Competitor Analysis
Competitor analysis in marketing and strategic management is an assessment of the strengths
and weaknesses of current and potential competitors. This analysis provides both an offensive
and defensive strategic context to identify opportunities and threats. The analysis seeks to
identify weaknesses and strengths that a company's competitors may have, and then use
that information to improve efforts
within
the
company. An effective analysis
will
first obtain important information from competitors and then based on this information predict
how
the
competitor
will
react
under
certain
circumstances.
To be able to effectively gain an understanding of the market you are preparing to enter, it is vital
to have an in depth knowledge of your competitors. The better that you understand the
competition, the more effective the strategies you can make to compete with them.
Essentially if your product is something that people want you will have little trouble selling it,
provided that there are no competitors. However, there are almost always competitors, or at least
there soon will be if a product is successful. These competitors will either make a similar product
in a way that makes it superior to yours, or they will undercut you on price and offer better value
to the customer.
Understanding your competitors will also help you to develop a better understanding of your
customers. You can learn the reasons that customers buy from competitors as well as
understanding what strategies the competition use to market to these people.
Identify your major competitors
Identify the products/services that they offer.
Describe the products/services that they offer.
What factors contribute to their success?
Assess their weaknesses.
How will you address their strengths and capitalize on their weaknesses?
What are their current market shares?
Competitor Profiling
A common technique is to create detailed profiles on each of your major competitors. These
profiles give an in-depth description of the competitor's background, finances, products, markets,
facilities, personnel, and strategies. This involves:
Background
location of offices, plants, and online presences
history - key personalities, dates, events, and trends
ownership, corporate governance, and organizational structure
Financials
P-E ratios, dividend policy, and profitability
various financial ratios, liquidity, and cash flow
profit growth profile; method of growth (organic or acquisitive)
Products
products offered, depth and breadth of product line, and product portfolio balance
new products developed, new product success rate, and R&D strengths
brands, strength of brand portfolio, brand loyalty and brand awareness
promotional mix, promotional budgets, advertising themes, ad agency used, sales
force success rate, online promotional strategy
distribution channels used (direct & indirect), exclusivity agreements, alliances,
and geographical coverage
pricing, discounts, and allowances
Facilities
plant capacity, capacity utilization rate, age of plant, plant efficiency, capital
investment
location, shipping logistics, and product mix by plant
Personnel
number of employees, key employees, and skill sets
strength of management, and management style
compensation, benefits, and employee morale & retention rates
Corporate and marketing strategies
objectives, mission statement, growth plans, acquisitions, and divestitures