Undertaking a Competitor Analysis
Assessing the Competition
Assessing your competitors serves four useful purposes:
- It requires you to assess your existing market share and current business methods.
We all operate in a competitive environment, and it’s most likely that your competitors are planning to take customers and market share away from you. How will they do it? What strategies will they adopt? Who will they target? All these questions will be considered when you begin a serious competitor analysis review. Your prime objective is, of course, to secure “home base” before you seek new markets.
- It can identify new market opportunities.
Most mature markets tend to be static in size and opportunity. Market share can only be won by attracting customers away from your competitors. How can you do it? Where are your competitors vulnerable? Do you have a competitive advantage you are not exploiting?
- You can learn from the strengths and weaknesses of your competitors.
“Respect your competitor’s strengths and capitalise on their frailties” was an adage used in the Middle Ages, and it still makes good sense today. By studying your competitor you can avoid potential pitfalls and save valuable time by not having to re-invent the wheel.
- It allows for an early review of potential changes in the market place.
Through competitive analysis, nasty surprises can be avoided or at least, minimised. Changes can come from many directions, new technology, personnel changes, production processes, etc.
Compelling reasons why you should consider a competitive analysis program.
- Business survival.
Regrettably, there are plenty of examples of businesses which have ended up on the scrap heap because they were made redundant by their competitors. Frankly, competitive analysis can be a question of life and death in cut-throat industries.
- To counter the effect of slow growth.
In a shrinking market caused by external economic factors, the only way to maintain sales and profit results is to attract market share from your competitors. In knowing your competitors’ “Achilles heel”, you can move with confidence. In knowing their likely counter strategies you can put in place a “damage control” program.
- To eliminate “complacency”
It’s a common trap into which many business people have fallen in the past. They lose a customer and it comes as a complete surprise. They mistakenly thought they were providing a good service, but were unaware of the standard of their competition. A competitive analysis program will provide a good “litmus test” for your goods and services and ensure that you are kept informed of the products, service and standard of your competition.
- To spot opportunities
Through studying your competitors and their methods, opportunities may emerge. Opportunities to purchase cheaper or better, opportunities to sell through a different medium, opportunities to produce more efficiently etc. Every competitor can teach you something which can make or save you money and you should approach the competitor review in this light.
- To keep the business “going forward”
Many action-orientated business people thrive on a challenge… and whither away once it becomes mundane and humdrum. One way of keeping their interest fresh and invigorating is to make the competition the target. Get your “action dynamos” to understand that not only do they need to ensure your existing customer base is secure, but also that real progress must come at the expenses of winning customers away from the competition.
- To stay competitive.
A final compelling reason why you should consider a competitive analysis program is because you have to assume your competitors are doing it to you. Let’s assume you are the manager of a manufacturing business. Imagine for a moment what the executives of your largest competitor could do with the following dossier of information on your business.
They’ve performed credit and finance checks on both the business and the key people. From this information they have a strong idea as to the financial position of your company. They know what future ability you have to raise capital, they know what assets are pledged as security, etc.
They can second guess your ability to withstand a downturn in the economy, a price ware or new competition. From the personal information they’ve gleaned on your key people they can second guess the salary levels, the level of the employees’ personal debts, etc.
This kind of information has been used in the past to offer attractive salary packages which pander to the known financial position of the prospective employee. As you are no doubt aware, there are limitless uses for this sort of information … and it’s not difficult to obtain. To get you started, we suggest you contact some of the larger credit collection agencies for details of their confidential finance reviews, (example: Dun and Bradstreet). The Credit Reference Association of Australia can provide you with a CRAA report on individuals and companies. This report will allow you to build up a model of the finances of your competitors. The various Corporate Affairs Commissions may hold financial information on your competitors’ companies which is available for public inspection.
They’ve reverse-engineered your products. They have a complete file on your material components – where it was purchased, the likely price, the delivery times, etc. They know your plant capacity, the state of your plant and equipment. In short, they know your product almost as well as their own.
With this kind of information they can give their salespeople a decided advantage in the field. They can modify their own product to capitalise on the weaknesses in yours. They can interfere with your production cycles by placing large orders of their own with your suppliers at crucial times.
This information wasn’t difficult to get. They bought your product and pulled it apart.
They made searches at the Patents, Trademarks and Design Office. Other searches at the Titles Office and Local Council revealed details of the factory site and layout. Casual discussions with plant suppliers revealed details of the capacity and condition of your machinery. In casual conversation, your factory employees unknowingly gave vital information about the management, production bottlenecks, large orders, and internal problems, among a host of other matters.
In a competitive environment, you can’t afford to wait until the attack begins.
If you found this article interesting and want to know more, contact us for a detailed report on Assessing your Competition including a template workbook for performing a Competitor Analysis.
Or ask us about our Business Analysis Report, which includes market research insights into your competitors!
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With this manual you will be learn how to tap into the awesome opportunity that exists with both lost and inactive customers.
