Is it possible that you just launch a startup and things start working for you? This could have been possible 100 years ago, maybe? But today, that is just a dream. Today, a business cannot even survive without doing all the homework let alone thrive. The homework means market research, choosing and studying a target audience, and conducting a thorough competitor analysis.
Today’s discussion is all about competitor analysis; different methods or frameworks to study your competitors. We will discuss the five most common types of competitor analysis framework and their benefits. Let’s start!
What Is Competitor Analysis Framework?
A competitor analysis framework is a tool that a business adopts to conduct a complete competitor’s research. The information we collect from doing competitor research is a core ingredient in shaping the marketing strategies for our business. Competitor analysis basically researches your competitors’ products or services, and their marketing strategies.
However, here are some important things to consider if a business really wants to do a useful competitor research.
- Choose the correct competitor for analysis; if you are just starting out, your competitors are new or young businesses.
- Identify which aspect of your competitor’s business should you study?
- Where can you get all the data for this analysis?
- And how can you use the research data for the improvement of your business.
There are different competitor analysis frameworks but which one should you choose? Well, we are going to discuss all of them one by one and you decide which one suits your business.
Benefits Of Competitive Analysis Framework
A competitive analysis framework can be beneficial in different ways. For example
- It can help a business in identifying the gaps in the industry. These gaps are actually the opportunities which a business can target to launch its product or service.
- Competitive analysis frameworks also help you understand the strengths and weaknesses of your competitors. Their weaknesses can be a potential opportunity for you to create a competitive advantage. A business can also identify its own weaknesses and strengths.
- When the marketers collect data for competitors’ analysis, they get more insights on current market patterns and trends. This way they can identify what are customers looking for and then develop a marketing strategy accordingly.
- Another good thing about these competitive analysis frameworks is that you can get inspiration from your competitors as well. For example, if your competitor has developed a successful marketing strategy, you get help from that to refine yours.
- Goal setting becomes a lot easier with the help of competitive analysis frameworks. A business can use competitors’ data to set more realistic and measureable goals for itself.
Types of Competitive Analysis Framework with Examples
SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis
SWOT is arguably the most common competitor analysis framework all over the globe. That is because it is very effective for every type and size of business, such as small, medium, and large organizations. SWOT analysis basically targets two factors;
- Internal factors (strengths and weaknesses) e.g. company culture, location, organizational culture, brand reputation, etc.
- External factors (opportunities and threats) e.g. political climate, alternatives, demand, laws and regulations, etc.
When should a business perform SWOT Analysis?
- Identifying your business’s strengths and weaknesses, possible threats and opportunities.
- Prior to formulating a new marketing strategy.
- During making a business plan for next year or quarter.
How can you perform SWOT Analysis?
- First of all, you have to make 4 sections- strengths, weaknesses, opportunities, and strengths.
- Then, choose the parameter or factor for which you are doing this analysis. For example, you can conduct a SWOT analysis for marketing strategies, target audience, sales, products or services, etc.
- Now fill all four sections (your strengths, weaknesses, possible threats, opportunities)
- Do this for every competitor and compare your business with them.
Porter’s Five Forces
Porter’ five forces analysis helps a business identify its current as well as future position or strength in a business environment/market. this framework targets five different factors, which are;
- Your competitors/rivals
- How much influence does your suppliers have on your business, i.e bargaining power of your suppliers)
- The type of influence your buyers have on you. i.e buyers’ bargaining power.
- How easy it is for new entrants to enter the market and increase competition.
- How easily can an alternative product replace your product or service?
When Can A Business Conduct Porter’s Five Forces Analysis?
- To boost the profits
- To evaluate or study your competitors
- For developing a better understanding of the industry and the market environment
- To identify your business’s weaknesses and improve them.
- To develop new business strategies
How To Conduct Porter’s Five Forces Analysis?
- Draw a box or circle in the center, and put your competitor/rivals in name in it.
- Then draw four arrows coming out of that box/circle and tag these arrows with four categories (threat of new entrant, buyers’ bargaining power, suppliers’ bargaining power, threat of substitution).
- Add all necessary details in those sections and analyze.
Strategic Group Analysis
Strategic group analysis helps a business understand its position in the competition. You can categorize your competitors with the help of a chart, graph, or a map on the basis of different characteristics such as market shares, market push or pull, vertical integration, technological position, cost position, brand identification, etc.
When Can You Use This Framework?
- Helpful in analyzing sales, target audience and marketing strategies.
- You can use this framework to compare your profitability/profit margin with your competitors.
How Can You Perform Strategic Group Analysis?
- Set your value proportion
- Determine your target market and key indicators.
- Verify your income stream and then identify your competitors accordingly.
Growth Share Matrix
Growth share matrix is one of the best approaches to evaluate and manage your product portfolio. It ranks products on the basis of market shares. With the help of this framework, you can identify which product and market should you invest in. Apart from that, it helps a business identify which of its products are producing higher market shares.
When To Use Growth Share Matrix
- Growth share matrix is useful in evaluating your competitors and your own strengths and weaknesses.
- A business can evaluate its current position in the market and develop a plan of action accordingly.
- You can assess where you should channelize your resources and capital.
How To Do Growth Share Matrix Analysis
- Make four quadrants on a document and assign a sign to each quadrant.
- Enter the details in the graph.
- Now choose any of your competitors and repeat this process again. you can create growth share matrix for all your competitors one-by-one.
Perceptual mapping, aka positional mapping, is an analytical framework that helps you assess your position in the market competition. In simpler words, you can evaluate where does your business or product stand among your competitors. Perceptual mapping generally targets two factors- quality and price. This framework is effective when you want to know customers’ perceptions about your product and your competitors’ products.
How To Do Perceptual Mapping
- Choose two attributes (such as price and quality) for comparison.
- Get your customers’ opinions on those attributes.
- Find out your competitors and look what customers say about these attributes with respect to their products or services.
- Make data comparison and then analyze where do you stand.