In order to plan marketing strategies and achieve competitive advantage for your company, you have to study your competition.
Recognizing the strengths and weaknesses of competitors allow managers to exploit weaknesses, emulate strengths or avoid competing in areas where other companies are especially strong. Failure to account for the presence of competitors can result in bad business decisions.
But first, do you know who your competitors are? There are direct competitors (those who manufacture and/or sell the same products, e.g. stuffed toys) and indirect competitors who make and sell products with the same use or fill the same need as yours does (e.g. other types of toys, like dolls, building blocks, etc.).
In determining who your competitors are you have to look at companies with similar technology and products as well as companies that use different technology and products. The common denominator is that each category has a method of solving the same problem that your product addresses, whatever technology is used.
How do you find the names of your competitors? Industry directories may be useful, industry associations can help. Articles and advertisements in trade journal may also yield information on who your competitors are. Talking with customers and suppliers can be useful too.
Once you get to know them, you need to study each of them. Here, according to America’s Journal of Technology Commercialization, are the aspects or factors you should study about your competitors to help your own company develop a competitive advantage.
Product features: How similar are other products, as compared with yours? Are there some features and benefits that they have that are better? Worse? What about your strengths here?
Competitor size: Who’s big, and how does that impact their place in the market? If they are big companies, are they focused solely on your industry, or are they in other industries as well? Who’s small? What is the mix of large vs. small companies, and why? How can you position your company against these sizes?
Market share and perceptions: Who has what market shares and why? Are these companies considered leaders and innovators, or followers? Do customers perceive their products and services to be good or adequate? Again, how can you stand out against these perceptions?
Financials: This is important for your marketing strategy. Are the dominant players achieving healthy margins in your industry, and why or why not? What has their growth in your industry been like for the last several years? Are they involved in any expensive litigation, and why? These issues provide clues about how they may be able to withstand and react to new competition.
Research & development: What kind of R&D budgets do your competitors have? How many patents do they have, and do any cover any technologies related to your products? Do you need to watch out for more innovations and thus need to try to stay ahead of the game? Or, it there someone you can partner with to get to market faster?
Sales and distribution: How do your competitors sell and distribute their products? If they sell through distributors or other channels, the particular distributors could possibly have a restriction on how many of competing products they sell, which could impact your own product distribution. So, you’ll need to note as many of the names as possible so that you can contact them.