Competitor analysis: legal and prohibited methods

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Competitor analysis: legal and prohibited methods

Competitors and competition… Perhaps these concepts, and with them the very existence of this phenomenon ⎯ competition ⎯ reflect the main and universal law (or condition) of origin, survival and evolution of all living things on the Earth. Not perhaps, but exactly! Right! Hardly anyone would argue that it does not. It is perfectly natural to ⎯ competition.

Why do you need a competitor analysis? Well, for example, you have good service, a wide assortment, normal prices, and the customer leaves. He goes to your competitors. So ⎯ what? Your competitor has made the client a better offer! How? How is it more profitable? You have to find out and analyze.
Or you are going to implement a new business idea. Without a thorough and comprehensive study of the market situation and the competitive environment, their analysis, you, being in your right mind, will not make real steps. Right? Analysis first!

Well and then, let your business thrive. And you, being a clever, experienced and farsighted businessman, will definitely and necessarily keep your hand on the “pulse” of the market, and, therefore, watch, study and analyze your competitors. Of course. Monitor and analyze!

This article will help you broaden your understanding of your competitors, learn about methods of competitor analysis, legal and illegal ways to obtain information about your competitors. Read it!

Purposes of Competitor Analysis

Competitor analysis is vital for any business to survive, improve and succeed in competition, strategic planning, and a long and prosperous life and has the purpose of determining:

  • the competitive market environment, its intensity and dynamics;
  • the extent of the main competitors, their assets, potential, structure;
  • strategies and tactics of key competitors in relation to suppliers (networks, partners) and consumers (promotion of goods/services);
  • technological schemes of organization of business-processes by competitors;
  • competitors’ ideas about the market and themselves in it in order to forecast
    their behavior and logic of practical actions and deeds;
  • strengths and weaknesses of competitors, areas of vulnerability;
  • opportunities, advantages or disadvantages.

Direct, indirect (indirect) and potential competitors

Direct competitors are (and are) companies and businesses that have similar characteristics to yours (localization, product, promotion, target market segment, etc.). Commonly known examples of global market ⎯ The Coca-Cola Company and PepsiCo, McDonald’s and Burger King, BMW and Audi.

Indirect competitors ⎯ businesses that offer completely different products, but for the same group of target consumers. Here the competition for customers is in the quality of goods or services, price or service, etc. An example of indirect competition on the price component is some manufacturer of budget smartphones and, for example, Apple. At the same time, the price gap should not be too big.

Potential competitors ⎯ companies that are not your direct competitors, but may well become them if the economic situation changes, they have a new unique selling proposition or any other circumstances that will make their goods or services relevant to your client.

How to identify your competitors

Now, in the age of total and universal domination of information technology, this task is not so difficult. You use the Internet. So, search engines help you. Experts recommend you use Crunchbase.com, Producthunt.com, Capterra.com,

Techcrunch.com, Angel.co. You can also turn to the Crunchbase site. It collects information about investors, founders, and investment rounds. Get busy! There are more opportunities than you think.

Be sure to search and find among the organizers and participants of industry and other exhibitions, conferences, seminars.

Do not bypass with your inquisitive gaze open periodic and permanent sources of analytical information, which very often and for free name the leaders, newcomers and outsiders of the market.

And then, no one and nothing prevents you from visiting your colleagues and seeing with your own eyes how everything works, or even carefully observing.

Finally, you can and should learn and adopt the experience of others. Take a tour of our Boiler Room site map. Get to know us. See our cases. In addition to the basic services of our company, we can surely help you in identifying your competitors and acquiring other knowledge about competition. Come in!

Where to get information about your competitors for analysis

There are many sources for getting information about your competitors these days. We’ve already mentioned them above. Let’s repeat ourselves and add more, namely:

  • search engines Yandex, Google (how to do it ⎯ all have long known);
  • thematic forums and portals (chat rooms, publications, news);
  • social networks (VK, Facebook and all others);
  • blogs and comments;
  • job vacancies and reviews of employers;
  • video and photo services;
  • printed materials (thematic publications: professional magazines, periodic newsletters)
  • mailing lists;
  • open official reporting;
  • “live” observation, informal communication with employees of a competitor, its partners, making “secret” purchases, etc;

calculation of parameters of interest through other related data (e.g. the real profit of the company may be taken from the official statement of cash flows, and the expenses may be determined on the basis of common sense by calculating the necessary organizational resources and their market value)
etc.

Methods of competitor analysis: comparative and competitive

Comparative analysis is used when there are several of your competitors. The algorithm of work here is as follows:

  • Competitor companies are ranked by their size (large-small).
  • In each group strengths and weaknesses are identified.
  • A plan is created to counteract each group of competitors.
  • A general competitive strategy is formed.

The strategy is analyzed, the necessary adjustments are made, and the adopted tools of competition are put into action.

The most known and recognized all over the world the author’s technique of the comparative analysis ⎯ is the theory 4P (Product ⎯ goods, Price ⎯ price, Promotion ⎯ promotion, Place ⎯ distribution), offered in 1960 by E.J. McCarthy ⎯ American professor of marketing.

Competitive analysis provides an opportunity to examine and understand in detail the goals
objectives, as well as the overall strategy of competing firms, to identify your strengths and weaknesses relative to them and build your own business strategy so as to maximize your advantages and existing opportunities and at the same time weaken the real and potential threats from the competitors.

At the present time there are 4 most known and proven methods in competitive analysis, namely:

  • SWOT-analysis, the essence of which is to identify the strengths and weaknesses of the company, as well as opportunities and threats from the external environment.
  • Michael Porter’s method (“Porter’s competitive forces”). American scientist asserted (and proved it) that company’s competitive position on the market is determined by 5 objective
  • factors (forces): 1⎯competitors; 2⎯”power” of suppliers; 3 ⎯”power” of buyers; 4 ⎯ risk of substitute goods; 5 ⎯ threat of new competitors.
  • PEST-analysis, the essence of which lies in the ability to competently study and scientifically forecast the impact of the macroeconomic situation on your business through the study of industry market trends.
  • SPACE analysis. This method of competitive analysis focuses on a company’s product and its financial capabilities as the main factors of business success and stability.

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