Competition analysis

The analysis of the competition is the process that a company puts into practice to know how to act in the competitive environment, which begins by recognizing its competitors to determine what its main objectives, strategies, weaknesses and strengths are.

However, competition analysis is a very important tool for any company that is market oriented.

Undoubtedly, for companies to achieve success in a highly competitive market , all decisions related to marketing strategies and tactics that they are going to implement must be based on how competitors act and react.

On the other hand, the most relevant aspects that companies should know about their competitors are based on knowledge about their products, prices, communication and distribution processes.

Competition analysis

Steps in the competition analysis

In any case, the steps in the analysis of the competition are first to identify the competitors, then know and evaluate their way of acting within the market and finally determine strategies of how we are going to defend ourselves or how we are going to face the competitors

  1. Who are the competitors?

Every company can identify its competitors and classify them as follows:

  1. Direct competitors

It turns out that direct competitors, are all companies that produce a product very similar to ours, are directed to the same market segment or use a price strategy very similar to ours.

For example, a direct competitor is the case of McDonald’s and Burger King, since both companies produce hamburgers, the market segment is people who appreciate fast food services and their price level is very similar.

  1. Indirect competitors

On the other hand, indirect competitors are all competitors that produce a product to cover the same need and as a consequence they are seeking to obtain consumer preference and have income through the sales generated. They usually produce substitute products.

In fact, in the case of McDonald’s, we could consider Kentucky Fried Chicken as an indirect competitor, in this case both companies solve the need for consumer hunger, so it is a McDonald’s competitor who hopes to keep the Consumer money facing that need.

  1. Competitors of the same sector

Now a competitor considered within the same sector is one that produces goods and services within the same production sector.

In relation to the case of the automotive industry , the Toyota company competes with Nissan because they are competitors of the same sector, for that reason every company that produces cars will be considered as a competitor of the same sector.

  1. Competitors within the market

Then, a competitor in the market is any company that produces any good or service to meet the same need.

That is, for the Toyota company a market competitor turns out to be any company that produces a good or service that serves to cover the need for transportation.

Therefore, Toyota is the competitor of the Uber company that offers travel services to the consumer through a technological application, the public transport service such as the subway and the taxi service, among some that can be named. In any case, all these companies solve the need for transportation for the user.

Of course, the competitor within the market greatly expands the competitive capacity of a company because it allows to recognize many more competitors and be more attentive to the actions and strategies they take and apply.

and. Real competitor

While a real competitor is any company that we can easily identify because they are currently competing in our market, it is easy to know and know how they behave in the competitive environment.

  1. Potential competitor

In the same way, the potential competitor is the most dangerous for a company, because as it is not yet present in the market, it is more difficult to know how it will act within the competitive environment and many times we are not prepared to face it.

Of course, there are many relevant cases in marketing such as Kodak that considered its biggest competitor was Fuji and turned out to be Sony with the introduction of digital cameras.

Types of competitors

  1. Knowledge and evaluation of competition

The information that most interests a company about its competitors is the following:

  1. The objectives and strategies

Above all, the objectives and strategies of each company allow to determine what they are giving greater importance; that is, if they are interested in market share, profits, growth, technological or service leadership.

  1. Strengths and Weaknesses

Apparently, the knowledge of the strengths and weaknesses of competitors allow us to respond better to their attacks when defending ourselves or if instead we take the initiative to go against the competition we know what are the weak points that we can take advantage of.

  1. Which competitors are we going to interact with

This last step allows us to define what kind of competitors we are going to relate to and thus adapt our marketing strategies to respond better.

Actually, by choosing which companies we are going to compete with, we can choose the weak or subordinate competitors who are the ones who generally lose, since they have fewer resources and possibilities to compete.

On the other hand, if we choose strong or dominant competitors, these are the ones that usually win in the competitive context because they are better trained and have better chances to attack or defend themselves.

However, if a company truly wants to innovate and evolve, it is better to choose to compete with strong competitors, but it must also measure its strength so as not only to lose out.

Finally, it is important for every company to know its competition, because this allows them to better train to react to an attack and to defend themselves in the best possible way. If, on the contrary, the company takes the initiative to attack, it must warn the strengths and weaknesses of its competitor to make the best decisions on how to deal with it.

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