Competitive Analysis:
The ‘What’ and ‘Why’
Eight-time Grand Slam tennis champion Andre Agassi lost 3 times in a row when he first started playing against competitor Boris Becker.
But after that third match, Agassi noticed something interesting in the way his opponent served his shots.
He noticed that Becker would stick his tongue out as he served the ball, and the direction of his tongue indicated the direction that he would serve.
Armed with this insight, he would go on to win their next 8 consecutive matches. Agassi ended his career with a total win rate of 10-4 against Becker.
Becker was regarded as having one of the most difficult serves in the game. It’s clear that no matter how well Agassi trained himself, and focused on his skills, he was at a disadvantage.
This was, of course, until he started focusing on his rival, too.
Now, you might not be a world tennis champion, but this analogy applies just as well to any entrepreneur or small business owner out there. It’s not enough to work hard and focus on your own success — you need to be mindful of what your competitors are doing, too.
Whether you’re thinking about starting a new business, branching out into a new industry, or strengthening your position in the marketplace, you should be thinking about doing one thing in particular:
Competitive Analysis
What is a competitive analysis?
The short answer:
A competitive analysis is a strategy to identify how your rivals are doing business, so you can do it better.
The long answer:
Performing a competitive analysis is more than just taking a look at your competitors’ website, or following them on social media.
There are a myriad of approaches to understanding where your competitors are in the market, so you can find your place. But they all require taking an in-depth look at your rivals so you can understand their strategy, their strengths, and their limitations.
Don’t be put off, however. Anyone can perform this type of research; you don’t necessarily need to hire an outside agency or spend countless hours groveling over spreadsheets and tables. All you need is the right mindset, so you know exactly what to look for.
Let’s look at 3 popular competitive analysis models, so you can better understand what type of questions you should be asking.
SWOT Analysis
SWOT stands for “Strengths, Weaknesses, Opportunities, and Threats”.
S & W are the internal factors that affect your ability to compete. Strengths are things that give you an advantage, and weaknesses are the things that put you at a disadvantage.
This can include items like the skillset of your staff, your company culture, and the tools/locations available to you.
O & T are the external factors. Opportunities are things like untapped audiences, increased demand, and financing or funding options. Threats are things like alternatives to the products/services you offer, cost of your materials and wholesale products, and even political unease.
Porter’s 5 Forces
Michael Porter modelled his framework using 5 measurable elements:
- Threat of new entrants
- Bargaining power of buyers
- Bargaining power of suppliers
- Threat of substitutes
- Intensity of competitive rivalry
He suggests you ask yourself questions like “How much power do customers/suppliers have?”, “How likely are customers to switch to an alternative?”, and “How many firms compete, and how much growth is available in this market?”
Growth Share Matrix
In this model, your products/services are grouped into one of 4 quadrants on a graph:
- Pets: Low market growth, and low market share
- Cash Cows: Low market growth, but high market share
- Question Marks: High market growth, but low market share
- Stars: High market growth, and high market share
This model helps you understand where it’s wisest to invest your time and money.
Pets should be given up, or repositioned. You are typically only holding onto them because they are close to your heart, but they don’t perform well.
Cash Cows should be used to fund investments in other areas. They are your most reliable resource.
Question Marks present exciting opportunities, but often demand higher risk investment. If you go in, go all in, otherwise stay all out.
Stars are where you should be expanding your business, no doubts about it. They require investment, but promise more stable risks.
Why do a competitive analysis?
You might be thinking this sounds like a lot of complicated work, is it worth it?
Absolutely.
Managing your business with this level of insight is like playing the classic board game “Battleship”, but being able to see your opponents board.
Not to mention your competitors are more than likely doing their own analysis.
Some of the benefits of doing your own include:
- Determining your brand’s “unique value”; what separates your offerings from everyone else’s.
- Benchmarking industry standards. Now you can measure your performance against similar brands.
- Finding the weak spots in your competitors. There are audiences and approaches they haven’t taken advantage of yet; now’s your chance to beat them to it.
- Learning what else your customers are looking for. Finding out what their complaints about your competitors are allows you to not make the same mistakes, and to improve your unique offers.
- Borrowing best practices. Unless it’s patented, there’s no reason you can’t take the most successful strategies of your rivals and make them work for you!
Now that we’ve answered the “WHAT” and the “WHY”, I’m sure you’re asking “HOW do I conduct my own competitive analysis?”
Unfortunately, that’s all the time we have for today’s article, but stay tuned for a step-by-step guide (coming soon to a META blog near you)! For now, you’ve already started getting the gears turning — and that’s a lot!
Thinking about your competitors as you make decisions for your own business will help you make better informed decisions.
A competitive analysis is one smart way to think before you act. And with a deeper understanding of your industry, your strategy is sure to be game, set, and match!
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