Performing a competitive analysis on a semi-regular basis can help you spot market opportunities, keep tabs on customer trends, and adjust your product mix to stay ahead of the competition. Use one of these methods to assess where your competitors may be outperforming your brand, and evaluate your strategy accordingly.
The SWOT analysis
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This method of competitive analysis organizes a company’s information into these categories.
A company’s strengths are those factors that offer benefits, such as engaged employees, strong brand recognition, or premium pricing. Weaknesses are factors that lead to disadvantages in the marketplace, like the lack of a website or a small marketing budget. Opportunities are external factors that the company could take advantage of: for instance, demand for curbside pickup. Finally, threats are external factors that could pose a risk to the business, like supply chain delays.
A SWOT analysis can be used both for your company and your competitors. This method enables you to see where your business can improve, and where there may be an opportunity to take market advantage.
[Read more: SWOT Analysis: What It Is and How to Do It]
Porter’s Five Forces
Designed by Michael Porter, a professor at Harvard Business School, this competitive analysis template examines five key market forces in an industry, which include:
- Competition in the industry.
- Potential of new entrants into the industry.
- Power of suppliers.
- Power of customers.
- The threat of substitute products.
Many entrepreneurs use Porter’s Five Forces to evaluate an industry in which they may launch a new business. This framework enables the entrepreneur to understand the competition intensity, attractiveness, and profitability of an industry or market. It can also be useful when creating business expansion strategies and targeted goals, such as launching a new product line or expanding into a new geographic area.
A SWOT analysis can be used both for your company and your competitors.
Growth-share matrix
A growth-share matrix classifies your company’s products into four quadrants: stars, question marks, cash cows, and pets. These cute names belie a specific combination of relative market share and growth.
“The matrix reveals two factors that companies should consider when deciding where to invest—company competitiveness, and market attractiveness—with relative market share and growth rate as the underlying drivers of these factors,” wrote Boston Consulting Group.
Stars, for example, are products that have high growth and high market share. These products have high future potential and are worth investing more. Cash cows see low growth but high market share; question marks tend to be new products with high growth but low market share. Lastly, pets are those with low growth and low market share that are worth cutting or repositioning.
Strategic growth analysis
This template organizes competitors into groups based on the similarities of their strategies. This method of competitive analysis is among the most flexible approaches. You could group competitors using their marketing tactics, pricing, product features, or sustainability efforts.
This type of competitive analysis is best used for dialing into one specific consumer need. If your analysis reveals that your top three competitors are using similar pricing strategies, for example, it can signal that you might also benefit from using that strategy. It can also show you where taking a risk by doing something different can pay off in the long run.
Position mapping
Finally, position mapping is one of the simplest tools for performing competitive analysis. Essentially, you compare two factors, such as perceived quality and price or price and benefit, in one map. A price benefit-position map, for instance, shows the relationship between a product’s primary benefit to customers and the prices of all the products in the market, explains Harvard Business Review.
Position mapping involves a fair amount of research, as well as regression analysis, but it can reveal how much customers expect to pay, on average, to get different levels of the benefit you have identified. With this information, you can refine your product line, improve your pricing, and capture more business.
[Read more: 6 Steps to Performing a Competitive Analysis]
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
Follow us on Instagram for more expert tips & business owners’ stories.
CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.
Next Event: Tax Filing Tips!
Join us on Thursday, February 22, at 12 pm ET for the first episode of our expert series, Ready. Set. Scale.: Smart Tax Tips for a Stress-Free Filing. We will have seasoned leaders offering actionable tips to help minimize the stressors of tax time for small businesses.
