The Competitive Analysis section of your business plan is devoted to analyzing your competition--both your current competition and potential competitors who might enter your market. Every business has competition.
For example, a competitor that is focused on reaching short-term financial goals might not be willing to spend much money responding to a competitive attack. Rather, such a competitor might favor focusing on the products that hold positions that better can be defended.
On the other hand, a company that has no short term profitability objectives might be willing to participate in destructive price competition in which neither firm earns a profit.
Competitor objectives may be financial or other types. Some examples include growth rate, market share, and technology leadership.
Goals may be associated with each hierarchical level of strategy - corporate, business unit, and functional level. The competitor's organizational structure provides clues as to which functions of the company are deemed to be the more important. For example, those functions that report directly to the chief executive officer are likely to be given priority over those that report to a senior vice president.
Other aspects of the competitor that serve as indicators of its objectives include risk tolerance, management incentives, backgrounds of the executives, composition of the board of directors, legal or contractual restrictions, and any additional corporate-level goals that may influence the competing business unit.
Whether the competitor is meeting its objectives provides an indication of how likely it is to change its strategy.
Competitor's Assumptions The assumptions that a competitor's managers hold about their firm and their industry help to define the moves that they will consider. For example, if in the past the industry introduced a new type of product that failed, the industry executives may assume that there is no market for the product.
Such assumptions are not always accurate and if incorrect may present opportunities. For example, new entrants may have the opportunity to introduce a product similar to a previously unsuccessful one without retaliation because incumbant firms may not take their threat seriously.
Honda was able to enter the U. A competitor's assumptions may be based on a number of factors, including any of the following: Competitor's Resources and Capabilities Knowledge of the competitor's assumptions, objectives, and current strategy is useful in understanding how the competitor might want to respond to a competitive attack.
However, its resources and capabilities determine its ability to respond effectively. A competitor's capabilities can be analyzed according to its strengths and weaknesses in various functional areas, as is done in a SWOT analysis.
The competitor's strengths define its capabilities. The analysis can be taken further to evaluate the competitor's ability to increase its capabilities in certain areas.
A financial analysis can be performed to reveal its sustainable growth rate. Finally, since the competitive environment is dynamic, the competitor's ability to react swiftly to change should be evaluated.
Some firms have heavy momentum and may continue for many years in the same direction before adapting. Others are able to mobilize and adapt very quickly. Factors that slow a company down include low cash reserves, large investments in fixed assets, and an organizational structure that hinders quick action.
Competitor Response Profile Information from an analysis of the competitor's objectives, assumptions, strategy, and capabilities can be compiled into a response profile of possible moves that might be made by the competitor.In marketing competitor analysis, you assess the strengths and weaknesses of your rivals and it is a critical part of your own marketing strategy.
The competitor analysis section can be the most difficult section to compile when writing a business plan because before you can analyze your competitors, you have to investigate them. Here's how to write the competitor analysis section .
Learn from competitor strengths, take advantage of competitor's weaknesses, and apply the same analysis to your own business plan. You might be surprised by what you can learn about your business.
WHAT TO EXPECTAn in-depth investigation and analysis of your competition is one of the most important components of a comprehensive market analysis.A competitive analysis allows you to assess your competitor's strengths and weaknesses in your marketplace and implement effective strategies to improve your competitive advantage.
The competitor analysis section can be the most difficult section to compile when writing a business plan because before you can analyze your competitors, you have to investigate them. Here's how to write the competitor analysis section of the business plan.
A marketing competitor analysis is a critical part of your own marketing strategy. By doing the analysis, you can formulate how to run your business. This can be seen as a reactive approach. That is to say that you are basing your strategy as a reaction to how your competitor will run his company.