What is Competitive Analysis?
According to the business dictionary, competitive analysis is an assessment of the difference between a firm’s performance and that of its competitors, and detection and examination of the factors that cause the difference. Analyzing your competitors is a great way to predict competitor behaviors while making better business strategic decisions.
The term competitive intelligence is used more often than competitive analysis. This is due to the effort of the Strategic and Competitive Intelligence Professionals or SCIP, the association that represents the profession. SCIP is all about competitive intelligence.
Baseline Components of Competitive Analysis
A good competitive analysis focuses mostly on your company’s competitors as follows:
- Existing Competitors, indirect competitors and outliers
- Competitors product or service summary–including customer perceptions, distribution and advertising
- Competitors’ strategies, objectives and leadership
- Competitors’ strengths and weaknesses
- The outlook of your marketplace, which particularly supports strategic planning
How Competitive Analysis is Used
Jan Herring, competitive intelligence guru, says analysis is used to support:
- Early warning–preventing surprises to your company
- Decision making
- Competitor assessment
- Planning and strategy development
- Collection and reporting
Competitive Analysis is a Moving Target
The challenge with competitive analysis is that all these pieces continue to change. In today’s competitive marketplace, there is no thing as a long-term sustainable competitive advantage.
When you’re in the happy place of being the market leader, you need to be looking for ways to be better, to expand your offering, create something new, acquire a complementary business. You want to stay nimble as an organization and not get bogged down with the operational and procedural issues that take time away from thinking, creativity, and taking action.
Thus, competitive analysis is not the annual snapshot of yesteryear, but an evolving set of information and analysis that can change daily. It is the job of the competitive intelligence professional to monitor the external environment while keeping up with your company’s current product life and what’s in the pipeline.
Many companies assemble competitor profiles, which contain factual information about competitors. Profiles are a nice baseline, but miss the analysis: the “so what?” and “what action, if any should we take, if ‘X’ happens?”
We like to tell a story in competitive analysis, and often competitive tools and techniques help management more clearly understand the implications of competitive findings. Find out which competitive techniques are in your company’s DNA.
Some of my favorites are SWOT, the BCG Matrix Share, Porter’s 5 Forces, STEEP analysis, Management Profiling, Competitive Positioning, the Radar Screen, and Win/Loss Analysis. Porter’s 5 Forces and STEEP are described in our market opportunity analysis section. Check out our competitive analysis example, which was used to support a key decision.
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