A competitor analysis framework—also called a marketanalysis framework or competitor analysis model—is generally defined as a structure that business professionals can use to research and evaluate their competitors. In other words, the art of knowing your enemy. Vital information, such as a competitor’s business strategies, products, offerings, marketing efforts, sales, and the like, into an organized visual model that’s easy to digest at a glance.
There are a ton of competitor analysis tools
out there to help you quickly and efficiently assess how you stack up against
your top competitors. And with the right tools on deck, one can spend less
effort trying to dig dirt on the competitors and more time actually marketing.
A Competitive analysis is a central part of a
marketing plan. Information gathered from a competitive analysis helps one
identify what makes the product or service unique from that of your
competitors. Using that data one can develop strategies to attract the target
market
There are several frameworks you can use for competitive analysis in marketing. For example, If you’re a digital marketing agency aiming to get a sense of a new client’s competitors, your needs may be different from an in-house marketing director.
List of Digital Media competitor
analysis tools include :
- Competitor analysis tools for
social media
- Competitor analysis tools for Search
Engine Optimization (SEO)
- Competitor analysis tools for
content
- Competitor analysis tools for
email, ads and industries
By tapping into publicly available social conversations, you can quickly find out how consumers feel about your competitors’ products and services, as well as examine your own share of voice in your industry.
Major tools for competition analysis
under Strategic Management are SWOT analysis, Porter’s 5 Forces analysis, BCG
Growth Share Matrix, Perceptual Mapping
The output from the studies of digital world are to be integrated into the other tools before a final view is taken under competition management
A detailed
discussion on the major Models/Frameworks that find application in competitor
profiling are given below:
Talk about an old faithful. The SWOT analysis has been around for decades,
and for good reason. It organizes a company’s information into the following
categories:
- Strengths: internal factors that provide benefits, like a
highly trained staff.
- Weaknesses: internal factors that cause disadvantages,
like a small marketing budget.
- Opportunities: external factors that pose opportunities, like
high demand for a product offering.
- Threats: external factors that pose challenges, like an
increase in the cost of supplies.
We recommend using SWOT analysis best practices to hone in on the strengths or
weaknesses of your competitors. This is especially helpful for identifying
potential competitive advantages your business may have over others, as well as
finding areas for improvement.
2 Porters 5 Forces Analysis
Michael Porter
in Porter’s
Five Forces Model has assumed that the competitive environment within
an industry depends on five forces- Threat of new potential entrants, Threat of
substitute product/services, bargaining power of suppliers, bargaining power of
buyers, Rivalry among current competitors. These five forces should be used as
a conceptual background for identifying an organization’s competitive strengths
and weaknesses and threats to and opportunities for the organization from it’s
competitive environment. Five
Forces analysis is frequently used to identify an industry's structure to
determine corporate strategy.
First described by Michael Porter in his classic
1979 Harvard Business Review article, Porter’s insights
started a revolution in the strategy field and continue to shape business
practice and academic thinking today. A Five Forces analysis can help companiesassess industry attractiveness, how trends will affect industry competition,
which industries a company should compete in—and how companies can position
themselves for success.
The five forces are:
1. Supplier power. An assessment of how easy it is for
suppliers to drive up prices. This is driven by the: number of suppliers of
each essential input; uniqueness of their product or service; relative size and
strength of the supplier; and cost of switching from one supplier to another.
2. Buyer power. An assessment of how easy it is for buyers to
drive prices down. This is driven by the: number of buyers in the market;
importance of each individual buyer to the organisation; and cost to the buyer
of switching from one supplier to another. If a business has just a few
powerful buyers, they are often able to dictate terms.
3. Competitive rivalry. The main driver is the number and capability
of competitors in the market. Many competitors, offering undifferentiated
products and services, will reduce market attractiveness.
4. Threat of substitution. Where close substitute products exist in a
market, it increases the likelihood of customers switching to alternatives in
response to price increases. This reduces both the power of suppliers and the
attractiveness of the market.
5. Threat of new entry. Profitable markets attract new entrants, which
erodes profitability. Unless incumbents have strong and durable barriers to
entry, for example, patents, economies of scale, capital requirements or
government policies, then profitability will decline to a competitive rate.
Arguably, regulation, taxation and trade policies make government
a sixth force for many industries, normally considered with the threat of new
entry.
Competitive
analysis approach to assist with strategy selection has been developed by Michael
Porter (1980, 1985) and his associates. This approach assumes that byanalyzing the forces that shape an industry, one can predict the general level
of profits throughout the industry and the likely success of any particular
strategy for a strategic business units. According to Porter, hypothesizes that
five key forces shape an industry: relative power of customers, relative power
of suppliers, threat of substitute products, threat of new entrants, and the
amount of rivalrous activity among the players in the industry. Harrigan (1981)
has argued that "exit barriers" are a sixth force influencing success
in some industries.
There
are two main propositions in the competitive analysis school: (1) the
stronger the forces that shape an industry, the lower the general level of
returns in the industry; and (2) the stronger the forces affecting a
strategic business unit, the lower the profits for that unit.
The
purpose of five forces analysis is to identify how much profit potential exists
in an industry. To do so, five forces analysis considers the interactions among
the competitors in an industry, potential new entrants to the industry,
substitutes for the industry’s offerings, suppliers to the industry, and the
industry’s buyers (Porter, 1979). If none of these five forces works toundermine profits in the industry, then the profit potential is very strong. If
all the forces work to undermine profits, then the profit potential is very
weak. Most industries lie somewhere in between these extremes. This could
involve, for example, all five forces providing firms with modest help or two
forces encouraging profits while the other three undermine profits. Once
executives determine how much profit potential exists in an industry, they can
then decide what strategic moves to make to be successful. If the situation
looks bleak, for example, one possible move is to exit the industry.
Five forces analysis helps organisations to understand the factorsaffecting profitability in a specific industry, and can help to inform
decisions relating to: whether to enter a specific industry; whether to
increase capacity in a specific industry; and developing competitive
strategies.
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Actions to take / Dos |
Actions to Avoid / Don'ts |
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Alternatives to Porter's Five Forces
While Porter's Five Forces is an effective
and time-tested model, it has been criticized for failing to explain strategic
alliances. In the 1990s, Yale School of Management professors Adam
Brandenburger and Barry Nalebuff created the idea of a sixth force,
"complementors," using the tools of game theory.
In Brandenburger's and Nalebuff's model,
complementors sell products and services that are best used in conjunction with
a product or service from a competitor. Intel, which manufactures processors,
and computer manufacturer Apple could be considered complementors.
Additional modeling tools are likely to
help round out your understanding of your business and its potential. A value
chain analysis helps
companies understand where their best productive advantage lies, while
the BCG matrix helps companies identify which
products are likely to benefit the most from increased investment.
Porter(1990) hypothesised in his text
"The Competitive Advantage of Nations", why some nations were more
competitive than others. As well as being able to successfully manoeuvre
through the environment he identified that the foundation of success lay in the
"diamond" of "home" advantage. To successfully launch an
international challenge he identified four "home" prerequisites - the
maximum use of endowed resources (natural and human) the forming of domestic
networks to fully exploit these resources, domestic demand (which may involve
the invitation to world class players to help develop these resources in
country) and finally, an industry and environmental structure (the latter provided
by Government) in order that these forces can thrive. Unfortunately, in many
developing nations, the first stage only has been reached and even then much of
the added value is exported. Thankfully this is not the case in other LDC's.
1. Porter, M.E. "Competitive Strategy". New York: The
Free Press, 1980.
2. Porter, M.E. "The Competitive Advantage of Nations".
New York: The Free Press, 1990
3. Strategic Group analysis
Strategic group analysis does exactly what it says—it
organizes competitors into groups based on similarity of strategy.
There’s a wide range of ways you can group companies.
Perhaps you’d like to group competitors by their marketing tactics, pricing strategies, or range of
offerings. Don’t forget to place your own company into the analysis to get a
better sense of who you’re most closely competing with and gain a better
understanding of the impact different strategies provide.
For instance, if you discover that the top three most
successful companies in your niche are all grouped into the same pricing
strategy, it may be time to see if doing the same will benefit your own
business.
4. Growth-Share
matrix
The growth-share matrix classifies your company’s
products against the competitive landscape. This is an example of a competitor
analysis that’s especially useful for big organizations with a large portfolio
of products or offerings.
A growth-share matrix is a chart divided up into four
quadrants to classify products or business units into:
- Stars: products with high growth and high market share. Invest more in these.
- Question marks: products (usually new ones) with high growth, but
low market share. Decide whether to invest more (if convinced it will
become a star) or give up on it.
- Cash cows: products with low growth but high market share
that are usually used to fund investment in stars.
- Pets: products with low growth and low market share.
Decide whether to reposition or give up on it.
Using this market analysis framework can help determine
what’s worth giving priority to, what to reposition, and what to ditch.
5. Perceptual Mapping
Perceptual mapping, also known as positioning mapping,
visualizes the perception of a company and its competitors on a plot
graph.
To use this competitive analysis framework, choose two
factors to use as the basis for comparison, like perceived quality and price.
Then, plot where your business and your competitors fall on the spectrum of
those two factors.
Perceptual mapping is great for obtaining a birds’ eye
view of how customers perceive your company in relation to your competitors.
Armed with that knowledge, your company can identify market trends and gaps, as
well as make adjustments to improve its existing positioning strategy. Smart
and strong.
6. Business Model
canvas
This framework strips a business model down to its bare
bones, improving clarity and focus on the most important factors.
A business model canvas is a single analysis that’s
divided up into nine elements:
- Customer segments: Who are the customers?
- Value
propositions: Why do
customers buy/use the proposition?
- Channels: How are propositions promoted, sold, and
delivered?
- Customer
relationships: How is the
customer treated throughout their buyer journey?
- Revenue
streams: How is
revenue earned?
- Key activities: What unique strategies does the business use to
deliver its propositions?
- Key resources: What unique strategic assets are required to
compete?
- Key
partnerships: What can
the business outsource so it can focus on its key activities?
- Cost structure: What are the major cost drivers and how are they
linked to revenue?
7. Customer Journey Map
A customer journey map, also known as a user journey map,
is a visual story of customers’ interactions with a brand.
First, all customer channels are mapped out—i.e., a
company’s website, social channels, paid media, newsletters, email support,
phone services, and face-to-face services (if the brand has brick-and-mortar
locations).
Customer journeys can then be mapped across these
channels for each buyer persona. The customer experience at each
touchpoint should be tacked on to the map, including key engagement metrics the customer hits. Below that,
add how the brand responds to address the customers’ concerns. Finally, jot
down what opportunities exist to improve the experience at each channel.
Utilizing customer journey maps can help gain insights
into common customer pain points and how to improve them—not only within your
own company, but for your competitors’ customers as well.
Those who read this, also read:
1. B C G Matrix
2. G E Matrix
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