Marketing Center

Keys to competitive analysis

Competitive analysis can help you shore up the barriers that can prevent competition from entering your market, show you weaknesses that can be exploited and position you for long-term success.

Published: November 01, 2010
Updated: July 19, 2017

You know the ins and outs of your business, but do you know how your business compares to the competition? Understanding your business’s industry and overall market environment can help boost your potential.

Look beyond trends and drill deeper into the analysis of the competitive landscape to help shore up barriers that may minimize new competitors entering your market and position your business for long-term success.

There are many ways to approach competitive analysis. Some business owners research other businesses to determine how their own business is stacking up against competitors, while others use it to find areas of opportunity where the competition is falling short. Either way, understanding what other businesses are and aren’t doing can help your business meet the needs of the customer, and ultimately provide current (and maybe even new) customers an improved product or service.

Harness the power of the Five Forces

Consider using the Five Forces model, as defined by Harvard Business School Professor Michael E. Porter, to help you complete a competitive analysis. Within each area of the Five Forces Model, you’ll find specific points that can help you map out and guide your analysis. The model includes:

  • Rivalry among existing competitors

  • The threat of new business

  • Bargaining power of buyers

  • Bargaining power of suppliers

  • The threat of substitute products or services (including technological change and developments).

But how do you implement Porter’s method?

Know your competition

Research the number of competitors you have — locally, at the state level, and nationally — to determine your industry’s impact and size. Other things to consider include:

  • Industry growth trends

  • Common company goals

  • Approaches to competition

Track business changes

While it may be nearly impossible to keep up with every single business, following new businesses that may directly impact you locally or at a product- or service-specific level can be beneficial.

You’ll also want to keep tabs on changes in laws and government regulations, as they may lead to additional expenses and changes in your business plan.

Keep up with trends

Like the fashion industry, trends come and go: what works one year may not work the next. Stay on top of the latest industry so you can develop a relevant business model.

Trend changes may also impact your cash flow. New trends mean higher demand, so understanding what’s on the rise can help you switch to cheaper to suppliers or manufactures, which can help your business save money.

Embrace the power of purchase

Learn what your competitors’ customers buy and why can help you understand their unique product or service value. Other items to recognize are:

  • Size/number of buyers: Are they a high volume store?

  • Product/service differentiation: What sets them apart from their competition?

Build brand standards

Another thing to keep in mind is your competitor’s mission and how they achieve it. Are they philanthropic? Do they contribute to their local neighborhood? Consider the following to help you determine how their business impacts their customers — and how you can shape your business to do the same:

  • Brand reputation: How do their customers perceive them?

  • Size/number of suppliers: Are they local? Where are their manufacturers?

  • Cost of switching suppliers: How much would it cost you to go local or switch manufacturers?

  • Relationships with customers: How do they engage with their customers?


For more on the Five Forces model, please visit the Institute for Strategy and Competitiveness website.