In order for a company to formulate effective marketing strategies that will cause them to lead in the market, it is essential that the company conducts a thorough analysis of its current and potential competitors. This can be termed as competitor analysis.
Competitor analysis basically is a thorough assessment of the weaknesses and strengths of a company’s current and potential competitors taking into consideration their products, prices, channels and promotion in comparison to theirs. In this analysis a company will try to identify who their competitors are, their strategies, their possible reaction patterns, objectives and their competitive advantages and disadvantages. Once the company is able to identify these it will be able to formulate strategies to counteract their competitors’ plans and keep them ahead of the market.
Competitors of a particular company are many and identifying them may not be as simple as it may seem. There are some that may be quite obvious, but others which may not, will be identified through the competitor analysis. A company may identify its competitors by looking into its industry in which it will find similar companies which offer a close substitute to its products or services. In such industries when there is an increase in price of one product there will be a shift in the demand of consumers to the other. For example in the beverage industry when there is an increase in the price of tea consumers are likely to shift to other alternative such as hot chocolate or even soft drinks.
A company can also look at the market to determine its competitors. It can do this by looking at companies that may be trying to satisfy the same target market and the same need in the market. This will give the company a broader perspective of its competitors. For example a coffee making company looking in the market would consider all company’s trying to satisfy consumers thirst as competitors. This would include all companies who produce drinks including water, beers, energy drinks and so on. This kind of analysis would help the company to formulate longer term marketing plans. However the best method would be to combine information on competitors in the industry and market in order to give a vivid picture of the competition that the company is up against.