Strategic planners consider external factors, such as competitive environment, in addition to internal factors when crafting strategic plans.It involves taking stock of the number and nature of competitors presenting a direct or indirect threat to a business. Competitive analysis can provide aspiring entrepreneurs with a clearer understanding of the marketplace conditions in an industry they are considering breaking into, or help established businesses refine their strategic directions. Understanding the advantages of competitive analysis in strategic planning can take your strategic plans to the next level.
Competitive analysis allows strategic planners to develop matrixes for spotting unserved or underserved gaps in the market. A competitor map is a strategic planning tool that lays out competitors in terms of their unique service models — identifying where they fit on a matrix with extremes ranging from high price to low price, high quality to low quality and high customization to low customization. A competitor map may reveal, for example, that most competitors in the local area charge premium prices for higher quality products, while the bargain segment of the market remains underserved.
Geographic competitor maps can be helpful when looking for market gaps for businesses like retail stores or other brick-and-mortar establishments. A geographic map of restaurant competitors,.
Direct competitors in rapidly developing industries, especially technology, engage in a continual race to develop new blockbuster products. In these highly competitive industries, companies can gain a tremendous advantage by learning what their competitors are developing or improving for future product releases. Knowing the directions competitors plan to take for their product lines can help a company develop products that trump competitors in terms of price, functionality or quality. Be careful not to cross legal boundaries into the world of industrial espionage; there are legal and safe ways to stay alerted to competitors’ new product developments without prying into private information.
Competitive analysis can reveal broad trends in the marketplace, again providing the advantage of being able to spot opportunities for differentiating your products and services. Sometimes going against the grain in an industry can attract a small but highly loyal counter-culture market segment. A small record label, for example, may discover that every single one of its competitors has switched to exclusively releasing music digitally and on CDs, which could open up a small unserved market for vinyl LPs.
Marketers in the 21st century focus on selling “benefits and value” rather than “products and services.” Because of this, staying on top of competitors’ marketing strategies can provide the same advantages as analyzing their product development initiatives. What consumers think they are buying can be more important than what they are actually buying, and it is advantageous to know what consumers think about your competitors’ brands.
Consider the case of a software developer. A software developer may know what products his competitors are selling, but it would be useful for him to know that one competitor is marketing products touted as the “easiest to use” in the market. The developer could counter this marketing tactic by revamping his own software’s user interfaces and giving out free trials to prove his products are actually more user-friendly.