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Understanding the strengths and weaknesses of your competition is critical to business survival and success. While you don't have to hire an ex-CIA operative to do this, you do need to assess the competition thoroughly, methodically and regularly – even if you run a small business.
Competitive analysis can be incredibly complicated and time-consuming, but it doesn't have to be. Let's look at a basic process for identifying and assessing the strengths and weaknesses of your competition.
Create Basic Profiles
The process starts with developing a basic profile for each of your current competitors. First identify them. For example, if you run a bookstore, you may have three competing bookstores in your town. Major online bookstores are also competitors, but thoroughly analyzing those companies will be less valuable unless you decide you want to sell books online, too. Rather, stick to those companies you directly compete with.
Once you identify your main competition, answer these questions about each company. Be objective. While it's easy to identify weaknesses in your competition, it’s more difficult to recognize where they may currently outperform you:
While the above may seem like a lot of information to compile, in reality the process is fairly easy. You should already have a feel for strengths and weaknesses based on what your customers tell you and why some of your customers take their business elsewhere.
You also have other options:
Analyze competitor's advertising not only to understand their objectives but also to understand how they perceive you. If they focus on low prices, for instance, they may feel you are vulnerable based on price. Or, if they focus on promoting outstanding service, they may feel your business provides relatively poor service.
Competitive analysis does more than help you understand your competition; it can also help you identify changes you should make to your business strategies. Learn from competitor strengths, take advantage of competitors' weaknesses, and apply the same analysis to your own business.
Identify Potential Competition
It can be tough to predict when and where new competitors may pop up. For starters, do regular Internet searches about your industry, your products, your services and your target market.
There are other ways to predict when competition may enter your space. Turn an analytical eye to your business and your industry. If the following conditions exist, competition is likely to pop up sooner rather than later:
If serving your market seems easy, assume competitors will enter your space in an attempt to siphon off some of your customers and your profits.