In business, competition is a given. All fields of business have a competitive nature. Therefore, an understanding of a business’s quality of competitiveness is necessary. This can be achieved through competitive analysis.
A business competition takes place when a number of businesses offer and sell the same product category, aim for similar target markets, or intend to overtake another business’s niche market. All of these cause competition in various forms; from price, customer services, to product or service quality. Generally, business competition is categorized into the three types below.
1. Direct Competition
Competition with businesses that sell the same category of products or services, resourcing and aiming for the same target market.
2. Indirect Competition
Competition that arise from businesses that offer fulfillment of the same needs for the same target market, but with a different product or service as substitute.
3. Replacement Competition
Competition from businesses of different fields, offering different kinds of solutions for needs-fulfillment of the same target market.
Competition has both positive and negative impacts on a business. The existence of competitors trigger quality improvement of products or services. However, upon losing the competition, businesses can potentially sink. As such, business owners need to understand its competitive strengths and weaknesses to build a robust competitive edge.
The necessity of competitive analysis
For a business to accurately measure its quality of competitiveness, competitive analysis is necessary conduct. This assessment is a method to gain understanding of competitors’ current and potential conditions by conducting research on their sales, marketing, and products or services.
Competitive analysis plays a key role in providing guidance regarding competition. The results can show the strengths and weaknesses of competitors. This becomes the basis to paint a clear picture of the competitive landscape. The competitiveness of the business will then be learned, as they can measure their strengths in the context of business competition. If the business deems its competitive edge to be lacking, a new strategy can be devised and implemented to overcome competitors.
Further Reading: Price Survey: Finding and Setting the Most Proper Selling Price
The benefits of competitive analysis
An understanding of the general competitive landscape is the main result of competitive analysis. However, that is not the only benefit to be gained. There are other advantages to be utilized by a business that conducts competitive analysis. Below are some of them.
1. Formulating UVP
Conducting competitive analysis will aid in identifying the Unique Value Proposition (UVP) of a business. Differentiation against competitors will be pinpointed, hence acting as support for future business strategy formulation.
2. Understanding competitors’ strengths
Competitive analysis will provide insight into the strengths of competitors. This is crucial insight that will help a business with ensuring the relevancy of its products or services with current market conditions.
3. Discovering opportunities for new strategies
Aside from learning of competitors’ strengths, the competitive analysis also uncovers their weaknesses. This opens up opportunities to implement new strategies that have not been carried out by competitors thus far.
4. Maintaining product relevancy
Through competitive analysis, customer reviews and feedback on competitor products can also be explored in depth. Results will show competitors’ weaknesses. Then a business can build a product that caters to consumers’ needs specifically relating to and filling the gaps in those weaknesses of competitors. As such, consumers will find their needs fulfilled in the product or service being offered.
5. Providing performance benchmark
Competitive analysis can serve as a benchmark of achievement. In turn, this can be utilized for future performance evaluation.
Insight into competitive edge and strengths
The competitiveness of a business has to be measured. Competitive analysis can be one the most effective ways to do this. By knowing a business’s own strengths and weaknesses relative to competitors, a business can devise the best strategy to win the competition.
The results of the assessment is insight on competitive edge. Hence, the business can grow the competence to outperform its competitors. If achieved, this will support the business in the competitive race.
However, it is no simple task to formulate the strengths of a business’s competitiveness. Businesses has to own a highly unique and differentiated value proposition, so that it is not easily copied, replicated, or even bested by competitors.
As such, competitive analysis plays a key role. Conducting such analysis will uncover learnings about the quality of competitiveness in market competition. From here, a business can begin to devise a strategy to outperform competitors.