How to do my first Competitor analysis

Do you know what you can gain from a competitor analysis as a small business owner?

If done right, such an analysis could help you set the direction of your business. You can avoid costly pitfalls. It could help you identify profitable business opportunities that your business might not know.

So there are many reasons why you should invest some of your time to create a competitor analysis, and this article helps you do so.

The article will explain what a competitor analysis is, what it should include, and how having one can improve your business. You will also get access to free hands-on templates that let you create your own competitor analyses with ease.

What can a competitive analysis do for you and your business?

Any business operates in a marketplace where we are dependent on the actions of our competitors. Our competitors introduce new products, change their prices, enter new markets and much more.

Such actions influence our ability to do business. Some activities are to our advantages, such as an increase in price or a withdrawal from a market. Other actions like updated features, new product releases, or price reductions put new constraints on what we can do.

This is why you need competitor analysis. So, you can make informed decisions on how to run your business in an ever-changing market landscape.

Who is the Target Audience for this article?

There is a big difference in how you should address the tasks of conducting a competitor analysis. If you are a larger corporation, then you have access to much more resources and data than smaller or medium-sized businesses have not.

Developed for business owners

This analysis is designed for business owners who manage smaller or medium sizes businesses. Who knows that doing a competitor analysis is most likely a great idea that could help you see where you can get the next competitive advantage.

You just need to know how to do so, and you are probably also looking for tools or templates that make that job as easy as possible.

Do your own analysis

If this is you, them, this article should be what you are looking for. We will combine knowledge on what a competitor analysis is with practical tips on how to create one fast. You even get to download a free PowerPoint and Excel sheet that lets you do your own analysis without starting from scratch.

We will start by letting you know what competitor analysis is and why it is a great idea to make one for your business. Then we will go through the four elements of our competitor analysis framework.

By the end of this article, you will know how to make your own analysis and know-how; the findings in the tool can help you detect signals from your competitors that can affect your options for running your business in the best possible way.

Competitor Analysis: What It Is and How to Conduct One

Competitor analytics is relevant for all types of businesses. But special conditions apply for smaller b2b businesses. As small business owners, we often know most of our competitors reasonably well, as there are probably not many of them. Most likely between 4 to 10 in any national marked or state you operate in.

So the trick as a b2b business is not to look for new competitors but to know what the existing competitors are doing when they compete for the same business as you do. From a management perspective, your goal is to collect as much and as diversified information on your competitor’s actives so you can understand how they conduct their business and how they get their sales.

A shadow dance

This exercise can be metaphorically compared to a shadow dance, as shown below. In a shadow dance, you don’t see the actual source of what creates the shadow. You see the shadow. But you can decode what the shadows mean, which is how the audience perceives the story.

Performing a competitive analysis is a similar experience. Your competitors will never let you in on how their business is run and their commercial objectives. But if you are smart and know what signs to look for, then you might be able to know it anyway.

“Every battle is won before it’s ever fought.

The famous ancient 5. century Chinese philosopher Sun Tzu who wrote the book “The Art of War,” is famously quoted for saying that every battle is won before it is ever fought. By this, he means that if you know your strengths and your competencies, and you know the same for your competitors, you know who will win even before you crash into a (market)battle.

This article contains links to a competitive analysis framework that helps you achieve such a state of mind.

What are the advantages of conducting a Competitor Analysis?

Let’s continue with the Shadow dance metaphor. What do you see when you experience a Shadow dance? You see fractions of a bigger picture that your brain can convert into sense and meaning.

You don’t see the dancer; you see the shadow of what apers to be a dancer.

You do this because you connect the dots The more dots you can connect, the more you understand. It is the same with a competitor analysis. You connect the dots, and based upon this, you are able to understand how they operate and why.

Know how your competitors operate

How do your competitors then operate? Usually, they would be very much like you are. They do business with the same tools as you do. Meaning they nourish leads; they do this with their marketing.

They then collect hot leads. This can be done with marketing automation, cold calling, or other types of actions.

You want to know what they are doing and figure out what they are successful in doing. You cant ask them directly. So you need to collect the traces of how they conduct their business to understand their actions.

Your customer will talk to both you and your competitors, and you need to know as much of what the competitors are doing as possible to tailor your messages to the customers. Also, you would like to know as much or more of your competitor’s business as your customers do. So you engage in more clear messages to them as part of your marketing strategy.

You can put the competitor’s activities into two high-level categories.

Strategic initiatives and operational initiatives

The strategic market initiatives are the ones that answer the Why and What questions. Why are they in the market? What is their goal? In the shadow dance, this is the storyline they are telling.

Operational is the How and What questions. How do they act, and what do they do to achieve the goals they have set out. In the shadow dance, this is how they act and what they do.

Who can benefit from an Analysis framework?

There is another dimension that is also worth paying attention to too. There are different business areas that are interested in your competitor analysis, and for various reasons. You have four internal target groups:

Management: Do we have the right focus and responsibilities

Marketing actions: How are the actors competing for attention. What is their marketing strategy?

Sales Actions: How are their Leeds created., who are their target customers, how are their sales funnel working

Product Actions: Do we need to adjust our product offering. What are our competitors offering? Doe s our product or service match the competition on core features?

So your competition analysis should contain this grid:

The Strategic competitor analysis

As the name suggests, the focus here is on the strategic perspectives of the business. The framework helps you get an overview of how your competitors manage their business.

The management perspective looks into how your competitor can gain or maintain future advantages. The operational level focuses on activities that will ensure that your competitor will gain competitive advantages today.

So both perspectives are relevant for you to have a focus on. But they are getting back to the shadow dancer. The traces that your competitor leaves from a strategic perspective are fewer and more unclear.

So it might be more difficult to make a specific conclusion. But this does not mean that you should leave this area out. Because if you do manage to identify patterns that can give away their strategic directions, you have gained precious insights.

The operational competitor analysis

The operational part of the competitor analysis is more straightforward. It has to do with your competitors leaving much more operational traces that you can pick up on. So it will be easier for you to map your competitors and conclude on your competitor’s operational actions.

This information is relevant for all your stakeholders, but management and your product department should pay the most attention to the findings. Marketing and sales should also be interested in this.

The competitor framework that we use consists of four components that help you understand how and why your competitors operate and assess the directions they are moving towards, and by doing so you will know how to get a competitive edge.

The four levels

The four levels are.

Focus on a competitor or the competition

You might have noticed by looking at the categories they operate on either a single competitor level or the competitive landscape. We mean that they focus on how a specific competitor is performing.

This is the case for Steps 2 and 4. They are both competitor analyses. The last two steps, 1 and 3, are looking at your competitive landscape and maps and benchmarks the actors on core parameters. As such, they are a competitive analysis.

So by going through all of the four fields makes it possible to get an apparent picture of whom you are competing against and how you can take appropriate actions to get the most out of your situation and gain a competitive advantage for your Brand.

Step 1: Who are your competitors?

The first step to getting started with your competitive analysis is identifying your competitors.

You might know this in advance, and if so, you can skip this part. However, please consider if you have all candidates on your list.

The two approaches to identifying your competitors

It makes sense to have two different views on who your competitors might be:

The first step looks at different ways suppliers compete for the same customer. The other angle is to look at competitors from a customer angle.

Different solution, same customer

If you are a marketing agency, you provide services that other business partners could also deliver to the same client.

The SEO agency, the accountant, or the IT development agency might pitch in for the same task as you do.

Direct or indirect competitors

Let’s say that you are Tesla. Your direct customers are other EV manufactures, such as the Volkswagen Group, Fisker Automobiles, etc. Indirect competitors solve the same problem as you, but with a different product. So, e-scooter producers could solve the transport problem for a potential Tesla customer with another product.

As you might have noticed, the type of business you are in will most likely determine which one of the most relevant methods is for you.

Know which one to use

Looking at the same customer, same solution is primarily used by companies that sell and produce B2B products, perhaps as software or as a consultancy service.

B2C companies will probably have more success with the direct competitors and indirect competitors method as it focuses on ways different products can solve the same problem.

Free Excel and Power-Point for download

We have made a free Excel sheet and a PowerPoint presentation that lets you work with these methods as a starting point, as well as the three others that you will also learn how to use in the article.

Step 2: Identifying the Strategic direction

Your competitors all follow a strategy, a business roadmap, or other planning concepts that help them set the direction on where they would like to go. The goal is to define and implement how the company.

Will get success in the future. So the focus is on a high level, and it will involve where their product will be sold, what product they will sell, how they will sell them.

You would like to know this for the same reason as you would like to know their operational strategy. Because what they do affects how you can run your business.

McDonald’s in Greenland?

In Greenland, they have a saying; It is not the polar bear you are watching that will eat you (It is the one you are not watching). And let’s stick with this analogy and stay in Greenland.

Greenland consists of roughly 50.000 inhabitants spread out on five larger villages and a series of smaller settlements. Let’s say that you run the only hamburger franchise in Greenland, and you learned that MaDonnals are looking for a Country Manager in Greenland.

This is a clear signal that they plan to enter the Greenlandic marked. Such a move will directly affect your ability to run your business. You would need to consider your strategy towards such a move.

McDonald’s would be expected to go for the bigger cities first. So is your Strategy to fight them there, or is it to focus on smaller Citys where you know they will never settle?

No matter what you choose, it is clear that the competitor’s move affects the strategic option and choices you make for your business.

So what we want to find the signals that your competitors and potential competitors send that can give indications of their strategic intent. The best sources for collecting such information is:

Know when their actions are of strategic importance

You need to know more about the three areas and what actions to take to know when they make choices of strategic importance.

Follow your competitors on LinkedIn

You should follow their LinkedIn page, and you should check up on their company profile regularly. This will help you know if they make moves that could affect your business. You should look for changes in their organization that could indicate a strategic shift. You are most interested in roles that will help them develop their business. So changes in sales area managers, new developers, or product managers could be indications of shifts in a strategic focus.

Job Portals

Looking into job portals is also a great way to know the competition’s strategic intent. You should pay attention to the types of jobs they are looking for, how many new people they are hiring etc. All of this should be watched from a strategic direction perspective from their side.

News

The last good source is news. You should follow their news streams. It could be their newsletter, search for articles about them. You might be able to make conclusions on their strategic intent based on such sources.

Let’s say that the McDonald CEO was interviewed two years ago in a business paper and told them that the 10% of the future growth of McDonald’s would come from countries where they were not yet established.

Then you would know already then that there is a high likelihood that this perspective would include Greenland too. And this knowledge would give you time to prepare for their entry into your market.

Step 3: The Core market battlefields

So now you know how to map the strategic direction of your competitors and your potential competitors. This is vital knowledge for the future success of your business.

However,you also need to know how to succeed as they operate in the market today.

We have all heard the expression; you need to pick your battles. This means that you must choose when to fight and when to accept things as they are.

The same goes for business. We all make choices. We can choose to make a luxury car. The consequence is that it cannot be sold as a mass-market product because the price is a core parameter in the mass car market segment.

So all of us make business choices. When it comes to your competitors, we need to know which choices they are making that make them unique and if they make different choices.

By doing so, we know what their unique selling points are from a product perspective. But the focus is beyond products; they make sales and marketing choices, distribution choices, and partner choices, which could give them an advantage.

Your first task in this step is to identify the areas where they could be different from you, which significantly impacts your business. The parameters that could be of interest here are:

Find your top 4

Not all seven will be of equal interest to your business, and it is not realistic that you can manage to track all of them. So you have to select the top 4 from the list. The four that is where you know that your competitors have an edge.

Difference

There should be a difference between how the businesses position themselves in the area. Take price; if you all compete on being the cheapest in the market, then it is not a parameter that you can differentiate yourself on, so it makes no sense to monitor it.

Importance

The parameter should be important to either you or your customers. If your product is a Software As A Service product that you use via a browser, it is globally distributed from day one. And the same goes for your competitors. So this disqualifies distribution as a significant parameter to monitor.

Free Competitor analysis template

Once you have found your four core parameters, then you should map them in two grids. This can be done in the Excel sheet that we have made available for you in this download.

The corresponding PowerPoint lets you know how to address the findings from your matrix.

The tools make it possible to spot how they implement their sales and marketing strategies. From this knowledge, you should also know where you will have specific advantages that you can pursue. That would be areas where you are stronger or where your competitors are not paying attention.

The PowerPoint presentation will give you tools on how to do so.

Step 4: Your competitor’s operational actions

The last step focuses once more on your single competitors. Here the idea is to track and monitor the activities that make you learn how their business is run on a daily basis. You need to monitor sources that can give you such information. The most valuable are:

The Excel sheet and the PowerPoint presentation that you can download lets you know how to do this and also make it easy for you to decode actions that you see what their actions could mean for your business.

How often should I update my Competitive Analysis?

It can be time-consuming tasks to fill out the tool for the first time, and a natural question would then be. How often do I need to update the information that I have just submitted in my competitive analysis?

In general, you can say that your competitors are more likely to change operational tactics than strategic. So you can expect the last two elements to be the ones that require the most frequent updates.

Make updates a part of your routine

A good way to ensure that your competitor analysis is updated is to make it a recurring task in your calendar. You could notify yourself every month to check that your finding is still valid. If all is unchanged, it will not require much time for you to do so. And you will have confidence that you are not at any unknown competitor risk.

However, if you start to see new action from how your competitors start to act; then, there is a great chance that you might need to adjust the way your business is run.

And you would like to know this as soon as possible, so you have the best foundation to adjust to a potential new competitive reality that change in your competitor’s actions has created.

Remember the saying from Greenland. It is the polar bear that you are not watching that will kill you.

Conclusion

As you can see, the competitor analysis approach that you have just gone through gives you findings on four core elements of how your competitors operate and give you insight on how you can achieve a competitive advantage and industry trends.

The information and knowledge that you have acquired by reading this article will only be of value to you if you act on it. The best way for you to do so is to build your own competitor analysis. Your first action should be to download the templates that we have made to make the competitor analysis your own.

Please share your thoughts and reflections

We hope you have enjoyed reading on how to make a competitor strategy. It does not have to be complex and difficult. You have already taken the first step by reading the article.

We would like to get feedback from you on our findings. Are the templates of value to you? What are we missing, and did you discover how your competitors operate that made you change how your business is run.

Please share your thoughts with the other readers.

About the author

Per Damgaard Husted wrote the article. Per is the CEO and founder of Cognifirm. Per has more than 20 years of management experience and is also the author of the book “AI for CEOs“. The book identifies areas where AI can create new business for you. Cognifirm is an automation tool for managers and marketeers that automate manual tasks.

Cognifirm has a Competitor surveillance feature that can help perform many of the tasks you have learned in this article. Features include auto-monitoring your competitor’s site, social media platforms, and much more.