Competition analysis is one of the key issues not only when setting up a new business, but also in the later stages of running a business. Why is it worth monitoring the activities of market rivals?
What is competition analysis?
To build a long-term competitive advantage and be successful in the industry, you need to know your market rivals. An effective tool for market recognition is competition analysis, which is defined as the identification and monitoring of current and potential rivals of a given company. In other words - it is a series of activities aimed at obtaining as much information as possible about companies that deal with similar activities as the enterprise. The study should cover all the important aspects of running a business, including strategies Public Relations, sales and marketing, plans and goals, strengths and weaknesses, patterns of activities.
Who should conduct a competition analysis?
The competition analysis is carried out primarily before starting a business and before introducing a new product or service to the market. The conclusions of the analysis can be helpful in the building process the company's competitiveness - in particular in creating market entry strategies, marketing and sales strategies, distribution plans, etc.
The analysis report should be regularly supplemented while running the company. Enterprises often fall into routine, operate according to well-established patterns, and lack a fresh perspective on certain matters. Unfortunately, even the best solutions may stop working over time. The analysis of competitors' activities is an opportunity to find new development opportunities and attract new customers, and thus maintain a stable position on the market, improve results and increase profits.
Why is it worth it?
An entrepreneur who collects a lot of information about competitors before bringing his brand to market has a better chance of success. The analysis of rivals' activities, their offers, target groups, price range, etc. and drawing conclusions from the conducted research is a good preparation for running a business and a way to develop an effective competitive strategy. A company that in some way stands out from its rivals has a chance to attract many customers, generate high profits, and in the future become a market leader.
Competitive analysis makes it possible to find out about the strengths and weaknesses of rivals. Weaknesses and mistakes made will show what to avoid in running your own business. This can be especially helpful when you enter an unknown market. A company that has been operating in a given sector for several years has certainly tested many solutions. The analysis will allow you to check which of them have worked and which have not been effective. An entrepreneur who uses competition analysis in creating a company's strategy minimizes the risk of making costly mistakes at the very beginning of running a business.
Getting to know the strengths is an opportunity to determine the position of your own company on the market - to check whether the company is developing in the right direction. If so, you should look for solutions that will allow you to maintain the achieved level. If not, find the cause and implement an appropriate recovery plan.
By monitoring your rivals' actions, you can predict their next moves. The company can take advantage of the weaknesses of the competition and draw inspiration from good actions, and thus build a long-term competitive advantage.
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What areas of analysis to focus on?
The competition analysis should provide us with as much valuable information as possible about our rivals. In order to obtain reliable results, all relevant areas of activity of competitors must be taken into account. What should you focus on the most?
- Offer
The entrepreneur should know the specifics of the products or services offered by the competition. He should know which products are most popular and why. What features make a given item popular - e.g. price, quality, distribution method, some added value. In the analysis of the offer, aspects such as product names and descriptions, their functionality and customer opinions are also important.
2. target group
The entrepreneur should create a detailed customer profile of the competition containing information about his gender, age, specific characteristics, needs and interests. It is worth checking whether the number of customers is stable, decreasing or growing, and also to analyze the reason for this - maybe the company has introduced some unique campaign or applied innovative solutions that caused the increase of customers.
- Sales channels
The competition analysis should include information on what channels are used by individual companies to sell their products / services, whether they focus on online or stationary sales, whether their product range is available for the entire country, or they offer international shipping. If competitors sell stationary, the stores should be checked in terms of the attractiveness of the location and specific features.
- Financing
The financing analysis will provide us with information about when the competition started its activity, when and under what circumstances it received financing, how much and from what investor. You should also check rivals' investment plans and financial performance indicators at this point.
- Strengths and weaknesses
The analysis of strengths and weaknesses should be carried out in relation to the entire company and to individual products / services. A helpful tool for researching this area is the SWOT analysis, which, apart from strengths and weaknesses, will indicate opportunities and threats related to a given competitor.
- Business model
This is all information about companies' strategies - including development, product, price strategies, etc.
7. Marketing
Contact with customers is an important element of the functioning of any company. The trader should analyze the tools and communication channelswhich competition they use to contact their target group.
8. Competitive advantage
The analysis makes it possible to check whether a given business has a chance of success, whether the brand has something that its competitors do not have - e.g. an innovative product, competitive price, some unique product feature. Finding a competitive advantage or market niche will allow you to stand out from your rivals.
9. Intensity of competition
The competition analysis should also include information on the number of companies operating in a given sector. High competition is not an advantage, but a hindrance. Market oversaturation is not conducive to sales, which may affect the activities of new or smaller companies. Large, experienced companies have a strong opinion and regular customers, which makes it easier for them to stay on the market.
Competition analysis methods
There are many ways to analyze your competition. Conducting activities based on only one of them is not fully effective and is associated with a high risk of error. Several methods should be combined to get a complete picture of the competition.
The main method of analyzing competition is desk research, i.e. the analysis of existing data. The method consists in collecting and processing data about rivals from various sources. The analysis may be subject to, inter alia, market research reports, portals and online stores of competitors, trade press, newsletters, records and recordings of industry events.
Marketing research should be the next stage of the competition analysis. It is obtaining information directly from market participants, i.e. customers, distributors and producers. The analysis can be carried out through qualitative marketing research or surveyed opinion polls.
Another method worth using in competition analysis is business intelligence. The interview allows you to verify the financial credibility of contractors, and thus reduces the risk of cooperation with dishonest or insolvent companies. It is also an analysis of the methods of securing confidential data used by competitors, which gives the opportunity to introduce improvements by imitating the competition.
The last stage of the competition analysis is mystery shopping. Conducting a mystery shopper research in competitive establishments is a good way to learn about customer service standards, sales methods, communication styles used in contact with the customer and other service elements used by market rivals. The analysis shows the full efficiency of the functioning of competitive companies.
An in-depth market analysis based on the above methods allows you to identify market barriersthat may hinder entry or operation in a specific sector. Data from all four stages will give a complete picture of the competition. The entrepreneur will learn about the trends prevailing in the industry, and thus properly prepare to enter the market.
Competition analysis - the most common mistakes
An improperly conducted competition analysis will not bring the expected results, and the company may lose instead of gaining as a result. The most common mistakes are:
- narrowing down the analysis to the most important competitors and omitting smaller or niche entities,
- narrow scope of analysis, not taking into account all key areas of rivals' activity,
- failure to take into account substitutes,
- ignorance of customer reviews.
Competition analysis should be an integral part of the functioning of any enterprise. Thanks to it, it is possible to properly prepare for entering the market. Often it is she who will determine the final success. Continuous market monitoring is an opportunity to select the best development strategies for the company.