Know Your Competition Know Your Competition

Understanding the strengths and weaknesses of your competition is critical to business survival and success. While you don’t have to hire an ex-CIA operative to do this, you do need to assess the competition thoroughly, methodically, and regularly – even if you run a small business.

Competitive analysis can be incredibly complicated and time-consuming, but it can be simplified. Let’s look at an essential process for identifying and assessing the strengths and weaknesses of your competition.

Create Basic Profiles

The process starts with developing a basic profile for each of your current competitors.

First, identify them. For example, if you run a bookstore, your town may have three competing bookstores. Major online bookstores are competitors, but thoroughly analyzing those companies will be less valuable unless you decide to sell books online. Instead, stick to those companies you directly compete with.

Once you identify your main competition, answer these questions about each company. Be objective. While it’s easy to identify weaknesses in your competition, it’s more challenging to recognize where they may currently outperform you:

  • What are their strengths? For instance, you may be vulnerable to price, service, convenience, and extensive inventory.
  • What are their weaknesses – or opportunities where you can outperform them?
  • What are their primary objectives? Determine if they are working to gain market share or if their goal is to capture premium clients. Look at your industry through their eyes and determine what they are trying to achieve.
  • What strategies do they use in marketing, advertising, public relations, etc.? Look for any gaps you might notice in their marketing strategy.
  • How could they take market share away from your business? Conduct an analysis of your company to determine your vulnerable areas.
  • If you change or add products and services, how will they respond?

While the above may seem like a lot of information to compile, the process is relatively easy. You should already have a feel for your strengths and weaknesses based on what your customers tell you and why some customers take their business elsewhere.

You also have other options:

  • Check their websites. The information you need about products, services, prices, and objectives should be readily available. If that information isn’t, you’ve just identified a weakness.
  • Direct observation. Visit their stores. Check out their brochures and other promotional literature. Have friends call and ask for information.
  • Check out marketing and advertising campaigns. You can quickly determine how the company positions itself, who it markets to, and its strategies to reach potential customers. You also will learn how they differentiate their business from yours.
  • Analyze competitor advertising not only to understand their objectives but also to understand how they perceive you. For instance, if they focus on low prices, they may feel you are vulnerable based on price. If they focus on promoting outstanding service, they may feel your business provides relatively poor service.
  • Internet searches. Search for news, public relations, and other mentions of your competition. Search blogs, Twitter feeds, and review and recommendation sites such as While most of the information you find will be anecdotal, you may at least understand how some consumers perceive your competition. Plus, the search may give you a heads-up about expansion plans, new markets they intend to enter, and changes in management.

Competitive analysis does more than help you understand your competition; it can also help you identify changes you should make to your business strategies. Learn from competitors’ strengths, take advantage of competitors’ weaknesses, and apply the same analysis to your business.

Identify Potential Competition

Predicting when and where new competitors may enter the market is challenging. Conducting regular Internet searches about your industry, your products, your services, and your target market can offer advanced notice.

There are other ways to predict when competition may enter your space. Turn an analytical eye to your business and your industry. If the following conditions exist, competition is likely to pop up sooner rather than later:

  • The industry enjoys high-profit margins
  • Entering the market is relatively easy and inexpensive
  • You serve a growing market – and the more rapidly growing, the greater the risk of competition
  • Supply is low, and demand is high
  • Very little competition exists; in effect, there is "room for everyone" currently in your market

If serving your market seems easy, assume competitors will enter your space to siphon off some of your customers and profits. Knowing what your competition looks like and how they move will help you stay ready.