Competitive analysis: What is it and how is it done

July, 20 2022

 Starting a business involves effort, sacrifice, and dedication. It also requires a prior assessment of the sector's situation and a competitive analysis in order to understand the situation of the companies that have been on the market for the longest. Answer questions such as: how did they get there? What obstacles did they run into?  What success have they had on their journey?

Competitive analysis is essential for uncovering potential problems or weaknesses for a business. It also helps us to determine our real possibilities of differentiating ourselves, succeeding, or standing out.

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What is competitive analysis?

Competitive analysis consists of analyzing the situation of a company (existing or in the process of being created) in its market environment.

Its main objective is to gain in-depth knowledge of a specific sector and identify the strengths and weaknesses of an idea or business. Therefore, it's possible to achieve a positioning and define a long-term strategy.

Analyzing the competition is also key for assessing the viability of a business project. This preliminary work may reveal a saturated market, both due to an excess of offers and to the existence of a monopoly that may hinder the establishment of a new brand.

Thus, any strategic analysis of the competition must answer these questions:

  Who are our direct competitors and our potential competitors?

  What are their objectives?

  How do they sell?

  What is their current situation and how has it evolved?

  What are their strengths and weaknesses?

How do you do a competitive analysis?

Conducting a competitive analysis is a complex process that has four steps.

Análisis de competidores - cafetería - Jeff

Step 1: Set objectives

Before starting the competitive analysis, it's important to identify the purpose of the study, i.e., what we want to do it for.

The main idea is usually to increase market share. However, a strategic analysis of the competition can also help us to check the viability/profitability of our project, identify new business opportunities (new market niches, new customer needs, etc.), adopt differentiated positioning (image, quality, price, etc.), or redesign marketing and advertising strategies.

Step 2: Identify the competition

A company's competition depends on many factors, the most important of which are the market segment, the type of operation, and the business model. A company aimed at a general audience will not be the same as one focused on a specific or local market niche. 

To identify your competition, you must assess whether the company:

  Has a business model that’s similar to yours.

  Satisfies the same customer needs as you do.

  Shares suppliers with you.

  Facilitates the creation of new companies that can also be your competitors (franchises).

  Offers services or products that can replace yours.

With all this, we can distinguish between:

  • Direct competition. Businesses that have the same model as yours, operate in a similar way, and offer virtually the same products or services. This competition is even more direct if you also operate in the same geographical area.
  • Indirect competition. Companies that answer to the same demands as yours, but in a different way (with other products or services) or with a different strategy. This type of competition must be carefully analyzed, since it's the one that can most easily reach new market shares that we're interested in.
  • Potential competitors. Although this is the least objective and most hypothetical option, we should not downplay its importance. This includes substitute competition (companies or individuals that satisfy the same needs, but with a different product or service than the one you offer); new competition (new companies that are in your market directly or indirectly); and disruptive competition (new companies that revolutionize the market in a global and innovative way).


Step 3: Data analysis

Once you've sorted out your competitors, you can determine who your direct competitors are by analyzing three key aspects:

Products (attributes and distinguishing features, range of product, price, quality, etc.)

Sales (points of contact/sales, promotions, channels, business model, distributors, etc.)

Marketing strategy (social media presence, content, branding, website, digital media ads, etc.)

With respect to the method of strategic analysis of the competition, there are several options.

  • Positioning map. It is arranged around two axes that reflect a variable, chosen according to the objective of the analysis. Its purpose is to identify a differentiating market segment.
  • SWOT analysis chart. The SWOT matrix provides an overview of the situation of a competitor's company on the market with respect to us. It's made of 4 squares that allow for a complete diagnosis and include strengths, opportunities, weaknesses, and threats.
  • BCG-matrix. It classifies competitors into 4 categories, according to their offer and their degree of maturity/implementation/acceptance in the current market.

Step 4: Interpretation of results

Correctly interpreting the data obtained in the competitive analysis is crucial for identifying and classifying the factors that can lead you to success. Furthermore, based on these results, we can establish a marketing plan with more specific and better defined short-, medium-, and long-term strategies and objectives.

The general recommendation is to compare the data of your competitors' companies with your business plan. We can then use the findings to improve performance and strengthen the distinctive aspects of a brand or company.

Competitive analysis: A practical example

Before starting with the competitive analysis of your company, we recommend you gather some tools such as the SWOT matrix to analyze direct competitors. You can modify and expand it based on your needs, and add categories like prices, distribution, suppliers, etc.

Here’s an example:

Download SWOT Matrix Template

If you're thinking about starting a business, there are several ways to conduct your competitive analysis. For franchise models, you'll always have much of this work taken care of since they give you a proven business model so that you only have to focus on the important things: preparing the space, hiring the staff, and managing the business on a day-to-day basis.

This is precisely the case with Jeff: we're the daily service company where you can launch a business in the laundry, gym, and coffee shop sectors.

Are you interested? Request information without any obligation.

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Filipe Cabrita
Filipe Cabrita

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