A good and comprehensive competitive analysis is required to ensure that your business plan is realistic and not deemed to be too optimistic. Its good to be ambitious but your ambition should be footed based on reality. Therefore, in order to survive, here are some of the aspect you should look into while doing your competitive analysis.
By understanding who and what your competitors are, you can reduce the risk that your business might fail. In a competitive analysis, you identify your competitors and analyze how difficult it will be to move into the market alongside of them. You look at their strengths and weaknesses, what sets your business apart from theirs, and the threats they pose. This is essential when you start with 0% market share, you need to convince the market that your products/services is worth to give a chance to.
First, Identify your competitors
Competitors can be organizations within the industry that produce similar products or services. Or they can be companies that produce products or services that fall into another industry category, but solve the same consumer problem as your business. When identifying your competitors, include all organizations that solve the same problem that you intend to solve.
For each competitor, you should gather information (as complete as possible) on:
- Products and services
- Strengths and weaknesses
- Market share
- Marketing strategies
- Key success factors
- How or what they are best known for
How to distinguish your business from others
Once you’ve discussed who your competitors are, you need to specifically show what differentiates your product or service from their offerings. Explain how you are responding to a customer need in a new and unique way, it is the only way you can gain advantage in the market. For example, your competitive advantage may be that your product is much easier to use than similar offerings currently on the market. Or your service may help client firms save more money or achieve greater efficiencies than your competitors’ services do. Or maybe, your business venture shall focused on the portion of the market which is usually ignored by your competitors.
Assessing threats from the competition
As part of your competitive analysis, assess potential challenges from your competitors.
For each competitor, answer these questions:
- Does your competitor enjoy strong brand recognition of its products?
- Will it aggressively block the entrance of a new rival?
- Will it recognize your special differentiating attributes and appropriate them for its own products or services?
When you understand how much of a threat your competitors are to your venture, you can develop strategies for dealing with them. You can also figure out how to win business from weak competitors and protect your business from strong ones. Once you gain market share, you need to assess on the threats from your competitors to make sure that you won’t go under.
The market analysis focuses on your target market which are the people or companies that will choose to purchase your product or service because you meet a need for them better than your rivals do.
Here is where you answer the questions:
- Is there an opportunity within this market?
- Can we capitalize on this opportunity?
- What can we do better that our competitors?
Assess the market’s size and growth
Indicate how large the market for your offering is and how fast it is growing. These are two key considerations for any business looking to enter a market or market niche. After all, there isn’t any point to starting or expanding a business unless you have identified a market for it.
The questions you need to answer are:
- Is there room for your presence in that market?
- Can the market expand to include you?
- Will market demand for your products or services grow?
Support any claims you make about market growth and demand with realistic and verifiable information.
Define your target market
Your next step is to define your target market: the individuals or companies that will purchase your offering. Describe:
- Who they are
- Where they are from
- What characteristics describe them
Consider the target market from different points of view, which could include:
- Geographic location or segmentation (national, state, suburban, city, neighborhoods)
- Demographic features (age, gender, race, income level, occupation, education, religion)
- Behavioral factors (customers’ attitudes and responses to types of products)