25 Mar ARD548-competition and market research
The purpose of the competition analysis is to get to know both current and potential competitors in depth. This knowledge should be as broad as possible. It is worthwhile for it to cover all important aspects of running a business.
The final stage of the competition analysis is drawing conclusions and incorporating the obtained results into the process of building a competitive advantage. Applications can be used to create, inter alia, market entry strategies, marketing, and sales strategies, or distribution plans.
A properly conducted analysis also allows you to identify niche market areas. Thus, it can lead to building a long-term competitive advantage through innovation.
Each competition analysis should end with the development of useful, practical business recommendations. In order for this to happen, the process must include the analysis of as many aspects of the competitors’ operation as possible.
What are the most common competitor analysis mistakes and how to avoid them?
During several decades of activity on the market, researchers and consultants from PMR have carried out hundreds of projects in the area of competition analysis. They collaborated with entrepreneurs and managers with very different approaches to this area of business analysis. Many of them avoided numerous pitfalls and problems during this process thanks to the support of an external expert.
- Narrowing down the analysis to a few companies
A serious and frequent mistake is to consider only a few of the largest entities in the competition analysis. It happens that due to the lack of knowledge, experience, or time, companies omit smaller and niche entities in their listings.
This approach makes it difficult to carry out a systematic market analysis (market size and value as well as the market shares of key players). Nor does it help to develop a dynamic analysis that should reflect the dynamics of the market and its structural changes. Additionally, companies taking shortcuts are not able to prepare well to compete with prospective, innovative, niche companies.
- Too narrow definition of competition
When only the offer from the “same store shelf” is included in the analysis, then only a part of the market can be known. Yet products and services can come from different market areas. Jam from mass production can compete successfully with an organic product, and locally produced washing powder – with its global counterparts.
The variety of companies, brands, and offers taken into account in the analysis will guarantee a better, broader market knowledge. It will allow you to learn about the competition in the context of various costs and production technologies, promotion, and distribution models, communication strategies, and brand building.
- Failure to take into account a substitute offer
It is worth remembering that competition and substitutes are closely related concepts. Analyzing products that meet the same demand in a different way is the foundation of a good development strategy. Going to the cinema can compete with going out for a pizza, pasta – with rice or porridge, and an apartment by the Polish seaside – with a cottage on the Adriatic, and sometimes even with a structured deposit. It all depends on the needs that the products or services are to satisfy.
- Ignorance of customers’ point of view
An important element of the competition analysis is the voice of consumers. It is not enough to collect objective data about market competitors. It is also necessary to obtain information on how customers and users perceive individual companies, brands and products. Looking at competition through the eyes of customers allows you to better understand key success factors, strategies and decisions. Forgetting about the opinions of consumers, it is very easy to fall into the trap of creating an offer that does not match their expectations.
- Too narrow scope of the analysis
Competitor analysis is a very wide-ranging process that consists of many different activities. The analysis should include information from the previously mentioned areas, including product, price, market, distribution, finance, technology. And the report resulting from this process must present the most comprehensive picture of the market possible. Failure to take into account one or more aspects could lead to inappropriate business decisions being made.