Competitor analysis allows you to compare resources and capabilities of other companies with your own capabilities.
Competitor analysis is the process carried out to know the weaknesses and strengths of a competitor . The data obtained must then be compared with own resources to make decisions based on what is detected and develop an action strategy.
Before continuing, it is important to indicate that an analysis is a detailed examination of something. Competition , meanwhile, refers to a rivalry or a dispute.
Features of competitor analysis
Competitor analysis is a task that is carried out to identify the shortcomings and strengths of the companies with which it competes in the same sector . This work allows us to detect the threats and possibilities that exist in the market.
This analysis must always be complemented with a look oriented toward one's own capabilities. That comparison is key to designing the steps to follow.
Thanks to a competitive analysis, it is possible to determine what factors allow you to differentiate and stand out and what barriers there are to progress. This knowledge is very important to develop a business plan and define lines of action in terms of marketing , commercialization, etc.
It should not be forgotten that a well-done competition analysis, based on measurable and concrete criteria, helps to discard preconceptions and beliefs that may turn out to be wrong. It therefore offers the appropriate framework for creating a management guide.
Pricing strategies can be defined based on a competitive analysis.
How it is carried out
Competitor analysis can be carried out in different ways. It can be divided into an analysis of direct competitors and an analysis of indirect competitors , always drawing a profile of the competition.
Market research must provide useful data regarding product differentiation and eventual competitive advantage for or against. The goal, ultimately, is to achieve a good market positioning.
It should be considered that competitive analysis is useful before moving forward with the creation of a company but also with the aim of expanding a business that is already underway.
If we focus on the first case, it is necessary to carry out market segmentation and define the customer profile, analyzing whether the existing demand is being satisfied. When the company or venture is in operation, this type of analysis is important to know the offer of rivals and understand how a superior option could be presented.
With a competitive analysis it is possible to make a sales prediction and anticipate future scenarios.
Tools for competitor analysis
There are various tools to do a competitive analysis. One of the most used is the SWOT analysis ( Strengths, Weaknesses, Opportunities, Threats ), which is also called SWOT or SWOT .
This resource consists of creating a diagram in a grid format to visualize strengths, weaknesses, opportunities and threats. This matrix, in this way, serves to study the internal characteristics (positive and negative, identified as strengths and weaknesses) and the external panorama (the favorable situation and the risks; that is, the opportunities and threats).
Another valuable instrument is PESTEL analysis . In this case, the aim is to describe the context in which the company operates, considering political, economic, legal, environmental and other factors.
By complementing the PESTEL method with the SWOT , you can run a competitive analysis that takes multiple elements into account.
The analysis can also consider Porter's 5 forces model . Postulated in 1979 by academic Michael Eugene Porter , it is based on the study of five components that, articulated together, establish the properties of competition.
Porter 's forces intervene both on a vertical level (the bargaining power that customers have and that of suppliers) and on a horizontal level (the rivalry between competitors, the threat of the entry of new actors and the threat posed by substitute products). Beyond its usefulness, there are experts who warn that this model does not take into account the role of the State in regulating prices or the possibility of opening a new market to replace the existing one.
Benchmarking
Benchmarking is a technique that consists of an analysis of the competition to know and understand their practices and strategies , in order to adapt and reproduce them. Of course, this must be done when the competitor is showing success and has a privileged position in the market.
With benchmarking, then, the aim is to emulate the actions of companies that are performing well. This is how we try to achieve a transfer of knowledge and experience.
It should be noted that there are several types of benchmarking. Competitive benchmarking is aimed at studying direct competitors, while functional benchmarking looks at other sectors and markets. There is even internal benchmarking to transfer actions from one area of the company to another.