Learn the art of competitor analysis to take any business further.
Competitor analysis is a proven method for assessing the competitive landscape in a given market and using the information to shape strategy. It is particularly helpful at answering several critical questions that inform business strategy, market development and execution. Any strategic advisor, business consultant or business leader worth their salt needs to know how to drive a targeted competitive analysis exercise. To do it right, the team at Expert Toolkit believe in the following 7 step process:
1. Identify existing and potential competitors
Who do you consider the be the competition? Consider your traditional competitors and non traditional competitors and agree a clear set of companies to be assessed during the analysis.
2. Develop a plan for researching the competitors
Develop a clear plan with (first and foremost) a clear definition of scope and purpose for the exercise. Also of critical importance is agreeing resources, timeframes, roles and accountabilities. Finally, understand who the key stakeholders are and what their expectation is for the final output of the analysis.
3. Assess the financial performance of the competition
This step is all about looking across common set of financial measures and ratios to identify potential sources of insight about a specific competitor and the sector as a whole. Is the competition financially healthy?
4. Assess the market performance of the competition
The market performance assessment step informs us on key dimensions such as market share, pricing, volumes, customer additions. Is the competition winning in the market? Where are they winning or losing market share?
5. Assess the cost performance of the competition
This step is diving into costs in several ways with the aim being able to understand profitability. Is the competition able to generate shareholder value by delivering what the customer wants with a sustainable cost base?
6. Assess the capabilities of the competition
There is a strong linkage between capabilities and overall business strategy. Understanding a competitor's strategy will indicate which capabilities they are likely to invest. Equally, understanding which capabilities a competitor is investing in will provide insights into their business strategy.
7. Assess the strategies of the competition
The final step of the analysis provides valuable forward-looking insight in the competition and where they are “placing their bets”. This is valuable competitive intelligence as it indicates where the competition is looking to move to and also informs how they might respond in certain market scenarios.
This is a very brief window into what it takes to perform a competitive analysis. For more details, insights and Expert Tips on how to perform an effective competitive analysis be sure to look at Expert Toolkit's Mastering Competition Analysis.