITION Once a small business owner has attended to
the above requirements of competitive analysis, he or she can proceed with the final element of the practice: building
a strategic plan that reflects the findings. Strategic plans should touch on all areas of a business's operations,
including production of goods and/or services, distribution of those goods and/or services, pricing of goods and/or
services, and marketing of goods and/or services.