A competitive landscape analysis is essential for businesses to determine their position within the market and identify growth opportunities. Without it, businesses will struggle to identify market gaps, capitalize on opportunities, and proactively address potential threats.
By running a thorough analysis, companies can gain insight into the strategies of their competion and leverage that knowledge to inform their own decisions.
It also fosters innovation and differentiation by inspiring the development of unique value propositions and ensuring alignment with customer preferences.
In this guide, we’ll break down what competitive landscape analysis is, why it’s crucial, and, most importantly, we’ll walk you through a step-by-step process to conduct your own.
What is a Competitive Landscape Analysis?
A competitive landscape analysis is a strategic business activity of evaluating and understanding the overall structure, dynamics, and key players within a specific industry or market. The goal is to gain insights into the competitive environment to inform business decision-making, identify opportunities, and formulate effective marketing strategies.
It is your tool for understanding who your competitors are, what they’re doing, and how you can outperform them. It’s an in-depth review that maps out the playing field within your industry.
Don’t mistake it for a quick, superficial scan, and it is not about copying what others are doing. It’s about learning from their successes and failures.
By defining gaps in the market or areas where your rivals are falling short, you can carve out your niche and develop innovative solutions that set you apart. You’re not just surviving in your industry but striving to dominate it.
Common Competitive Landscape Analysis Frameworks
So, here the frameworks and methodologies designed to comprehensively analyze the competitive forces, industry dynamics, and external factors that shape a company’s position within its market.
You’re likely already familiar with some common competitive landscape analysis frameworks. Do you recognize names like SWOT Analysis, Porter’s Five Forces, or the PESTEL Analysis? These, along with the BCG Matrix and Competitor Analysis Framework, are key tools you’ll use in your analysis.
SWOT Analysis
This is one of the most common competitive landscape analysis frameworks: the SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It’s an effective tool for understanding your company’s market position.
Please refer to this step-by-step guide:
- Identify Strengths (Internal, Positive Factors):
- What advantages do you or your organization have?
- What unique skills, resources, or capabilities set you apart?
- Consider factors such as expertise, technology, reputation, and financial resources.
- Identify Weaknesses (Internal, Negative Factors):
- What areas need improvement or enhancement?
- Are there limitations in terms of skills, resources, or processes?
- Consider aspects like lack of expertise, outdated technology, or financial constraints.
- Identify Opportunities (External, Positive Factors):
- What external factors could benefit you or your organization?
- Are there emerging trends, market changes, or new technologies?
- Consider potential partnerships, market growth, or industry advancements.
- Identify Threats (External, Negative Factors):
- What external factors could pose challenges or risks?
- Are there industry trends, competition, or economic factors that could negatively impact it?
- Consider changes in regulations, economic downturns, or emerging competition.
- Create a SWOT Matrix:
- Organize your findings into a four-quadrant matrix with sections for Strengths, Weaknesses, Opportunities, and Threats.
- List the most important factors in each quadrant.
- Prioritize and Analyze:
- Assess the significance and impact of each factor.
- Think how strengths can be leveraged to capitalize on opportunities.
- Evaluate how weaknesses might be addressed to mitigate threats.
A thorough SWOT analysis provides a clear picture of your competitive landscape. It’s an essential step in formulating a sound business strategy.
Porter’s Five Forces
Porter’s Five Forces is a framework developed by Harvard business professor Michael E. Porter to analyze the competitive forces within an industry and understand the factors that shape the competition and profitability of a market. The model identifies five key forces that influence the level of competition in an industry:
- Threat of New Entrants: Examines the ease with which new competitors can enter the market and potentially erode profitability.
- Bargaining Power of Buyers: Focuses on customers’ power in influencing prices, quality, and other factors.
- Bargaining Power of Suppliers: Examines the influence of suppliers on the industry by assessing their ability to control prices, supply, and terms.
- Threat of Substitute Products or Services: Analyzes the availability of alternative products or services that could meet the same needs as those offered by businesses within the industry.
- Intensity of Competitive Rivalry: Evaluates the competition level among existing industry firms.
PESTEL Analysis
PESTEL analysis is a strategic management tool that helps organizations understand and evaluate the external macro-environmental factors that can impact their business. The acronym PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal factors.
This analysis provides a comprehensive framework for assessing the various external influences that affect a business or industry, allowing organizations to anticipate and respond to changes in the broader environment.
So, you must examine each factor.
Political factors are the influence of government policies, regulations, and political stability on the business. Economic factors focus on the impact of economic conditions, such as inflation, exchange rates, and economic growth.
Social factors consider cultural trends, demographics, and societal attitudes that may affect the demand for products or services. Technological factors assess the impact of innovation, automation, and technological advancements on the industry.
Environmental factors examine the ecological and sustainability aspects relevant to the business, while legal factors involve an analysis of laws, regulations, and compliance issues.
Organizations gather relevant information, analyze its potential impact, and use the insights gained to effectively make informed strategic decisions and adapt to the external environment.
BCG Matrix
The BCG matrix, also known as the Boston Consulting Group matrix, is a management tool used to analyze a company’s product portfolio based on two key dimensions: market share and market growth. It was developed by the Boston Consulting Group in the early 1970s and is widely used in strategic management to help companies allocate resources and make decisions about their product offerings.
The BCG matrix categorizes a company’s products into four quadrants:
- Stars: Products with high market share and high market growth rate. These are typically the leading products in a company’s portfolio and have the potential to generate substantial profits. However, they also require significant investment to maintain and further increase market share.
- Cash Cows: Products with a high market share but a low market growth rate. Cash cows are considered mature products in stable markets. They generate a steady income and require less investment compared to stars. Companies can use the cash generated by cash cows to support other products in their portfolio.
- Question Marks (Problem Child): Products with low market share but a high market growth rate. These products are in growing markets but have not yet achieved a dominant position. Companies need to decide whether to invest more to turn them into stars or phase them out if they do not show potential for growth.
- Dogs: Products with low market share and low market growth rate. These products may not generate significant profits, and companies must evaluate whether to divest or reposition them. Dogs may not contribute substantially to the overall profitability of the company.
The BCG matrix helps companies prioritize their product portfolio and allocate resources effectively. It’s important to note that the matrix is a snapshot and that products can move between categories as market conditions change. The goal is to ensure a balanced portfolio that maximizes profitability and strategic growth.
Blue Ocean Strategy
Blue Ocean Strategy is a business concept introduced in the book “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant” by W. Chan Kim and Renée Mauborgne. “Blue ocean” represents untapped, uncontested market space, while “red ocean” represents existing, competitive markets.
The main idea behind the Blue Ocean Strategy is to encourage businesses to move away from competing in crowded and saturated markets (red oceans) and instead focus on creating new market spaces (blue oceans) where competition is irrelevant or nonexistent.
This involves innovation and the development of unique value propositions that set a company apart from its competitors.
To apply this strategy, you’ll need to innovate and differentiate your product or service, creating a leap in value for your company and your customers. You’ll shift your focus from beating the competition to making it irrelevant.
The Blue Ocean Strategy is a radical, value-driven approach, aiming to break the value-cost trade-off and open up new market space.
Let’s now move to the next section, where we’ll discuss the concept of ‘competitive positioning mapping.’
Competitive Positioning Mapping
Competitive Positioning Mapping, also known as perceptual mapping or brand mapping, is a strategic marketing technique used to visually represent the competitive landscape of products or brands in relation to each other.
This mapping helps businesses understand how consumers perceive different offerings in the market and allows them to identify opportunities for differentiation.
The process usually involves creating a visual map with two or more axes representing key dimensions or attributes important to consumers within a particular market.
These dimensions could include price, quality, features, innovation, customer service, and others, depending on the industry and the specific factors that drive customer purchasing decisions.
Next, we will finally look at how you can conduct your own competitive analysis in very simple steps.
6-Step Competitive Landscape Analysis
Competitive insights are the foundation for any strategy. A good analysis helps identify new opportunities, strengths and weaknesses, and threats to your product or service.
Here, we will go over six steps you need to take when conducting competitive intelligence.
Define Your Industry and Market
Defining the industry and market is the foundational step in conducting a comprehensive competitive landscape analysis. The industry represents the broader economic sector within which a company operates, encompassing similar types of businesses engaged in similar activities.
Conversely, the market is a more specific and targeted space within the industry, focusing on the actual buyers and sellers. To conduct a thorough analysis, it is crucial to identify key segments within the market and comprehend the overall market structure.
This involves understanding customer needs, competitive forces, regulatory factors, and other influences shaping the industry’s dynamics.
A clear definition of the industry and market sets the stage for systematically exploring competitors, market trends, and strategic opportunities, enabling businesses to make informed decisions and stay competitive in their operating environment.
Gather Data on Competitors
Once you’ve defined your industry and target market, it’s time to identify your key competitors. These businesses offer the same or similar products or services as you or those targeting the same customer base.
This involves understanding the following:
- Content – what are they talking about, and how are they framing their messages?
- Offering – what products or services are they offering, and at what price points?
- Social Media Activity – how often do they post, and what’s the engagement like?
- Financial Performance – how profitable are they, and what are their growth trends?
Look at their pricing and their market positioning. Are they a direct competitor offering the same product to the same customers or an indirect competitor offering a different product to the same customers?
Understanding who your competitors are and what they offer is crucial to developing a strategy that differentiates you from them. Don’t forget to also take note of their strengths and weaknesses. This information will be invaluable in the next steps of your competitive landscape analysis.
Select an Analysis Framework for Each Competitor
Now that you’ve collected crucial information about your competitors, it’s time to choose an analysis framework tailored to each one of them. This framework, or model, serves as a lens through which you’ll examine their strategies, strengths, and weaknesses.
This process requires a strategic approach tailored to your objectives and industry dynamics. Begin by clearly defining your goals for competitor analysis, such as understanding market positioning, identifying strengths and weaknesses, or evaluating future strategies.
You may opt for any of the frameworks above.
It’s essential to recognize that no single analysis framework fits all situations, and the choice should align with your specific business context and goals.
Evaluate Competitive Positioning
After selecting the right competitive analysis framework, your next step is evaluating your competitors’ market positioning. This involves understanding how they’ve carved their place in the industry and how they perceive themselves.
Consider the following points:
How they differentiate themselves: What’s unique about their products or services?
- Look for unique selling propositions.
- Inspect their marketing messages.
Their target audience: Who are they trying to reach?
- Identify their ideal customer.
- Evaluate their market segmentation.
Their value proposition: What value do they promise to deliver?
- Assess the benefits they pledge to provide.
- Examine the problems they solve.
Understanding your competitors’ positioning will help you strategize better and find your own unique place in the market.
Assess Market Trends and Dynamics
Now that you’ve got a handle on your competitors’ positioning, it’s time to assess market trends and dynamics. This step is crucial in understanding the underlying forces that drive your industry and can provide valuable insights for strategic planning.
- Identify key market trends: Spotting trends early can give you a competitive edge. This could include changes in customer preferences, technological advancements, or shifts in the regulatory environment.
- Understand market dynamics: This involves analyzing market growth, segment size, and customer behavior. It’s about understanding the ‘why’ behind the ‘what.’
- Monitor changes in supply and demand: This could include changes in production capacity, price fluctuations, or shifts in consumer demand. Monitoring these factors is vital as they can significantly impact your business.
- Keep abreast of industry news and events: This will help you stay ahead of any potential challenges or opportunities that may arise.
Draw Conclusions and Develop Strategy
After digesting your industry’s market trends and dynamics, draw strategic conclusions that can shape your business’s competitive position. Analyzing the competition isn’t just about understanding what others are doing. It’s about identifying where to outperform them and carve out a unique market position.
This strategy should play to your strengths, mitigate your weaknesses, seize identified opportunities, and guard against threats. It’s a guide for your business to navigate the complexities of the market landscape.
You might need to tweak your business model, or perhaps you’ll find an untouched niche. Remember, it’s not about emulating your competitors but surpassing them. You’re looking for ways to differentiate your business to give yourself a competitive edge.
With your conclusions, you can now develop a strategy that competes and excels in your chosen market. That’s the power of a well-executed competitive landscape analysis. It’s a compass pointing the way to your business’s success.
By following these steps, businesses can gain valuable insights into their competitive landscape and make well-informed decisions to drive success in the market.
Conclusion
You’ve got this. Understanding your competitive landscape isn’t rocket science; it’s essential to your business strategy. By using these frameworks and following this six-step guide, you’re on your way to gaining valuable insights. Remember, it’s not about outdoing competitors but understanding them. So, dig deep, analyze, and use that knowledge to make informed decisions. Now, go and conquer your market.
