What is a competitor analysis?
A competitor analysis is a method where the main focus is to analyze competitors in the industry. The analysis identifies the company’s main competitors and evaluates strategies, market position, strengths, and weaknesses in the industry. Porter’s Five Forces analyses are an example of a competitor analysis. This analysis method focuses on 5 factors that provide insight into the competitive strength within the industry. In addition to competitor analysis, it will be essential for the company to carry out a situational analysis to gain comprehensive insight at both the micro and macro level.
Why should companies develop a competitor analysis?
- A competitor analysis is essential for businesses for several reasons: it can help reveal the profitability of the market. For example, it can show whether the market is saturated (a “red ocean”) with high competition, where it is difficult to stand out from competitors.
- The results from the analysis will provide guidance for developing a competitive strategy that leverages market gaps and creates competitive advantages. Market gaps can be unmet customer needs or unsatisfactory products.
- The competitor analysis also helps identify potential threats that competitors may pose to your company. This can, for example, include the threat of a price war.
Summary
A competitor analysis can be a valuable part of strategic planning to help your company succeed in the market.
