The Role of Competitive Analysis
“Never interrupt your enemy when he is making a mistake.” —Napoleon Bonaparte
Many might consider Napoleon Bonaparte to be a strategic genius. So, we will take his words to heart. Your competitor could be making a mistake at this very moment — or it could be you who is making the mistake. Without a broad view of the playing field, it’s nearly impossible to tell.
A competitive analysis is the process of identifying and evaluating competitors’ strategies to determine their strengths and weaknesses relative to your own. Knowing and understanding more about your competitors requires a lot of research. More importantly, this information needs to be reflected back onto your own company strategy.
The first step in a competitive analysis is to get all of the information in one place. Assuming you already know who your competitors are, basic research into each one is next. Simply looking companies up and finding out who they are via their website, social media and general marketing materials is a good way to start. Pretend you are a customer – what questions would you ask in seeking this service or product? How does the competitor address these needs? Go deeper into the marketing details to determine what the company’s main marketing messages are and how well they work.
Identify the Advantage
Every company has a competitive advantage, the one aspect that makes them unique and helps them to outperform you and other businesses. A competitive advantage is the result of a well-developed and executed strategic plan. A lasting competitive advantage is something other companies cannot easily replicate or imitate. For small businesses, the most common advantage used to compete is a higher quality product or better service. Examples of a competitive advantage might be a better production process for a car manufacturer or even Coca-Cola’s secret recipe with added brand name recognition. Some competitive advantages are easier to copy than others.
Find their Strengths and Weaknesses
For all of the research you’ve done so far, this is where you get to draw a few conclusions. The SWOT or Strengths-Weaknesses-Opportunities-Threats Analysis is a common method of determining internal and external factors that will affect future performance. It helps leaders to develop full awareness for every aspect of their strategic plan. If you can determine what the SWOT analysis is for your competitor, you have a good chance of understanding their strategic plan. As you analyze, take note in particular of the strengths. How well is your company prepared to deal with these strengths. Further, do their weaknesses present an opportunity for you?
A competitive analysis should generate meaningful answers in how you can better steer your business. While you won’t often have a literal opportunity to interrupt “the enemy” in the midst of a mistake, a thorough analysis will ensure you catch your own mistakes before they happen.