Competitive Analysis
Success in business has a lot to do with how well you differentiate your products from your competitors'. To help differentiate your product, you need to know a lot about your competition. The first step is to identify your competitors. You may have done that earlier during your industry analysis. If so, you're ready to continue. If not, you should take time now to do that before moving forward.
Once you have identified your competitors, you should answer the following questions about each one. Answer each question as best you can with the information that you are able to find.
- How “big” is each competitor? How you measure size depends upon what you want to know. Possible metrics include revenue, market share, or number of units sold. Regardless, it is desirable to know something about how important the competing firm is in the marketplace.
- How have competing firms grown? Are one or more companies growing rapidly? What are the market conditions which have spurred growth/downsizing? Have there been several new entrants recently? Have firms exited or stopped providing certain products? What is important here is to understand both how and why other companies have changed.
- What resources do competing firms have? Do they have access to needed financing? Are they located in a great spot? Do they have knowledgeable staff and management? What are their strengths?
- What segments do your competitors target? Are there some market segments not being targeted by firms in the industry? How are firms reaching their target segments?
As you answer each of the questions above, you should be thinking about them relative to your business. After completing the competitive analysis, you'll be able to understand how your business fits in with the others in the industry.