How to analyze competitors: methods, stages and examples

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Competitor analysis is a study that allows you to correctly structure marketing and pricing, provides an opportunity to assess your company’s competitiveness and develop a well-thought-out strategy for successful business development.

In this article, we will consider how to analyze competitors, we will talk about the methods of such research and the stages of its implementation.

Why do you need a competitive analysis?

The analysis of the organization’s competitors is carried out for the purpose of assessing the market, developing marketing positioning, studying the strategy of competitors and understanding how you can rebuild from them and find your advantage.

Such a study will help in the design of price and product policy. By analyzing competitors, you will be able to understand in which direction you should develop in order to maximize market coverage and increase profits.

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Methods of competitive analysis

Consider four methods.

SWOT

SWOT analysis is a universal method of research, it is equally well suited for both a personal brand and a product or company. The name of this method is an acronym consisting of the words: Strengths (strengths), Weakness (weaknesses), Opportunities (opportunities) and Treats (potential threats).

Scheme of SWOT analysisThe advantage of the method is the ability to use it for various areas of business due to its high flexibility and adaptability. Also, this method can be used for operational control of the enterprise.

One of the weak points of SWOT analysis is subjectivity, since the result depends on the position of the researcher. In addition, this method requires the collection of a large amount of information, which increases time costs.

This method is most suitable for adjusting business strategy, tactical actions, but not for developing a business strategy from scratch, because SWOT assesses the state of the market only at this moment in time.

Analysis of Porter’s five forces

The “Porter five forces analysis” method was developed by the American economist Michael Porter at the Harvard Business School in 1979. This method of competitive analysis includes the study of the following parameters:

  • Threats of the appearance of substitute products that can make the product useless. For example, after the advent of DVD, cassette players disappeared from the market.
  • Threats of new players bringing new resources and technologies to the market and reducing your profits. They analyze the presence of entry barriers (these include patents, licenses, standards, copyrights, etc.), brand value, start-up costs for product launches, cost advantages, access to sales channels, and other indicators.
  • Market power of suppliers who may refuse to work with the firm or charge too high prices for unique products. It is necessary to study the number of suppliers, compare the cost of goods and retail prices, find out whether suppliers have resources for planning the sale of goods to end buyers.
  • Market power of consumers, that is, the influence of buyers in the development of the firm, their sensitivity to changes in the price of goods. The number of consumers and dependence on current distribution channels, sources of information and availability of substitute products, unique sales offer of competing firms are studied.
  • The level of competition is a determining factor affecting the level of competition in the industry. They analyze the number of competitors and their positioning, the level of market growth and criteria for its saturation, barriers to entry and exit from the industry, the level of spending by competing companies on advertising.

Schematic representation of Porter's five forcesThe advantages of the method include accounting for the influence of direct competitors, and even determining the degree of competition. Among the shortcomings, we can name the fact that the model is mainly applied only to simple market structures.

PEST

The PEST analysis (sometimes also referred to as the STEP analysis) is a marketing tool that allows you to determine the organization’s long-term strategy.

The abbreviation PEST consists of the English words: Politics, Economics, Socio-culture and Technology. This method of competitive analysis reveals aspects of the company’s political, economic, socio-cultural and technological environment that affect the organization’s business.

Scheme of PEST analysisThis type of analysis provides a general view, the so-called helicopter view (overview from the highest point, from a helicopter) – a top view of the external environment of the company and the place it occupies in the market, allows you to assess the whole picture.

Advantages of PEST methodology: the possibility of developing a global strategy for the development of new business projects, finding optimal opportunities for development, simplifying the understanding of processes in the industry. This type of analysis is distinguished by the rapid collection of information and the provision of a complete picture of the external environment and market offers.

A disadvantage of the PEST tool one can consider the risk of incorrect interpretation of the data, which can lead to ineffective decision-making, and even the complexity of the analysis due to the evaluation of many factors, which can complicate the process of making the right decision.

The analysis of the macroenvironment must be carried out on an ongoing basis, the mutual influence of environmental factors should be taken into account.

SPACE

The name of the SPACE method stands for Strategic Position and Action Evaluation, translated into Russian – “strategic position and action evaluation”.

This technique allows you to determine the strengths and weaknesses of an organization in a specific market by evaluating four groups of factors: the stability of the situation, the company’s competitive advantages, the attractiveness of the industry and its financial potential.

SPACE analysisSuch an analysis assumes that the company’s strengths are its financial strength and prospects, as well as the competitiveness of its products. The advantages of the method include: a clear logic of competitive analysis, the ability to determine the main strategic positions, the convenience and clarity of the demonstration of results. The disadvantage of the method is that the result of the analysis depends on the specific set of factors that you decide to evaluate, while there are no objective criteria for the selection of factors.

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Stages of analysis of the competitive environment of the market

Qualitative analysis of competitors takes place in several stages:

  1. First of all, it is necessary to define problems and set specific goals of marketing research that will help solve current tasks. This is necessary in order not to analyze unnecessary information that cannot provide answers to the questions that interest you.
  2. At the next stage, clearly define your competitors, as well as the target audience of buyers with which competing firms interact, and create a corresponding list.
  3. Prepare the technical means of data collection, and then search for the necessary information with the subsequent systematization of the information received.
  4. The next step involves structuring, thorough research and quality assessment of the collected information.
  5. The final stage is the creation of a detailed report, on the basis of which you will be able, using information about competitors, to form a new strategy for the promotion of your company.

An example of competitor analysis

Let’s analyze the competitive analysis using the example of an online store. Let’s consider the steps that need to be taken when conducting a SWOT study.

First, let’s decide on the goals. In our case, this is the identification of direct competitors followed by the creation of an advertising promotion strategy. Let’s say our current problems are low traffic and therefore no sales. The general state of the field is characterized by strong competition, a large number of large chain stores. External factors and threats that can make it difficult to achieve the goal, in this case, are the expansion of the assortment by other companies, as well as the control of content and goods by state authorities.

Start your analysis by looking for major competitors in your industry with the same or similar offerings. Then you need to collect available information about the dynamics of attendance, customer reviews, information about products, promotions and advertising campaigns.

After collecting the necessary data, structure it in a convenient format using graphs and tables.

Analysis of competitors.  An example of a table
Then you should analyze all available information. Create a table with the characteristics of competing companies, their promotion methods, singling out the most successful of them.

Create a form for all online stores with a brief description of each item. Based on such a table, you can start creating a strategy for the promotion and development of your business.

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