How to conduct a competitive strength analysis
Creating a competitive strength report can help you determine what sets your business apart from rival companies.
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Identifying and researching competitors helps you size up the other businesses serving your customer base and learn how consumers perceive your products and services against other offerings in the market.
A competitive strength grid organizes your research. It outlines the strengths, weaknesses, and key points of differentiation for each of your competitors, and it guides your important business decisions.
First, identify your competitors by talking with customers and suppliers, researching industry groups, and using online tools. Make a list of your top competitors:
Direct competitors sell the same products and services as you and pose the greatest risk.
Indirect competitors provide alternatives to your offerings and attract similar customers.
And new entrants are businesses or products that may change the nature of your market. For example, MP3 devices, and later smartphones, changed the market for businesses that sold CD players.
Add these competitors to your grid and research them. You can visit their store location or website, as well as their social media pages, to gauge their strengths and weaknesses.
For the strength column, look at where your competitors outperform you. Maybe it's more streamlined distribution, successful social media campaigns, or expert customer service.
For weaknesses, where are your competitors struggling? Maybe it's overpriced products, low-quality materials, or inconvenient locations. That's an opportunity for you.
For differentiations, what sets a competitor apart from the rest? Maybe it's a secret family recipe, expansive inventory, or environmentally friendly values.
Your completed competitive strength grid provides a snapshot of your local market.
Now it's time to analyze. Your competitors' strengths are threats to your business. Their weaknesses are opportunities. With this information, you can develop a SWOT analysis of your business. This will give you insight on how to compete and how to make your business more attractive to customers.
Use your grid to seize opportunities. If competitors offer lower prices, you could try negotiating costs with suppliers to reduce your own prices. If a competitor has a better online presence, use online tools or work with an expert to optimize your digital marketing and social media.
Remember, the landscape is always evolving. Your competitors may adjust their strategies, and new competition may emerge. Stay ahead of the curve by updating your competitive strength grid each quarter.