Competition AnalysisCompetition analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats. Profiling coalesces all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment.[1] Competitor analysis is an essential component of corporate strategy. It is argued that most firms do not conduct this type of analysis systematically enough. Instead, many enterprises operate on what is called “informal impressions, conjectures, and intuition gained through the tidbits of information about competitors every manager continually receives.” As a result, traditional environmental scanning places many firms at risk of dangerous competitive blindspots due to a lack of robust competitor analysis

Competitor array

One common and useful technique is constructing a competitor array. The steps include:

  • Define your industry – scope and nature of the industry
  • Determine who your competitors are
  • Determine who your customers are and what benefits they expect
  • Determine what the key success factors are in your industry
  • Rank the key success factors by giving each one a weighting – The sum of all the weightings must add up to one.
  • Rate each competitor on each of the key success factors
  • Multiply each cell in the matrix by the factor weighting.

This can best be displayed on a two dimensional matrix – competitors along the top and key success factors down the side. An example of a competitor array follows:

Key Industry
Success Factors
WeightingCompetitor
#1 rating
Competitor
#1 weighted
Competitor
#2 rating
Competitor
#2 weighted
Extensive distribution.46
2.4
3
1.2
Customer focus.34
1.2
5
1.5
Economies of scale.23
.6
3

.6
Product innovation.17

.7

4
.4

Totals1.0204.9153.7

In this example competitor #1 is rated higher than competitor #2 on product innovation ability (7 out of 10, compared to 4 out of 10) and distribution networks (6 out of 10), but competitor #2 is rated higher on customer focus (5 out of 10). Overall, competitor #1 is rated slightly higher than competitor #2 (20 out of 40 compared to 15 out of 40). When the success factors are weighted according to their importance, competitor #1 gets a far better rating (4.9 compared to 3.7).

Two additional columns can be added. In one column you can rate your own company on each of the key success factors (try to be objective and honest). In another column you can list benchmarks. They are the ideal standards of comparisons on each of the factors. They reflect the workings of a company using all the industry’s best practices.