How to conduct a Competitors Analysis

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How to conduct a Competitors Analysis

Introduction

Most business owners would need to identify and conduct research on who they are competing with as part of their ongoing business survival efforts.

The aim of this article is to:

  • Define what is a Competitors Analysis .
  • Identify the Types of Competitors.
  • Identify the Classification of Competitors.
  • What questions to ask when assessing your competitors.
  • What financial analysis to do on your competitors, and
  • Where to find Competitive analysis templates.

 

What is a Competitors Analysis ?

Competitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. Thisanalysis provides both an offensive and defensive strategic context to identify opportunities and threats.

Source: Wikipedia

Types of competitors

Direct

  • These are competitors that offer very similar or the same product and services as you do.
  • Their method of delivery and marketing might be different than yours.

Indirect

  •  These are competitors that offer a different product and services as you do but it solves the same need of the customer.
  • They may also have a different method of delivery and marketing might be different than yours

Classification of Competitors

When you are doing market research on who your competitors are you need to classify each one into the following categories;

  • Key national competitors
  • Key international competitors
  • Substitutes
  • New entrants

Analysis Assessment

The purpose of this section is to identify in which areas you are competing with your rivalry. These are basically your potential risk areas of competition in the market.

Where the answer is “YES” you would need to look into it and put a strategy in place to either eliminate or reduce the risk area. You may also need to do more research and find out what their tactics and strategies are.

For each competitor you have identified ask yourself the following questions.

Location

  • Are they in a better location than my company to serve the market ?

Revenues

  • Are their annual sales greater than my company ?

Management

  • Do their founders, board members, and management have more industry experience and better connections than my company does ?

Capital structure

  • Do they have the financial backing of a major corporation, shareholders, or a great amount of venture capital ?

Value proposition

  •  Are their strengths similar to my company’s strengths ?
  •  Are their strengths my company’s weaknesses ?

Product and Services

  • Does their product line meet the needs of a similar market to my company’s product line ?
  • Is their product line similar to my company’s in functionality and appearance ?

Pricing

  • Is their price structure different to my company’s ?
  • Do they offer a money back guarantee where you do not ?

Marketing

  • Is their marketing activities different and more effective to my company’s ?
  • Is their brand more widely recognized than yours ?

Customer Service

  •  Do they have a call centre to address and resolve customer complaints were you do not ?
  • Are they more punctual at delivery of product and services than you are ?
  • Is the Customer’s confidence higher at your Competitor than at your business ?

Customer Experience

  • Is the Customer’s experience far better at your competitor than at yours ?
  • Are they more flexible in meeting the needs and requirements of the customer than you are ?

Suppliers

  •  Do they have different suppliers to you ?

Logistics and Distribution Channels

  • Do they have different distribution channels to you ?

Cost of Production

  •  Is their cost of production less than your company ?

Innovation

  •  Is the Competitor more innovative than your business ?

Growth

  • Is the Competitor expanding faster than your company is ?

Financial Analysis

For each competitor you have identified get hold of their published results and look at the following;

Revenue

  • Latest quarter
  • Previous quarter
  • Prior Financial Year
  • % growth from Prior Year

Operating Income

Formula:

Sales less Cost of Sales = Operating Income

  •  Latest quarter
  • Previous quarter
  • Prior Financial Year
  • % growth from Prior Year

Operating Income Margin

Formula:

Operating Income / Sales = Operating Profit Margin

  •  Latest quarter
  • Previous quarter
  • Prior Financial Year
  • % growth from Prior Year

Remember you are competing with your competitor at the operating profit level. This is driven by your Selling prices less the cost of goods or services sold. If your operating income is higher than your competitors it can either mean that your Selling price to your customers are too high or you have managed to improve on your Cost of Sales.

Number of Employees

Market share

Product Quality

 

Where to find templates ?

You can try:

Google : Competitors Analysis Templates

Conclusion

In order to stay ahead of the pack you should be doing your competitors analysis at least every six months. It allows you to formulate a plan of action to put strategies in place to ensure the future sustainability of your business.

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Arno Wakfer CA (SA)

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Article published with permission from the author.

 

By |2018-03-13T10:11:15+00:00February 2nd, 2016|Business Exit Strategy, Strategy|1 Comment

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One Comment

  1. Chris Thompson April 26, 2016 at 8:20 pm - Reply

    Great post! This was good information on competitors analysis. Keep up the good work and I wish you all the best.-Chris Thompson

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