Competitor analysis is a critical component of the strategic planning processes. It enables an organization to make better informed decisions about its strategy and its allocation of resources.
3 Steps to Competitor Analysis
Step #1. Identify Market Competitors – Focus on the key competitors and key types of competitors. The best way to identify current and future competitors is to target products. For example, if you are selling peanuts, you need to know how many branded and unbranded players there are there in the peanut market. You need to know if any new company is starting to sell peanuts, or if any current company might stop selling them. You also need to know how many of your customers prefer some other product, such as crisps, over peanuts. By doing this, you get to know your direct and indirect competition.
Step #2. Find Market Share – Once you have identified the competition, the second step is to know their market share. You cannot know the strengths and weaknesses of your competition unless and until you know their presence. If your product is selling in a wide region, you need to break down the region into territories and find out the share of wallet in each territory. While doing this, you can also do some mini market research to find the reason for the sales of your competition. Is it selling because it is easily available, quality is high or price is low? Once you know the share of market and you have done your analysis, you need to do an analysis to work out the strengths, weaknesses, opportunities and threats for each of your competitors. This is important because this shows where you currently stand in your industry, who do you need to benchmark to move forward and what strategies can be most effective to stay on top or to avoid a drop in rank.
Step #3. Plan Strategies and Take Action! – Now that you have all your competitor analysis in front of you, it is time to determine your line of action. If the competition is far superior, you have two ways to move forward. You can either try the same strategies as the top competitor and slowly move up, or you can get creative and try to directly take on the market leader. At the same time, if the competition is average and you can reach the top through some effort, then do not hesitate to put the best strategies forward to reach the top. Remember that if reaching the top takes much effort, then staying on top will take double the effort.
In the end, remember that whatever changes you make, your competitor is going to respond. Therefore, competitor analysis is key in helping you to pin point your current standing in the market and the future direction of your company, but will need updating from time to time.