The competitive analysis, determines strengths and weaknesses of competitors within the chosen market. With this evaluation, businesses can establish:
i) what makes the product or service unique
ii) what gaps are there in the market, and
iii) what strategies will generate competitive advantage.
The six steps used by Vidvox to develop competitive analysis include:
- Identify current and potential competition. This is done from customer’s point of view and from the business’ perspective.
- Determining five strategic areas of competitiveness. For example, these could be chosen from durability, quality, marketing, selling capability, distribution or reach, service quality, and price.
- Create a competition matrix. Down left column write names of five major competitors. Across the horizontal axis, list five strategic areas in which you are competitive filling each box. Evaluate the strengths and weaknesses of each competitor in relation to the associated strategic area.
- One may need to expand selected areas and create separate matrices for those areas that contain multiple variables.
- Reviewing the matrices to determine which areas your business is most vulnerable. One could see price as the benchmark in a competitive product; its position could be threatened if quality is compromised.
- Determining the gaps in the competitive matrix. These represent strategic opportunities for the company.
A competitive analysis is critical to business strategy. It provides an analytical tool to evaluate which strategic areas can offer best value to target customers. It also helps determine the company’s position in the market.