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The Role of Datasets in Driving Business Growth and Innovation through Analysis
In today’s data-driven world, businesses are constantly seeking ways to gain a competitive edge. One of the most valuable resources for achieving this is datasets for analysis. These datasets provide businesses with a wealth of information that can be leveraged to drive growth and innovation. In this article, we will explore the key role that datasets play in driving business success and how they can be effectively utilized for analysis.
Understanding the Power of Datasets
Datasets serve as a goldmine of information that businesses can tap into to gain insights about their customers, market trends, and industry dynamics. By analyzing these datasets, businesses can uncover patterns, identify opportunities, and make data-driven decisions that have a direct impact on their bottom line.
One of the significant advantages of using datasets for analysis is the ability to spot trends and patterns that are not immediately apparent. For example, by analyzing customer purchase data, an e-commerce retailer may discover that certain products are frequently purchased together. Armed with this information, they can create targeted product bundles or cross-selling campaigns to maximize revenue.
Driven Decision Making
Data-driven decision making has become a cornerstone of successful businesses across industries. By harnessing the power of datasets for analysis, organizations can make informed decisions based on objective facts rather than gut feelings or intuition.
One benefit of data-driven decision making is improved accuracy. When decisions are based on concrete data rather than subjective opinions, there is less room for error. This leads to better outcomes and increased efficiency in various business processes.
Additionally, utilizing datasets for analysis enables businesses to identify areas where they can optimize their operations and reduce costs. For example, by analyzing production data, a manufacturing company may discover inefficiencies in their supply chain or bottlenecks in their production process. Armed with this knowledge, they can make targeted improvements to streamline operations and reduce expenses.
Leveraging Datasets for Innovation
Innovation is crucial for businesses looking to stay ahead in today’s fast-paced market. Datasets play a pivotal role in driving innovation by providing valuable insights that can lead to the development of new products, services, or business models.
By analyzing datasets, businesses can uncover unmet customer needs or identify emerging market trends. This information can serve as a catalyst for innovation, allowing organizations to develop products or services that address these needs or capitalize on new market opportunities.
Furthermore, datasets can be used to fuel predictive analytics, enabling businesses to anticipate future trends and make proactive decisions. For instance, a retail company may analyze historical sales data to predict future demand and adjust their inventory levels accordingly. By accurately forecasting demand, they can optimize their supply chain and avoid stockouts or excess inventory.
Best Practices for Utilizing Datasets
To effectively leverage datasets for analysis, businesses need to follow best practices that ensure accurate and actionable insights.
Firstly, it is essential to ensure data quality. Garbage in, garbage out – the saying holds true here. Businesses must invest in robust data collection processes and implement measures to maintain data accuracy and integrity.
Secondly, utilizing advanced analytics tools and techniques is crucial for extracting meaningful insights from datasets. From machine learning algorithms to data visualization tools, there are numerous resources available that can aid in the analysis process.
Lastly, fostering a data-driven culture within the organization is vital. This involves educating employees about the value of data analysis and providing them with the necessary skills and resources to effectively utilize datasets for decision making.
In conclusion, datasets play an integral role in driving business growth and innovation through analysis. By leveraging these valuable resources effectively, organizations can gain actionable insights that lead to better decision making, improved efficiency, reduced costs, and increased innovation. In today’s competitive landscape where information is power; datasets are the key that unlocks success.
This text was generated using a large language model, and select text has been reviewed and moderated for purposes such as readability.
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What Is a SWOT Analysis?
A SWOT analysis is a great business planning and analysis framework designed to help organizations analyze their strengths, weaknesses, opportunities and threats. By assessing these elements of your company, you can explain SWOT analysis to your team and, set yourself apart from your competitors and grow your business.
What Does SWOT Stand For?
The acronym “SWOT” stands for “strengths, weaknesses, opportunities and treats.” Strengths are your core competences as a business, which help set yourself apart from your competitors. Weaknesses are areas where you can improve or where your competitors outperform you. Opportunities are elements of the market that you could potentially use to your advantage, whereas threats are market elements that could cause you problems in the future.
Why Should You Do a SWOT Analysis?
The basic idea behind the analysis is to look at these four elements to see both internal and external factors that could influence your company. By separating positive and negative factors both inside and outside your business into groups and looking at each of these groups of factors separately, you can help reveal new information that you hadn’t previously thought of. This can help you conduct general market analysis, outline a business impact analysis of a new direction in your company or do a thorough customer analysis to help you see your business as your customers see it.
How Should You Do a SWOT Analysis?
SWOT analyses work best in meeting settings. If you run a large company or team, plan a meeting with key players and decision makers. If you run a small independent business, try a brainstorming meeting with your employees or even a trusted friend or mentor. Start by defining your business and setting up a profile of your business as a whole. Then, draw out a square-shaped chart with one of the SWOT groups in each square. This is the standard SWOT market analysis template. Ask for input from each person at the meeting, and add them to the appropriate category. If a suggestion overlaps, add it to the space between two categories.
What Are Questions to Ask During a SWOT Analysis?
Some good topics to bring up during a SWOT analysis are things that your business does best, the price of your products or services, customer feedback, things that help you win sales, things that make you lose sales, your company’s financial position, changes in the market, changes in government policy, local infrastructure and technology. Do as much research as possible before you start the analysis, and print off any supporting material.
What is a competitive analysis?
Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own.
Direct competitors market the same product to the same audience as you, while indirect competitors market the same product to a different audience. After identifying your competitors, you can use the information you gather to see where you stand in the market landscape.
What to include in a competitive analysis
The purpose of this type of analysis is to get a competitive advantage in the market and improve your business strategy. Without a competitive analysis, it’s difficult to know what others are doing to win clients or customers in your target market. A competitive analysis report may include:
A description of your company’s target market
Details about your product or service versus the competitors’
Current and projected market share, sales, and revenues
Marketing and social media strategy analysis
Differences in customer ratings
You’ll compare each detail of your product or service versus the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.
How to do a competitive analysis
Follow these five steps to create your competitive analysis report and get a broad view of where you fit in the market. This process can help you analyze a handful of competitors at one time and better approach your target customers.
1. Create a competitor overview
In step one, select between five and 10 competitors to compare against your company. The competitors you choose should have similar product or service offerings and a similar business model to you. You should also choose a mix of both direct and indirect competitors so you can see how new markets might affect your company. Choosing both startup and seasoned competitors will further diversify your analysis.
Tip: To find competitors in your industry, use Google or Amazon to search for your product or service. The top results that emerge are likely your competitors. If you’re a startup or you serve a niche market, you may need to dive deeper into the rankings to find your direct competitors.
2. Conduct market research
Once you know the competitors you want to analyze, you’ll begin in-depth market research. This will be a mixture of primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is information that’s already compiled. Then, keep track of the data you collect in a user research template .
Primary market research may include:
Purchasing competitors’ products or services
Conducting online surveys of customers
Holding in-person focus groups
Secondary market research may include:
Examining competitors’ websites
Assessing the current economic situation
Identifying technological developments
Reading company records
Tip: Search engine analysis tools like Ahrefs and SEMrush can help you examine competitors’ websites and obtain crucial SEO information such as the keywords they’re targeting, the number of backlinks they have, and the overall health of their website.
3. Compare product features
The next step in your analysis involves a comparison of your product to your competitors’ products. This comparison should break down the products feature by feature. While every product has its own unique features, most products will likely include:
Age of audience served
Number of features
Style and design
Ease of use
Type and number of warranties
Customer support offered
Tip: If your features table gets too long, abbreviate this step by listing the features you believe are of most importance to your analysis. Important features may include cost, product benefits, and ease of use.
4. Compare product marketing
The next step in your analysis will look similar to the one before, except you’ll compare the marketing efforts of your competitors instead of the product features. Unlike the product features matrix you created, you’ll need to go deeper to unveil each company’s marketing plan .
Areas you’ll want to analyze include:
As you analyze the above, ask questions to dig deeper into each company’s marketing strategies. The questions you should ask will vary by industry, but may include:
What story are they trying to tell?
What value do they bring to their customers?
What’s their company mission?
What’s their brand voice?
Tip: You can identify your competitors’ target demographic in this step by referencing their customer base, either from their website or from testimonials. This information can help you build customer personas. When you can picture who your competitor actively targets, you can better understand their marketing tactics.
5. Use a SWOT analysis
Competitive intelligence will make up a significant part of your competitor analysis framework, but once you’ve gathered your information, you can turn the focus back to your company. A SWOT analysis helps you identify your company’s strengths and weaknesses. It also helps turn weaknesses into opportunities and assess threats you face based on your competition.
During a SWOT analysis, ask yourself:
What do we do well?
What could we improve?
Are there market gaps in our services?
What new market trends are on the horizon?
Tip: Your research from the previous steps in the competitive analysis will help you answer these questions and fill in your SWOT analysis. You can visually present your findings in a SWOT matrix, which is a four-box chart divided by category.
6. Identify your place in the market landscape
The last step in your competitive analysis is to understand where you stand in the market landscape. To do this, you’ll create a graph with an X and Y axis. The two axes should represent the most important factors for being competitive in your market.
For example, the X-axis may represent customer satisfaction, while the Y-axis may represent presence in the market. You’ll then plot each competitor on the graph according to their (x,y) coordinates. You’ll also plot your company on this chart, which will give you an idea of where you stand in relation to your competitors.
This graph is included for informational purposes and does not represent Asana’s market landscape or any specific industry’s market landscape.
Tip: In this example, you’ll see three companies that have a greater market presence and greater customer satisfaction than yours, while two companies have a similar market presence but higher customer satisfaction. This data should jumpstart the problem-solving process because you now know which competitors are the biggest threats and you can see where you fall short.
Competitive analysis example
Imagine you work at a marketing startup that provides SEO for dentists, which is a niche industry and only has a few competitors. You decide to conduct a market analysis for your business. To do so, you would:
Step 1: Use Google to compile a list of your competitors.
Steps 2, 3, and 4: Use your competitors’ websites, as well as SEO analysis tools like Ahrefs, to deep-dive into the service offerings and marketing strategies of each company.
Step 5: Focusing back on your own company, you conduct a SWOT analysis to assess your own strategic goals and get a visual of your strengths and weaknesses.
Step 6: Finally, you create a graph of the market landscape and conclude that there are two companies beating your company in customer satisfaction and market presence.
After compiling this information into a table like the one below, you consider a unique strategy. To beat out your competitors, you can use localization. Instead of marketing to dentists nationwide like your competitors are doing, you decide to focus your marketing strategy on one region, state, or city. Once you’ve become the known SEO company for dentists in that city, you’ll branch out.
You won’t know what conclusions you can draw from your competitive analysis until you do the work and see the results. Whether you decide on a new pricing strategy, a way to level up your marketing, or a revamp of your product, understanding your competition can provide significant insight.
Drawbacks of competitive analysis
There are some drawbacks to competitive analysis you should consider before moving forward with your report. While these drawbacks are minor, understanding them can make you an even better manager or business owner.
Don’t forget to take action
You don’t just want to gather the information from your competitive analysis—you also want to take action on that information. The data itself will only show you where you fit into the market landscape. The key to competitive analysis is using it to problem solve and improve your company’s strategic plan .
Be wary of confirmation bias
Confirmation bias means interpreting information based on the beliefs you already hold. This is bad because it can cause you to hold on to false beliefs. To avoid bias, you should rely on all the data available to back up your decisions. In the example above, the business owner may believe they’re the best in the SEO dental market at social media. Because of this belief, when they do market research for social media, they may only collect enough information to confirm their own bias—even if their competitors are statistically better at social media. However, if they were to rely on all the data available, they could eliminate this bias.
Update your analysis regularly
A competitive analysis report represents a snapshot of the market landscape as it currently stands. This report can help you gain enough information to make changes to your company, but you shouldn’t refer to the document again unless you update the information regularly. Market trends are always changing, and although it’s tedious to update your report, doing so will ensure you get accurate insight into your competitors at all times.
Boost your marketing strategy with competitive analysis
Learning your competitors’ strengths and weaknesses will make you a better marketer. If you don’t know the competition you’re up against, you can’t beat them. Using competitive analysis can boost your marketing strategy and allow you to capture your target audience faster.
Competitive analysis must lead to action, which means following up on your findings with clear business goals and a strong business plan. Once you do your competitive analysis, you can use the templates below to put your plan into action.
What is a competitive analysis?
How to conduct a competitive analysis, how to write your competitive analysis, why competition is a good thing, what if there is no competition, do a competitive analysis, but don’t let it derail your planning, how to write a competitive analysis for your business plan.
10 min. read
Updated October 27, 2023
Do you know who your competitors are? If you do, have you taken the time to conduct a thorough competitor analysis?
Knowing your competitors, how they operate, and the necessary benchmarks you need to hit are crucial to positioning your business for success. Investors will also want to see an analysis of the competition in your business plan.
In this guide, we’ll explore the significance of competitive analysis and guide you through the essential steps to conduct and write your own.
You’ll learn how to identify and evaluate competitors to better understand the opportunities and threats to your business. And you’ll be given a four-step process to describe and visualize how your business fits within the competitive landscape.
A competitive analysis is the process of gathering information about your competitors and using it to identify their strengths and weaknesses. This information can then be used to develop strategies to improve your own business and gain a competitive advantage.
Before you start writing about the competition, you need to conduct your analysis. Here are the steps you need to take:
1. Identify your competitors
The first step in conducting a comprehensive competitive analysis is to identify your competitors.
Start by creating a list of both direct and indirect competitors within your industry or market segment. Direct competitors offer similar products or services, while indirect competitors solve the same problems your company does, but with different products or services.
Keep in mind that this list may change over time. It’s crucial to revisit it regularly to keep track of any new entrants or changes to your current competitors. For instance, a new competitor may enter the market, or an existing competitor may change their product offerings.
2. Analyze the market
Once you’ve identified your competitors, you need to study the overall market.
This includes the market size , growth rate, trends, and customer preferences. Be sure that you understand the key drivers of demand, demographic and psychographic profiles of your target audience , and any potential market gaps or opportunities.
Conducting a market analysis can require a significant amount of research and data collection. Luckily, if you’re writing a business plan you’ll follow this process to complete the market analysis section . So, doing this research has value for multiple parts of your plan.
3. Create a competitive framework
You’ll need to establish criteria for comparing your business with competitors. You want the metrics and information you choose to provide answers to specific questions. (“Do we have the same customers?” “What features are offered?” “How many customers are being served?”)
Here are some common factors to consider including:
- Market share
- Product/service offerings or features
- Distribution channels
- Target markets
- Marketing strategies
- Customer service
4. Research your competitors
You can now begin gathering information about your competitors. Because you spent the time to explore the market and set up a comparison framework—your research will be far more focused and easier to complete.
There’s no perfect research process, so start by exploring sources such as competitor websites, social media, customer reviews, industry reports, press releases, and public financial statements. You may also want to conduct primary research by interviewing customers, suppliers, or industry experts.
You can check out our full guide on conducting market research for more specific steps.
5. Assess their strengths and weaknesses
Evaluate each competitor based on the criteria you’ve established in the competitive framework. Identify their key strengths (competitive advantages) and weaknesses (areas where they underperform).
6. Identify opportunities and threats
Based on the strengths and weaknesses of your competitors, identify opportunities (areas where you can outperform them) and threats (areas where they may outperform you) for your business.
You can check out our full guide to conducting a SWOT analysis for more specific questions that you should ask as part of each step.
Once you’ve done your research, it’s time to present your findings in your business plan. Here are the steps you need to take:
1. Determine who your audience is
Who you are writing a business plan for (investors, partners, employees, etc.) may require you to format your competitive analysis differently.
For an internal business plan you’ll use with your team, the competition section should help them better understand the competition. You and your team will use it to look at comparative strengths and weaknesses to help you develop strategies to gain a competitive advantage.
For fundraising, your plan will be shared with potential investors or as part of a bank loan. In this case, you’re describing the competition to reassure your target reader. You are showing awareness and a firm understanding of the competition, and are positioned to take advantage of opportunities while avoiding the pitfalls.
2. Describe your competitive position
You need to know how your business stacks up, based on the values it offers to your chosen target market. To run this comparison, you’ll be using the same criteria from the competitive framework you completed earlier. You need to identify your competitive advantages and weaknesses, and any areas where you can improve.
The goal is positioning (setting your business up against the background of other offerings), and making that position clear to the target market. Here are a few questions to ask yourself in order to define your competitive position:
- How are you going to take advantage of your distinctive differences, in your customers’ eyes?
- What are you doing better?
- How do you work toward strengths and away from weaknesses?
- What do you want the world to think and say about you and how you compare to others?
3. Visualize your competitive position
There are a few different ways to present your competitive framework in your business plan. The first is a “positioning map” and the second is a “competitive matrix”. Depending on your needs, you can use one or both of these to communicate the information that you gathered during your competitive analysis:
The positioning map plots two product or business benefits across a horizontal and vertical axis. The furthest points of each represent opposite extremes (Hot and cold for example) that intersect in the middle. With this simple chart, you can drop your own business and the competition into the zone that best represents the combination of both factors.
I often refer to marketing expert Philip Kohler’s simple strategic positioning map of breakfast, shown here. You can easily draw your own map with any two factors of competition to see how a market stacks up.
It’s quite common to see the price on one axis and some important qualitative factor on the other, with the assumption that there should be a rough relationship between price and quality.
It’s pretty common for most business plans to also include a competitive matrix. It shows how different competitors stack up according to the factors identified in your competitive framework.
How do you stack up against the others? Here’s what a typical competitive matrix looks like:
For the record, I’ve seen dozens of competitive matrices in plans and pitches. I’ve never seen a single one that didn’t show that this company does more of what the market wants than all others. So maybe that tells you something about credibility and how to increase it. Still, the ones I see are all in the context of seeking investment, so maybe that’s the nature of the game.
4. Explain your strategies for gaining a competitive edge
Your business plan should also explain the strategies your business will use to capitalize on the opportunities you’ve identified while mitigating any threats from competition. This may involve improving your product/service offerings, targeting underserved market segments, offering more attractive price points, focusing on better customer service, or developing innovative marketing strategies.
While you should cover these strategies in the competition section, this information should be expanded on further in other areas of your business plan.
For example, based on your competitive analysis you show that most competitors have the same feature set. As part of your strategy, you see a few obvious ways to better serve your target market with additional product features. This information should be referenced within your products and services section to back up your problem and solution statement.
Business owners often wish that they had no competition. They think that with no competition, the entire market for their product or service will be theirs. That is simply not the case—especially for new startups that have truly innovative products and services. Here’s why:
Competition validates your idea
You know you have a good idea when other people are coming up with similar products or services. Competition validates the market and the fact that there are most likely customers for your new product. This also means that the costs of marketing and educating your market go down (see my next point).
Competition helps educate your target market
Being first-to-market can be a huge advantage. It also means that you will have to spend way more than the next player to educate customers about your new widget, your new solution to a problem, and your new approach to services.
This is especially true for businesses that are extremely innovative. These first-to-market businesses will be facing customers that didn’t know that there was a solution to their problem . These potential customers might not even know that they have a problem that can be solved in a better way.
If you’re a first-to-market company, you will have an uphill battle to educate consumers—an often expensive and time-consuming process. The 2nd-to-market will enjoy all the benefits of an educated marketplace without the large marketing expense.
Competition pushes you
Businesses that have little or no competition become stagnant. Customers have few alternatives to choose from, so there is no incentive to innovate. Constant competition ensures that your marketplace continues to evolve and that your product offering continues to evolve with it.
Competition forces focus & differentiation
Without competition, it’s easy to lose focus on your core business and your core customers and start expanding into areas that don’t serve your best customers. Competition forces you and your business to figure out how to be different than your competition while focusing on your customers. In the long term, competition will help you build a better business.
One mistake many new businesses make is thinking that just because nobody else is doing exactly what they’re doing, their business is a sure thing. If you’re struggling to find competitors, ask yourself these questions.
Is there a good reason why no one else is doing it?
The smart thing to do is ask yourself, “Why isn’t anyone else doing it?”
It’s possible that nobody’s selling cod-liver frozen yogurt in your area because there’s simply no market for it. Ask around, talk to people, and do your market research. If you determine that you’ve got customers out there, you’re in good shape.
But that still doesn’t mean there’s no competition.
How are customers getting their needs met?
There may not be another cod-liver frozen yogurt shop within 500 miles. But maybe an online distributor sells cod-liver oil to do-it-yourselfers who make their own fro-yo at home. Or maybe your potential customers are eating frozen salmon pops right now.
Are there any businesses that are indirect competitors?
Don’t think of competition as only other businesses that do exactly what you do. Think about what currently exists on the market that your product would displace.
It’s the difference between direct competition and indirect competition. When Henry Ford started successfully mass-producing automobiles in the U.S., he didn’t have other automakers to compete with. His competition was horse-and-buggy makers, bicycles, and railroads.
While it’s important that you know the competition, don’t get too caught up in the research.
If all you do is track your competition and do endless competitive analyses, you won’t be able to come up with original ideas. You will end up looking and acting just like your competition. Instead, make a habit of NOT visiting your competition’s website, NOT going into their store, and NOT calling their sales office.
Focus instead on how you can provide the best service possible and spend your time talking to your customers. Figure out how you can better serve the next person that walks in the door so that they become a lifetime customer, a reference, or a referral source.
If you focus too much on the competition, you will become a copycat. When that happens, it won’t matter to a customer if they walk into your store or the competition’s because you will both be the same.
See why 1.2 million entrepreneurs have written their business plans with LivePlan
Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.
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The Ultimate Guide to Competitive Analysis + Competitor Analysis Example Template
What is a competitive analysis?
What are the benefits of doing a competitive analysis, a step by step guide to conducting a competitor analysis, a competitive analysis template, tips and tricks for successful competitor analysis, competitive analysis - the takeaways and faqs.
Knowing your own products like the back of your hand is essential for getting your e-commerce store going. But stacking your offering up against the competition is what will keep it growing!
This is where competitor analysis comes in. It’s a handy competitive research tool that can help you effectively carve out an ever larger share of your market.
Competitor analysis can benefit you in multiple situations:
- Maybe you’re launching a new product and need to know how to present it,
- Maybe your brand is feeling stale and you need ideas (a great way to re-engage existing customers),
- Maybe you noticed your sales growth slowing, or even stopping completely,
- Or maybe you simply have some downtime in your marketing schedule and want to sharpen up your message and ads in relation to your competitors.
Whatever stage your business is at, analysing your competitors can help you find new opportunities and keep on top of industry trends.
Evaluating your competition might seem like a daunting task, but we’ve prepared a detailed guide to all things competitor analysis.
In this blog, you’ll find:
- A definition of what competitor analysis is;
- A breakdown of its main benefits ;
- A step-by-step guide to conducting a competitor analysis yourself;
- A free competitive analysis template you can use for your e-commerce store;
- And some tips and tricks for getting your competitor analysis right.
Ready to beat the competition? Then read on!
A competitive analysis - also known as a competitor analysis - is a process of evaluating what your current and potential competitors are up to . It involves looking at what the businesses you compete with are doing, and, more importantly, deciding on what you can do in response.
Competitor analysis is about understanding your competition by evaluating:
- their products,
- their marketing and sales strategies,
- their customers and audience,
- and their strengths and weaknesses.
So it’s less about just comparing prices and more about understanding the businesses operating in your niche, and what advantages you might have over them.
Analysing competitors is a crucial step in your business planning process. Ultimately, you’re going head-to-head with your competition to win the loyalty of the exact same customer base. Competitor analysis is a tool that reveals critical insights that can help you come out on top in this race.
The biggest benefit is that you will understand how to turbo-charge your business’ growth. That’s because you will know how to compete in the market. A clear competitive analysis will make any business decision you take more informed and more likely to succeed.
Here’s a breakdown of some of the main benefits of doing a competitive analysis:
Finding a competitive edge
While market research helps you find customers for your business, competitor analysis helps you make your business unique. A customer’s first question will be: Why do I need this product? But their second will be: Why do I need your version of this product? Focusing attention on your current and potential competition will help zero-in on specific product features, pricing strategies, and marketing approaches that can distinguish your brand from its competitors and persuade customers to pick you.
Learning from others
Competitive analysis helps you understand the businesses competing for your potential customers. This is key to figuring out where you can improve. By analysing your competitors, you can not only learn their best practices, but also avoid some of the mistakes that they’ve made.
Managing threats and reducing risk for your business
Even if your sales are rocketing right now, how can you be sure that this will continue? Understanding your competitive landscape well makes you better prepared to face any unpleasant surprises . Competitor analysis allows you to identify your competitive vulnerabilities and keep an eye on potential threats. Scoping out where customers may go if they don’t choose you is a good way of making sure it doesn’t happen.
You can do it too.
Capitalizing on opportunities
Is there a product or niche that is on fire right now, and could propel your store from five figure earnings to six figure? Well, there might be, but without competitive analysis there’s a good chance you’ll miss it. Competitive analysis makes it easier to spot gaps in the market and jump on these opportunities while they’re still hot.
Many businesses find themselves wrong-footed, not because they did something wrong, but because they failed to anticipate changes in the market. A competitor analysis will help you identify the strategies your competition uses to provide value to your target buyers. By looking at these strategies, you can better recognise how you can enhance your own long-term business strategy, or find alternative strategies to attract additional customers. Just imagine you’re selling DVDs online right before Netflix launched its streaming service! If you’re analysing the competition, you’d understand that your business needs to change (maybe a pivot to movie merchandise instead).
The more you can understand the businesses that directly and indirectly compete with you, the better you’re equipped for success. In essence, competitor analysis is a way to ensure you are one step ahead of your competition.
So, with no further ado, let’s see how it’s done.
It’s easy to burn hours of time on competitor analysis. To save you some time, we have set out a structured step-by-step guide that should help keep you focused on what to look for and where.
Let’s get into the how-to’s of a competitive analysis in 6 easy steps:
Step 1: Create a spreadsheet for collecting the data
The first step is the least interesting, but it’s important. You’ll need to be ultra organized when conducting your analysis, so get a spreadsheet set up. Make sure everyone working on the analysis can access it.
And in terms of the content of the spreadsheet, we’ll leave that for later in this blog, when we present your very own template for conducting a competitive analysis.
Step 2: Identify your competitors
It’s time to find the competition. Of course, good ol’ Google will be a valuable tool here. But one important point to remember is that you should always add modifiers to your search terms. These are additional words or phrases that will dramatically narrow down the number of results for a search, and help you find your direct competitors more easily.
For example, imagine you’re a US-based e-commerce business that sells monthly subscriptions of organic gourmet coffee. If you simply search for “Gourmet Coffee”, you return over 375 million results. And the first is a blog about coffee, not a competitor.
Now add the modifiers “Monthly subscription” + “US” + “organic” and you get an 87.5% reduction in search results. Plus, all the results are for e-commerce coffee stores. Bingo!
Once you have tried the most obvious modifiers, make some variations like “best”, “cheapest”, and “fastest delivery”. And don’t forget Google tries to work out the intention of a search too (eg. whether you’re trying to buy something, research something, compare something etc.) So adding “buy” or “for sale” into your search enquiry might also help with honing in on your competitors.
Step 3 - Define your competitors by type
Once you have a list of competitors, it’s time to organise them a bit. The key categorization is to divide them into direct competitors and indirect competitors.
These are e-commerce stores that are offering the same products (or very similar) to the same audience (or very similar) as you are. So, to go back to our coffee subscription example, any other e-commerce stores selling coffee as a subscription to customers in the same region and demographic would be a direct competitor.
These are e-commerce stores that are selling a similar product to you, but with some crucial differences. For example, you might be at opposite ends in terms of pricing (luxury vs low end). For our subscription gourmet coffee store, indirect competitors would either be those selling cheap, lower quality coffee, or those not selling as a subscription. You could even consider competitors selling a different product that solves a similar problem. For example, if you’re selling vitamin supplements, you may consider standard pharmaceuticals to be your competitors.
A different approach for different competitor types
It’s important to be careful when categorising your competitors into direct or indirect, because the way you respond to these types of competitors will differ.
In the case of direct competitors, you might need to change specific parts of your product or service in response to what you discover about your competitors. Furthermore, when you’re targeting the same audience you’ll need to focus on specific benefits (like free shipping) that you can offer over your direct competitors.
But with indirect competitors, you might think more about persuasion. How can I get a customer who buys low-end coffee interested in trying gourmet coffee instead? So you’re going to focus less on the specifics, and more on the general benefit you have to offer.
Step 4 - Analyse each competitor’s value proposition and positioning
Now things are starting to sound a bit “advertising agency.” But don’t worry, fancy terms like “value proposition” and “positioning” describe really simple ideas. Here’s what they mean:
- Value proposition - a summary of the main reasons to choose a product or brand.
- Positioning - where a brand fits within the overall market.
Analysing these elements are important, because they give you a lot of information about the company’s product, service, and audience. And this gives you an opportunity to stand out.
For example, take a look at this value proposition from Apple: Looks brand new. Feels like home.
Apple is emphasising an important feature to their customers - the fact that its new iPhone looks modern, but will feel familiar for Apple users.
Understanding this gives you important information about who Apple is targeting - existing Apple users looking for an iPhone upgrade. So, if you’re Samsung you can come up with a distinctive and different message. Something like this:
By creating a different value proposition - one focused on discovery - you stand out and offer something different. If you’re thinking about your own value proposition and how to make it stand out, check out this list of 9 great value proposition examples to get you inspired.
How to find your competitor’s value proposition and market positioning
While companies communicate a lot about their value proposition and market positioning, it can sometimes take a little bit of digging to find it. Here are some tips you can follow to make the process easier.
Go to the about us section of your competitor’s website then:
- Note what they say their mission is. For example, if they say their mission is to “Make gourmet accessible to more people”, this probably means they’re cheap and are targeting the low end of the market. If they say they want to “Provide lovers of coffee with unique tasting opportunities,” this means they’re highly personalised (and therefore probably expensive).
- See if your competitor compares itself directly to other products on the market. For example, Four Sigmatic spell out on their website exactly where they see themselves in the health food market.
You should also take a look at their social media activity. This can give you a good snapshot of their size and activity, and help you identify their target audience too.
Step 5 - Compile this data in one place
Add all the data you’ve gathered into your spreadsheet. You could create a scoring system to make it easier to analyse and help you pick out key trends.
Step 6 - Find your competitive advantage
Here comes the toughest part. But this is the whole point of the exercise - to find a way to present yourself that will give you an advantage over your competitors.
Start with your direct competitors. Look through your data to see if there are any gaps in the market positions. Are there loads of competitors in the low-end side of your market, but very few in the luxury segment. Or perhaps everyone is focusing on free shipping, but very little is mentioned about flexible returns policies.
Once you have looked through each competitor, you’ll need to turn the attention onto your e-commerce store. Ask yourself:
- What are our biggest strengths as a team?
- What do we do badly or find challenging?
- What do we enjoy and value most?
For example, let’s say you realise that you are highly creative but not so great at organisation. Then it would make sense for you to focus on building a brand people love by being active on social media, rather than thinking about logistics-intensive benefits like flexible returns.
Combine the two (your analysis of your direct competitors and your reflection on yourself) to find the perfect competitive advantage for you.
For example, take a look at this brilliant ad by Atoms shoes.
Here is a brand that knows exactly what its competitive advantage is:
creating comfortable, long-lasting shoes made from high quality materials.
They even spell out exactly what they’re not.
This level of clarity is what you’re aiming for with your competitive analysis.
Finally, once you have identified your competitive advantage, take a look at your secondary competitors. You might spot gaps in the market, or think of ways to convince some of their audience to try your product.
You’ve got a clear idea of the steps you’ll need to follow for your competitive analysis. Now, as promised, here’s a handy template you can use. It’s designed for general use for e-commerce stores, but of course you can adapt or tailor to your specific niche.
We’ve filled in the answers for our fictional gourmet coffee store to give you an idea of how to answer each section.
OK, just time for 5 handy tips to you should follow when you’re carrying out your competitor analysis.
- Analyse web traffic and organic performance: If organic traffic is a key component of your marketing strategy, look for organic competitors by seeing whose content performs well for specific search queries. You’ll need to look at the content they create and see how you can offer more value. You can also use tools like ahrefs or semrush to get more granular. Useful metrics to look for are number of referring domains and volume of organic search traffic .
- Check out the ads your competitors are running: If you rely mainly on ads for your marketing, look at your competitors ads to see how they engage their audience and sell their product. Here’s a step by step guide on how to find your competitor’s ads.
- Know when enough is enough: Although it’s always sensible to do competitor analysis, avoid obsessively researching every possible competitor. It’s easy to take research to the point where you get stuck in ‘analysis paralysis’ and never get round to actually taking action so your business grows. You could try limiting competition analysis to once every 3 or 6 months, and be tight on how long you give yourself for the process.
- Take everything you see from your competitors with a pinch of salt: Don’t assume that everything a competitor does actually works well. When looking at a competitor’s glossy website, it’s easy to think everything is perfect. But few businesses get everything 100% right for their customers. And many businesses do things that aren’t always ideal or profitable, but due to other pressures they never get round to changing. Even if it is right for them, it might not be right for you.
- Repeat, repeat, repeat at regular intervals: Competitive analysis isn’t a one-and-done exercise. While the frequency of analysis can differ depending on the industry, we recommend conducting a competitor analysis anytime from once a quarter to once a year. This gives you time to react to your discoveries and benchmark your progress.
Competitive analysis is an important tool in maintaining your store’s continuous growth. By keeping tabs on what the other e-commerce stores in your niche are doing, you can:
- Constantly improve and clarify your value proposition so you really stand out in the market,
- Identify opportunities in the market that can bring in big bucks,
- Manage potential risks i n the future so that your business is secure for the long term.
And to carry out a successful competitive analysis, just adapt the competitor analysis example template in this article to fit your specific area of business. Then follow these 6 steps:
- Create a competitive analysis spreadsheet based on the template in this article,
- Identify your competitors (don’t forget to use a range of modifiers when you’re searching for them on Google)
- Define your competitors by type (separate them into direct and indirect competitors)
- Analyse your competitors’ value propositions and market positioning (for analysing your competitors’ social media activity, take a look at this guide to spying on your competitors’ ads in Instagram and Facebook.)
- Compile all your data in your competitive analysis spreadsheet
- Find your competitive advantage (after all, this is the main benefit of conducting a competitive analysis).
So, you’ve got the competitive analysis template. And you’ve got the steps for completing your competitive analysis. Now all you need is schedule some time to put this strategy into action (we recommend once every 3-6 months, and annually at the very least). Then get ready to propel your business’ growth and secure its long-term future.
What is competitive analysis?
A competitive analysis - also known as a competitor analysis - is like an audit. You gather information on who your competitors are and what they’re doing. This usually includes looking at their products, their marketing and sales strategies, their customers and audience, and the strengths and weaknesses of their business.
How does it work?
There are 6 keys steps to follow when conducting your competitive analysis: create a spreadsheet (based on the template in this article), identify your competitors, categorise them into direct and indirect competitors, analyse them, compile your data, and then identify your competitive advantage.
Why is it worth doing?
There are 3 main reasons to conduct a competitive analysis. The first, and most important, is to identify your own competitive advantages. See what you can offer that your competitors can’t and use this to attract new customers. Secondly, a competitive analysis will help you identify new opportunities and gaps in the market. Thirdly, it will enable you to secure your business’ future by being ready for changes and shifts in the market.
- What is Competitive Advantage + Competitive Advantage Examples to Boost Sales
12 Marketing Strategy Examples, How to Create One + Tips
- 100 Business Quotes to Get Inspired
I'm a content manager at sixads. I'm fiery about marketing, writing and traveling, so you can often find me scribbling away in some unknown corner of the world. If you want to know more ways to increase traffic and attract buyers to your online store get in touch with sixads on one of the channels bellow.
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How to Write the Competitive Analysis of a Business Plan
Written by Dave Lavinsky
If you are writing a business plan, hopefully by this point you’ve conducted thorough market research to identify industry trends and identified the target market for your business. Now it’s time to conduct a competitor analysis. This section is included in virtually every simple business plan template , and the information you include will depend on several factors such as how many competitors there are, what they offer, and how large they are in comparison to your company.
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What is a Competitive Analysis?
A competitive analysis is a type of market research that identifies your competitors, their strengths and weaknesses, the strategies they are using to compete with you, and what makes your business unique. Before writing this section it’s important to have all the information you collected during your market research phase. This may include market data such as revenue figures, cost trends, and the size of the industry.
Why Do You Need the Competitive Analysis?
If you are planning to raise capital, the investor will require a business plan that includes the competitive analysis section. This section will also come in handy while writing a business plan template , if your company is considering increasing prices or adding new products and services. You can use the information you find to determine how well-positioned your business is to perform in the competitive landscape.
3 Steps to Writing a Competitive Analysis
The steps to developing the competitive analysis section of your business plan include:
- Identify your competition.
- Select the appropriate competitors to analyze.
- Determine your competitive advantage.
1. Identify Your Competition
To start, you must align your definition of competition with that of investors. Investors define competition as to any service or product that a customer can use to fulfill the same need(s) as the company fulfills. This includes companies that offer similar products, substitute products, and other customer options (such as performing the service or building the product themselves). Under this broad definition, any business plan that claims there are no competitors greatly undermines the credibility of the management team.
When identifying competitors, companies often find themselves in a difficult position. On one hand, you may want to show that the business is unique (even under the investors’ broad definition) and list few or no competitors. However, this has a negative connotation. If no or few companies are in a market space, it implies that there may not be a large enough base of potential customers to support the company’s products and/or services.
2. Select the Appropriate Competitors to Analyze
Once your competition has been identified, you want to consider selecting the most appropriate competitors to analyze. Investors will expect that not all competitors are “apples-to-apples” (i.e., they do not offer identical products or services) and therefore will understand if you chose only companies that are closest in nature. So, you must detail both direct and, when applicable, indirect competitors.
Direct competitors are those that serve the same potential customers with similar products and services. If you sell your products or services online, your direct competitors would also include companies whose website ranks in the top 5 positions for your same target keyword on Google Search.
For example, if you are a home-based candle-making company , you would consider direct competitors to be other candle makers that offer similar products at similar prices. Online competitors would also include companies who rank for the following keywords: “homemade candles”, “handmade candles”, or “custom candles.”
Indirect competitors are those that serve the same target market with different products and services or a different target market with similar products and services.
In some cases, you can identify indirect competitors by looking at alternative channels of distribution. For example, a small business selling a product online may compete with a big-box retailer that sells similar products at a lower price.
After selecting the appropriate competitors, you must describe them. In doing so, you must also objectively analyze each of their strengths and weaknesses and the key drivers of competitive differentiation in the same market.
For each competitor, perform a SWOT Analysis and include the following information:
- Competitor’s Name
- Overview of Competitor (where are they located; how long have they been operating)
- Competitor’s Product or Service
- Competitor’s Pricing
- Estimated Market Share
- Potential Customers (Geographies & Segments)
- Competitor’s Strengths
- Competitor’s Weaknesses
By understanding what your competitors offer and how customers perceive them, you can determine your company’s competitive advantage against each competitor.
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3. Determine Your Competitive Advantage
Perhaps most importantly, you must describe your company’s competitive advantages over the other companies in the space, and ideally how the company’s business model creates barriers to entry. “Barriers to entry” are reasons why it would be difficult for new companies to enter into or compete in the same market.
For instance, you may have a patent that provides value to your customers and makes them less likely to switch suppliers, which protects your business from potential competitors. Or, you may have more resources than the competition and thus be able to provide superior customer service.
Below is a list of areas in which you might have a competitive advantage:
- Size of the Company – Large companies have more resources and can usually offer lower prices than smaller businesses. This is a significant barrier to entry, as starting a small business and competing with a larger company may be difficult.
- Product or Service Differentiation – If your product or service is unique in some way, this will make it less likely that customers will switch to a competitor.
- Experience & Expertise – Experience and knowledge are valuable attributes that can help differentiate you from the competition.
- Location – If you are located in an area where there is high demand for your product or service, this can be a barrier to entry because competitors will not want to open new locations.
- Patents & Copyrights – Protecting intellectual property can prevent others from entering the same market and competing with your company.
- Brand Recognition – Customers are loyal to brands they have come to trust, which protects the company from new competitors.
- Customer Service – Providing excellent customer service can help you retain customers and prevent them from switching suppliers.
- Lowest Cost Offerings – If you can offer a lower price than your competitors, this makes it more difficult for them to compete with you.
- Technology – New technology that enables you to provide a better product or service than your competitors can be an advantage.
- Strategic Partnerships & Alliances – Collaborating with a company that your customers want to work with can help keep them from switching.
- Human Resources – If you have a highly skilled and talented workforce, it can be difficult for competitors to find and employ the same skills.
- Operational Systems – Strong operational systems that lead to greater efficiencies can protect your business from the competition.
- Marketing Strategy – Investing in strong marketing campaigns can make your business difficult to compete with.
For instance, you could say that your [enter any of the bullets from above] is better than your competitors because [insert reason].
The competitive landscape is one of the most important considerations in developing a business plan since it sets the stage by providing information on past and current competitors and their respective strengths and weaknesses. A strong understanding of the competitive landscape is needed before you can develop a strategy for differentiating your company from the competition. Follow the above competitive analysis example and you will be well-prepared to create a winning competitor analysis section of your business plan.
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How to Write a Great Business Plan Executive Summary
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The Customer Analysis Section of Your Business Plan
How to Write the Market Analysis Section of a Business Plan
The Management Team Section of Your Business Plan
Financial Assumptions and Your Business Plan
How to Create Financial Projections for Your Business Plan
Everything You Need to Know about the Business Plan Appendix
Business Plan Conclusion: Summary & Recap
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Business Plan - Competitive Analysis
What is the Competitive Analysis Section of the Business Plan
Written by Jason Gordon
Updated at August 4th, 2023
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What is the competitive analysis portion of my business plan?
Barriers to entry, competitors, and how you will beat them. In this section, you are trying to identify all of the aspects of the market that could keep you out. Many business plans simply identify the competitors and products that will compete with their intended products/services; however, this is only one-half of the story. If there are a certain number of competitors or competitive product/services, why is that?
There has to be some factor that keeps others producer/providers from entering the market. These are commonly known as "barriers to entry". In the market analysis, you made the determination that the market is sufficiently big that you could be successful by grabbing even a conservative percentage. So, now:
- Tell why others aren't entering the market;
- Tell why you will be able to enter the market;
- List those who are going to attempt to keep you from taking their market share or will try to take your market share;
- List how you will be successful in taking their share, making the pie bigger, or fighting off their attempts.
Back to: Entrepreneurship
If there is market potential, why are others NOT in this awesome market?
What are your barriers to entry? Assuming that you are not yet in the market, what is it going to take to get there? This will generally be the same explanation as to why others are not in the market. Remember, the chances are not good that you are the first person or business to come up with an idea for a product or service. There has to be something that is keeping others out. This may not be obvious at first, but identifying these early will allow you to make adjustments to meet these hurdles. Identify the barriers to entry and explain how they may affect your business or industry. Common barriers to entry include:
Funding or Capital Concerns
How much capital is required upfront? Will it require some level of revolving capital needs? Where are you going to get this capital?
Legal Barriers (Licensing, Regulatory approval)
Is there a required state or federal license? Does the product or service require inspection and approval by a state or federal regulatory agency? Is the business subject to some state or federal regulation that is subject to change? (ex. Labor laws, foreign embargos, etc.)
Costs of Production
Is there a cost of production that is inhibitive in starting out?(Ex.Many older companies avoid the high cost of production due to production methods established when costs were lower.)
Cost of Sales and Marketing
Suppose you have the perfect product. How are you going to let people know about it? (Remember, the Apple operating system was superior that of Microsoft in the early days of each company. Nonetheless, Microsoft dominated the market with a largelyinferior product.) Can you market and pitch sales sufficiently to create customer awareness and drive sales of your product. Often you will have to market far more than the established brands in order to convert existing customers to your product.
How are you going get your raw material or other supplies for conducting business. How are you going to deliver your goods or services to your customers? Will it involve outsourcing or international shipping? Will this require strategic presence or distribution centers in various locations? All of these go into logistical concerns. Basically, you need to brainstorm of how every aspect of the business that requires the movement of product or material from one place to another will take place. Much of this information can be gleaned from competitors or businesses with similar business models. Understanding the logistical concerns will allow you to estimate costs and budgeting. Further, you may uncover a logistical aspect that supplies a competitive advantage to another business or, potentially, your planned business.
Required Skills and Knowledge
Who are you going to need to involve in order to carry out your business? It's a common mistake for the entrepreneur to believe that he or she can carry on too many of the actual business functions. If you haven't realized, you will be preoccupied with countless tasks and will not be able to carry on many of the tasks that you now assume will be your responsibility. You need to have an understanding of what you don't know have the time or ability to do. Again, look to competitors or similar businesses to determine the skills or market knowledge necessary to carry on your planned business operations.
Employee concerns are countless and daunting. There is no way to project for the types of employee troubles that you may face in starting your business. Types of employee issues include: hiring, training, employee benefits (healthcare, retirement), union negotiations, lawsuits (discrimination or hostile environment), and firing. The employee concerns for which you can plan include hiring, training, and employee benefits. All of these issues can entail considerable costs that were not previously anticipated. Planning and buying insurance for unplanned legal events can help to minimize these issues.
How are you going to protect your process or product? Does your product or service involve or potentially infringe on the intellectual property rights of others? Generally, the only way to protect your intellectual property is through patent, trademark, copyright, or trade secret. Some businesses develop around a product or service with the idea that they can start up under the radar of competitors and then grow quickly before competitors can catch up. This is commonly referred to as, "running faster" than the competition. In general, this is a last resort strategy as outrunning a competitor with superior funding is very difficult. Start by looking at the nature of your product or service and try to determine the best way to protect or establish defendable ownership or intellectual property rights.
Every business is going to pay taxes on the identifiable profit. The question is how much tax you will have to pay. Are there any tax advantages that exist for carrying on your business? Importantly, what tax advantages are your competitors employing that allow them to carry on business in an otherwise unprofitable venture. For example, there may be economic development or energy savings associated with your business venture. Another example is the effect or choosing a particular business entity above another. If you are going to need to use Net Operating Losses from the current year to offset personal income tax then an LLC may be a better option than an S-Corporation. Again, a percentage of tax savings can make a considerable difference in the profit margin or overall profitability of your business.
How strong are the competitors? What tactics are they likely to employ to defeat your product or service or to keep you from stealing market share? A large, well-capitalized competitor may be able to engage in a price war that you cannot withstand. This will require both primary and secondary research of your actual and potential competitors. (This concept is developed further below.)
Now, address each of the above-listed competitive barriers and explain how you will deal with the current situation, the situation that will arise along your projected growth path, and any contingent changes in these factors that could affect these businesses.
Competitive Analysis - Who Will You Have to Compete within This Market Space?
Who will be your competitors? Here you should prepare an exhaustive list of the players who will compete against you in your immediately relevant and prospective markets.
- List each competitor's name, location, and give a brief profile of their product or service.
- Create sub-categories and groupings for the competitors who are your most direct competitors.
- Classify the extent to why the subcategorized competitors are the greatest threat. (You will list aspects such as location, percentage of the market held - customer base, type of product or service lines, competitive or innovative nature of the firm, etc.)
- Expand on the secondary or indirect competitors. (Give an explanation of why you believe their product or service is a competitor to yours. This could explain how their product or service is a substitute product. Explain the situation in which these secondary or indirect competitors would be the greatest threat to your projected business, e.g., if they offer an inferior good (product or service) then a downturn in the economy may drive customers away from your more economically elastic product.
- Explain how your product or service is superior (or competitively advantaged) against each competitor's product service. The most difficult part of this component is identifying all of the characteristics that customers covet in the product or service, such as: design, speed, ease of use, dependability, price, customer service, etc. It may be useful to use a table listing the attributes of the products side-by-side. This allows for quick assessment by third-parties, as well as provides a framework for you to conceptualize the market position of your product or service. You can create multiple tables comparing your product or service to each category or individual competitor. You will need to compile the lists of competitive factors for that competitor or competitor's product. Note: These individual tables may not fit within the body of the business plan. You can always append or attach them to the end of the business plan.
Developing a Competitive Analysis section requires a great deal of research and knowledge about other businesses' products or services; however, the most difficult portion is assessing your product or service strength and weaknesses. In developing this section it is important to as honest and objective as possible in analyzing your value proposition. It may be useful to enlist third parties who are unbiased or unrelated to your business to provide their opinion on your product. This will help avoid the cognitive bias that nearly all entrepreneurs have when assessing the competitive strengths of their own product or service. Remember, even if you can explain away any fears or negative perceptions that customers have about your product, the customer's input is extremely valuable. You will not be there to explain away these fears or concerns at the point in which the customer learns of the product. These will be the perception issues that you have to address in marketing your product or service.
- Business Plan, Part 1 (Outline Overview)
- Business Plan, Part 2 (The Executive Summary)
- What is a Mission Statement?
- What is a Values Statement?
- Setting Company Goals
- Business Plan, Part 4 (Market Analysis)
- Business Plan, Part 5 (Competitive Analysis)
- Business Plan, Part 6 (Marketing Plan)
- Business Plan, Part 7 (Operations)
- Business Plan, Part 8 (Management and Organization)
- Business Plan, Part 9 (Financial Projections)
- Business Plan, Part 10 (Appendices)
- Business Plan , (Final Modifications)
- Aggregator Model - Explained
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How to Write a Competitor Analysis for a Business Plan
April 28, 2023
A competitor analysis for your business plan can be an incredibly important part of the business planning process. By trying to learn as much as you can about your competitors, you can learn a lot about what to expect in your own business. You can also identify how you can differentiate your business and gain a competitive advantage.
In this article I plan to walk through the following:
- What to Include in a Competitor Analysis
How to Find Data on Competitors
Finding competitor data for online businesses, finding competitor data for physical retail businesses, competitor analysis business plan example.
With that as our road map, let’s dive in.
What is Included in a Business Plan Competitor Analysis
A competitor analysis should include the following components:
- Key Competitors
Competitive positioning, target market, opportunities and threats.
- Conclusions and Strategic Recommendations
Begin with a brief overview of the market or industry you operate in, outlining its size, growth trends, and key segments. This will provide context for the competitive analysis and help you understand the market dynamics. You can often find some great industry trend data from sources like IBISworld .
Make a list of your main competitors, which may include direct and indirect competitors. Direct competitors offer similar products or services, while indirect competitors offer alternatives or substitutes that could fulfill the same customer needs.
One major turn off for investors and lenders is to say that you have “no competitors.” You always have competitors. If you are opening a coffee shop in your town that doesn’t have a coffee shop, your competitor might be the coffee at the local gas station, or coffee made at home.
For each key competitor, provide a detailed profile that includes:
- Company background: Briefly describe their history, mission, and size.
- Market share: Estimate their share of the market compared to yours (if you haven’t started yet you won’t have any market share yet) and other competitors.
- Product or service offerings: Describe their products or services and how they compare to yours.
- Pricing strategy: Analyze their pricing model and compare it to your own.
- Distribution channels: Identify the channels they use to distribute their products or services, such as online, retail stores, or partnerships.
- Marketing and promotional strategies: Analyze their marketing efforts, including advertising, social media, and public relations.
- Strengths and weaknesses: Identify their competitive advantages and disadvantages in comparison to your business.
Assess your company's competitive positioning by comparing your strengths, weaknesses, opportunities, and threats (SWOT analysis) to those of your competitors. Highlight what makes you unique and areas where you can gain a competitive advantage.
Describe your target market and how it differs from your competitors'. Understanding the market segments that your competitors serve will help you better define your own target audience and tailor your marketing strategies accordingly.
Based on your competitor analysis, identify potential opportunities to exploit in the market and threats that your competitors may pose to your business. This can help you develop proactive strategies to mitigate risks and capitalize on growth opportunities.
Conclusion and Strategic Recommendations
Summarize your findings and provide recommendations for how your business can differentiate itself, address competitive challenges, and gain market share. This may include recommendations for product or service development, pricing, marketing strategies, or strategic partnerships.
So one of your initial questions should be where in the world do you find reliable data on your competitors, it's not like you can call them and just ask them for their financial statements and customer database!
Depending on whether your business is primarily online or a physical location, the approach and tools that I use to do competitive research will differ. I am going to show you examples of the type of research that I like to do and the data that I am able to pull from a couple of tools that we like to utilize.
There are a few data points that I like to find for online competitors. I want to know:
- How much organic traffic is my competitor's website getting?
- How much paid traffic is my competitor’s website getting?
- How much search volume is there for keywords that I want to compete for?
- How much would I have to pay per click for keywords that I want to rank for?
In order to find this data I use two tools.
- Google Adwords Keyword Planner
Let me show you how I use both tools to gather data on my competitors.
How to Use Ahrefs for Competitor Analysis
Let’s assume I am working on a business plan for a gym in Indianapolis. I would start by looking at the search volume for “Indianapolis Gyms” which would give me some idea of the number of people searching for this each month. You can see below that there are 250 monthly searches for this keyword according to Ahrefs.
Next, I would look to see which gym is top ranked for that keyword and in this example I found a Lifetime Fitness . Now I can take that keyword and run it through the Ahrefs Site Explorer and I can now see how much website traffic that particular competitor is getting each month. This particular website is getting about 800 organic website visitors per month.
Ahrefs can also estimate how much paid traffic a particular website is receiving each month as well.
If you want to see exactly how I use the Ahrefs tool, check out the short video below:
Watch: I recorded a demo of using Ahrefs for competitor analysis here.
How to Use Google Adwords Keyword Planner for Market Research
I also like to use Google Adwords Keyword Planner to gather some additional data about my market. So again, if I search for “Indianapolis Gyms” I can see Google’s estimate of traffic per month as well as seasonal trends in search volume. I can also see the average cost per click that advertisers are paying for that keyword.
As you can see, the cost per click ranges from $1.32 to $5.29 for advertisers right now. If you can see how much paid traffic your competitor is getting on Ahrefs and you know the average cost per click for relevant keywords from Google Keyword Planner, you can back into a rough estimate of how much your competitor is spending on advertising per month. I think this can be useful as well.
One other thing you might notice is that Ahrefs seems to have conservative search volume estimates compared to Google Keyword Planner. We saw 250 monthly searches from Ahrefs and 2,400 from Google Keyword Planner. This should give you some range of how big your market might be.
If your competition is not an online business, or doesn’t really have much of an online presence, then finding foot traffic data is going to be much more useful for you in your competitor analysis.
We have partnered with a company called Advan Research to be able to pull foot traffic data reports from their platform.
Here is some of the really cool data that we can get and how you might use it in your competitor research.
Monthly Foot Traffic Data
You can pull monthly foot traffic data for your competitors. This foot traffic data is based on cell phone GPS data and can provide some great insight on potential customer traffic you might expect. For example, in the graph below we pulled the monthly traffic for a local Steakhouse that gets about 5,000 visitors per month.
Daily and Hourly Foot Traffic Data
You can pull foot traffic data for a location by the day and the hour to get an idea of what days and hours are busiest for your competitors and likely to be busiest for you.
Customer Location Data
One of the most powerful data reports you can pull on a competitor is a heat map of where their customers are coming from. If you notice that customers are traveling a long distance to your competitor, you could look at finding a location that is closer to a large segment of your competitors' customers.
Annual Revenue Estimate and Revenue per Square Foot Data
Finally, for larger businesses or publicly traded companies, Advan can provide you with estimates of their annual revenue, revenue per square foot and how many square feet they are renting for their business. Talk about some serious competitor intelligence that can set you ahead and impress your investors and lenders.
The following is an example of a competitor analysis for a restaurant business plan which you can adapt to your own business. I would also recommend that you incorporate data from Ahrefs, Google Adwords Keyword Planner and our Foot Traffic Data Report into this section of your business plan. The idea here is to get a good understanding of where the competitors stand and to identify your place in the market.
I. Competitor Analysis
The purpose of this section is to identify and evaluate the main competitors in the local Italian restaurant industry and to determine our competitive positioning. Understanding the competitive landscape will help us to develop effective strategies that enable us to compete effectively in the market, differentiate ourselves, and carve out a sustainable market share. Our analysis will focus on the following key areas
A. Market Overview
The local Italian restaurant market is valued at approximately $X million and is expected to grow at a CAGR of X% over the next five years. The industry is characterized by the presence of several well-established Italian restaurants, popular chain restaurants, and a few emerging independent restaurants. The primary segments within the industry are fine dining, casual dining, and fast-casual dining.
B. Key Competitors
Competitor A (Fine Dining Italian Restaurant)
Market Share : X%
Strengths: High-quality ingredients, exceptional culinary skills, elegant ambiance, and strong brand recognition.
Weaknesses: High pricing, limited menu offerings, and a focus on a specific customer segment (high-income individuals).
Competitor B (Casual Dining Italian Restaurant)
Market Share: X%
Strengths: Wide variety of Italian dishes, family-friendly atmosphere, and strong customer loyalty.
Weaknesses: Inconsistent food quality, slow service during peak hours, and limited menu innovation.
Competitor C (Fast-Casual Italian Restaurant)
Strengths: Quick service, affordable pricing, and convenient locations.
Weaknesses: Limited menu variety, lack of authentic Italian flavors, and a focus on takeout and delivery over dine-in experiences.
C. Competitive Positioning
Based on our analysis, our competitive positioning is as follows:
Unique Value Proposition: Our primary differentiation lies in our commitment to providing authentic Italian cuisine using high-quality, locally-sourced ingredients, combined with exceptional customer service in a warm and inviting atmosphere. This will enable us to attract customers seeking a genuine Italian dining experience that sets us apart from competitors.
Competitive Pricing: Our pricing strategy is to offer value for money while maintaining profitability. By carefully selecting our suppliers and managing our costs, we will be able to offer a competitively priced menu without compromising on quality.
Target Market: We will cater to a broad range of customers, including families, couples, and groups of friends, by offering a versatile menu that appeals to various tastes and preferences. Our focus will be on attracting local patrons and tourists alike, who are looking for an authentic and memorable Italian dining experience.
Marketing and Promotion: We will invest in both traditional and digital marketing strategies to create brand awareness and drive customer traffic. This will include targeted social media campaigns, local newspaper advertisements, participation in local food festivals, and collaboration with local businesses and organizations.
I hope this has been helpful in giving you some ideas on how to gather relevant competitor research so that you can make informed decisions about where you locate and start your business.
If you are interested in our Foot Traffic Data Report to help provide the data for your competitor analysis or other sections of your business plan, please don’t hesitate to contact us.
About the Author
Adam is the Co-founder of ProjectionHub which helps entrepreneurs create financial projections for potential investors, lenders and internal business planning. Since 2012, over 50,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections.
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Competitive Analysis for Business Plan
The Competitive Analysis section of your business plan provides an overview of the competition in your market. This section should help readers understand the strengths and weaknesses of your competitors and how your business will differentiate itself.
Why Competitive Analysis is Important in Business Plan?
The Competitive Analysis is important because it helps you understand your competitors and to develop strategies to differentiate your business and gain market share.
What to Include in Competitive Analysis
Before we jump in to the next section. You can download free business plan examples written by our professionals to see how we have written the competitive analysis in business plan. Here are some key components to include in your Competitive Analysis,
Identify your main competitors including direct and indirect competitors, describe their products or services, market position, and target customers.
Direct & Indirect Competitors Example
- Pepsi and Coca-Cola are direct competitors in the soft drink industry.
- Nike and Adidas are direct competitors in the athletic shoe market.
- Apple and Samsung are direct competitors in the smartphone market.
- A fine dining restaurant may have indirect competition from fast food chains.
- A high-end spa may have indirect competition from at-home spa products.
- A movie theater may have indirect competition from streaming services like Netflix.
Identify the strengths and weaknesses of your competitors and explain how your business will differentiate itself. This includes your unique value proposition, pricing strategy, and marketing approach.
Estimate the market share of each competitor and explain how you will gain market share. This includes your sales strategy, customer acquisition tactics, and promotional efforts.
Barriers to Entry:
Identify the barriers to entry in your industry, such as high capital costs, regulatory requirements, or proprietary technology. Explain how your business will overcome these barriers and establish a competitive advantage.
The SWOT Analysis component of the Competitive Analysis assesses the strengths, weaknesses, opportunities, and threats facing the business in relation to its competitors. This analysis should include an evaluation of the business’s internal strengths and weaknesses, as well as an analysis of external factors such as market trends, regulatory changes, and competition.
The Risk Analysis component of the Competitive Analysis identifies potential risks and challenges that may impact the business’s ability to achieve its marketing goals. This includes an evaluation of financial risks, such as changes in market conditions or unexpected expenses, as well as non-financial risks such as reputational damage, supply chain disruptions, or legal and regulatory risks.
The milestones section in the competitive analysis of your business plan outlines the major goals and achievements that your business hopes to reach over a specific period.
The milestones section should include a clear timeline with specific, measurable objectives that will allow the business to track its progress towards achieving its goals. Some examples of milestones could include:
- Opening a new store or location
- Launching a new product or service
- Reaching a specific sales target
- Hiring key staff members or building out a team
- Implementing new technology or systems
- Obtaining regulatory approval or certification
Overall, the milestones section provides a roadmap for the business’s success, helping to ensure that it stays on track and achieves its objectives.
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