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- iHaveNet.com: Small Business Guide
Real Small Business
For your small business to succeed, you need to know almost as much about your competitors as you do about your own company and customers. Unfortunately, many small business owners make the mistake of waiting until a competitor has opened up shop across the street and is cutting into profits to find out who and what they're up against.
A competitive analysis allows you to identify your competitors and evaluate their respective strengths and weaknesses. By knowing the actions of your competitors, you will have a better understanding of what products or services you should offer; how you can market them effectively; and how you can position your business.
Competitive analysis is an ongoing process. You should always be gathering information about your competitors. Look at their Web sites. Read their product literature and brochures. Get your hands on their products. See how they present themselves at trade shows. Read about them in your industry's trade publications. Talk to your customers to see how they feel about competitive products or services.
Here's more about how to analyze your competitors:
- Step 1: Identify your competition
- Step 2: Analyze strengths and weaknesses
Step 1: Identify your competition
Every business has competitors, and you need to take the time to discern who your customers can approach to get a product or service that fills the same need as yours does. Even if your product or service is truly innovative, you need to look at what else your customers would purchase to accomplish this task. For example, you may be opening a Web site that offers online Bingo. Your competition would be other Bingo sites, other Web gaming sites, the Bingo hall down the street, and any other businesses that are competing for the same leisure-time dollars.
Begin by looking at your primary competitors. These are the market leaders, the companies who currently dominate your market. They are probably the ones who you find yourself bumping up against in your search for new customers. If you're a florist, it would be other florists in your neighborhood. If you're a computer consultant, it would be other consultants with the same specialty.
Next, look for your secondary and indirect competitors. These are the businesses who may not go head-to-head with you, but who are targeting the same general market. Sticking with the florist example, it might be a small local roses-only store, a national floral delivery service, or the flower/plant department of your local supermarket or discount store..
Finally, look at potential competitors. These are companies who might be moving into your market and who you need to prepare to compete against. For example, you might have an independent frozen yogurt stand; you will need to prepare to compete against national frozen yogurt franchises, even if they are not yet in your market.
Step 2: Analyze strengths and weaknesses
After you've figured out who your competitors are, determine their strengths and find out what their vulnerabilities are. Why do customers buy from them. Is it price? value? service? convenience? reputation? Focus as much on "perceived" strengths and weaknesses as you do on actual ones. This is because customer perception may actually be more important than reality.
It's a good idea to do this strengths/weaknesses analysis in table form.
Write down the names of each of your competitors. Then set up columns listing every important category for your line of business (price, value, service, location, reputation, expertise, convenience, personnel, advertising/marketing, or whatever else is appropriate to your type of company). Once you have this table set, rate your competitors, and be sure to put in comments as to why you've given them that rating. You might even want to put strengths in red and weaknesses in blue, so you can tell at a glance where each competitor stands.
Step 3: Look at opportunities and threats
Strengths and weaknesses are often factors that are under a company's control. But when you're looking at your competition, you also need to examine how well prepared they are to deal with factors outside their control. These are called opportunities and threats.
Opportunities and threats fall into a wide range of categories. It might be technological developments, regulatory or legal action, economic factors, or even a possible new competitor. For example, a photo developing store needs to know how well its competitors are prepared to deal with the advent of digital photography. Or a company that sells over the Web should analyze how its competitors are prepared to deal with online security issues.
Again, an effective way to do this is to create a table listing your competitors and the outside factors that will impact your industry. You will then be able to tell how they can deal with opportunities and threats.
Step 4. Determine your position
Once you figure out what your competitors' strengths and weaknesses are, you need to determine where to position your company vis a vis the competition. Some of this may be obvious from the results of your analysis, but it also pays to take a hard look at how your business operates.
One of the most effective ways to do this is to create a strengths/weaknesses opportunities/threats analysis of your business. Rank your company in the same categories that you ranked your competitors. This will give you an even clearer picture of where your business fits in the competitive environment. It will also help you determine what areas you need to improve, and what characteristics of your business you should take advantage of to gain more customers.
The bottom line: look for ways to leverage your strengths and take advantage of your competitors' weaknesses.
Small Business Guide
- Starting Up Your Business
- Coming Up With a Winning Business Idea
- Common Startup Mistakes
- The New Rules for Startups
- Business Incubator FAQs
- Naming Your Business
- Researching Your Business
- Your Personal Savings
- Registration, Licenses, and Permits
- Getting a Tax ID Number
- Fast-Growth Startup Resources
- Structuring Your Business
- Overview: Corporations
- State Offices of Incorporation
- Incorporate Out of State?
- Writing a Partnership Agreement
- Choosing a Board of Directors
- Basics of a C Corporation
- Basics of an S Corporation
- Basics of an LLC
- Basics of a Sole Proprietorship
- Basics of a Non-Profit Corporation
- Basics of a Professional Corporation
- Basics of a General Partnership
- Basics of a Limited Partnership
- Your Company's Public Relations
- Elements of a Successful Public Relations Campaign
- How to Use Your Press Coverage Effectively
- Press Releases
- How to Write a Successful Press Release
- Sample Product/Service Press Release
- Sample Commentary Press Release
- Sample Event Press Release
- Sample Tips Press Release
- Sample Personnel Press Release
- Effective Competitive Analysis
- Managing Purchasing to Maximize Cash Flow
- Top Six Pricing Mistakes Businesses Make
- How to Avoid Lowering Your Prices
- Bidding Basics
- Hiring Staff
- Creating an Effective Job Description
- Do You Know How to Pick Them?
- Little-Known Hiring Resources
- Classifying Contract Workers
- Tips for Successful Interviewing
- What You Can't Ask in a Job Interview
- New Hire Paperwork
- Small Business Insurance
- Types of Insurance for Small Businesses
- Small Business Insurance FAQs
- Insurance Resources for Small Businesses
- Home Office Insurance: Myths & Realities
- Small Business Resources
- Government Resources for Small Business on the Web
- Resources for Women Entrepreneurs
- Fast-Growth Startup Resources
- Small Business Security Resources
- Taking Time Off
- Your Pre-Vacation Checklist
- How to Take a Vacation
- Learning to Delegate
- Getting Away When You Can't Get Away
- Preparing for Tax Season
- Year-End Planning Tax Savers
- 10 Ways to Pay Less in Tax
- 25 Common Business Deductions and Expenses
- Avoid These Common Errors and Audit Triggers
- Understanding the Home Office Deduction
- Corporate Income Taxes Primer
- Employment Taxes Primer
- Sales Tax Primer
- Sole Proprietorships and Partnerships Tax Primer
- How to Get a Filing Extension
- Year-End Reconciliation
- Getting the Most from Your Accountant
- Developing Accurate Financial Projections
- Cash Flow
- 10 Ways to Help Increase Your Cash Flow
- Cash vs Accrual Accounting
- Bookkeeping and Record Keeping Basics
- Quick Ways to Get Through a Cash Crunch
- Projecting Cash Flow
- Cash Flow Triage
- Getting Funding
- Cash Flow Through Factoring
- Small Business Investment Corporations (SBIC)
- Traditional Funding Sources
- Non-Traditional Funding Sources
- Your Company's Credit
- How to Read a Business Credit Report
- Credit Terms Glossary for Your Small Business
- How to Protect and Improve Your Business Credit Rating
- Give Your Business the Financing Edge
- Employee Compensation
- Employee Benefits
- Bonuses: How To Be Fair
- Workers' Compensation Q&A
- Keeping Workers' Compensation Costs Down
- Payroll Management Choices
- Key Elements of Payroll
- Working with a Payroll Service Provider
- How to Create a Business Plan
Starting Your Own Business - Effective Competitive Analysis
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