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How to Write Competitive Analysis in a Business Plan (w/ Examples)

The Competitive Analysis Kit

• Vinay Kevadia
• January 9, 2024

14 Min Read

Every business wants to outperform its competitors, but do you know the right approach to gather information and analyze your competitors?

That’s where competitive analysis steps in. It’s the tool that helps you know your competition’s pricing strategies, strengths, product details, marketing strategies, target audience, and more.

If you want to know more about competitor analysis, this guide is all you need. It spills all the details on how to conduct and write a competitor analysis in a business plan, with examples.

Let’s get started and first understand the meaning of competitive analysis.

What is Competitive Analysis?

A competitive analysis involves collecting information about what other businesses in your industry are doing with their products, sales, and marketing.

Businesses use this data to find out what they are good at, where they can do better, and what opportunities they might have. It is like checking out the competition to see how and where you can improve.

This kind of analysis helps you get a clear picture of the market, allowing you to make smart decisions to make your business stand out and do well in the industry.

Competitive analysis is a section of utmost value for your business plan. The analysis in this section will form the basis upon which you will frame your marketing, sales, and product-related strategies. So make sure it’s thorough, insightful, and in line with your strategic objectives.

Let’s now understand how you can conduct a competitive analysis for your own business and leverage all its varied benefits.

How to Conduct a Competitive Analysis

Let’s break down the process of conducting a competitive analysis for your business plan in these easy-to-follow steps.

It will help you prepare a solid competitor analysis section in your business plan that actually highlights your strengths and opens room for better discussions (and funding).

Let’s begin.

1. Identify Your Direct and Indirect Competitors

First things first — identify all your business competitors and list them down. You can have a final, detailed list later, but right now an elementary list that mentions your primary competitors (the ones you know and are actively competing with) can suffice.

As you conduct more research, you can keep adding to it.

Explore your competitors using Google, social media platforms, or local markets. Then differentiate them into direct or indirect competitors.

Direct competitors

Businesses offering the same products or services, and targeting a similar target market are your direct competitors.

These competitors operate in the same industry and are often competing for the same market share.

Indirect competitors

On the other hand, indirect competitors are businesses that offer different products or services but cater to the same target customers as yours.

While they may not offer identical solutions, they compete for the same customer budget or attention. Indirect competitors can pose a threat by providing alternatives that customers might consider instead of your offerings.

2. Study the Overall Market

Now that you know your business competitors, deep dive into market research. Market research should involve a combination of both primary and secondary research methods.

Primary research

Primary research involves collecting market information directly from the source or subjects.  Some examples of primary market research methods include:

• Purchasing competitors’ products or services
• Conducting interviews with their customers
• Administering online surveys to gather customer insights

Secondary research

Secondary research involves utilizing pre-existing gathered information from some relevant sources. Some of its examples include:

• Scrutinizing competitors’ websites
• Assessing the current economic landscape
• Referring to online market databases of the competitors.

Have a good understanding of the market at this point to write your market analysis section effectively.

3. Prepare a Competitive Framework

Now that you have a thorough understanding of your competitors’ market, it is time to create a competitive framework that enables comparison between two businesses.

Factors like market share, product offering, pricing, distribution channel, target markets, marketing strategies, and customer service offer essential metrics and information to chart your competitive framework .

These factors will form the basis of comparison for your competitive analysis. Depending on the type of your business, choose the factors that are relevant to you.

4. Take Note of Your Competitor’s Strategies

Now that you have an established framework, use that as a base to analyze your competitor’s strategies. Such analysis will help you understand what the customers like and dislike about your competitors.

Start by analyzing the marketing strategies, sales and marketing channels, promotional activities, and branding strategies of your competitors. Understand how they position themselves in the market and what USPs they emphasize.

Evaluate, analyze their pricing strategies and keep an eye on their distribution channel to understand your competitor’s business model in detail.

This information allows you to make informed decisions about your strategies, helping you identify opportunities for differentiation and improvement.

5. Perform a SWOT Analysis of Your Competitors

A SWOT analysis is a method of analyzing the strengths, weaknesses, opportunities, and threats of your business in the competitive marketplace.

While strengths and weaknesses focus on internal aspects of your company, opportunities and threats examine the external factors related to the industry and market.

It’s an important tool that will help determine the company’s competitive edge quite efficiently.

It includes the positive features of your internal business operations. For example, a strong brand, skilled workforce, innovative products/services, or a loyal customer base.

It includes all the hindrances of your internal business operations. For example, limited resources, outdated technology, weak brand recognition, or inefficient processes.

Opportunities

It outlines several opportunities that will come your way in the near or far future. Opportunities can arise as the industry or market trend changes or by leveraging the weaknesses of your competitors.

For example, details about emerging markets, technological advancements, changing consumer trends, profitable partnerships in the future, etc.

Threats define any external factor that poses a challenge or any risk for your business in this section. For example, intense competition, economic downturns, regulatory changes, or any advanced technology disruption.

This section will form the basis for your business strategies and product offerings. So make sure it’s detailed and offers the right representation of your business.

And that is all you need to create a comprehensive competitive analysis for your business plan.

Want to Perform Competitive Analysis for your Business?

Discover your competition’s secrets effortlessly with our user-friendly and Free Competitor Analysis Generator!

How to Write Competitive Analysis in a Business Plan

The section on competitor analysis is the most crucial part of your business plan. Making this section informative and engaging gets easier when you have all the essential data to form this section.

Now, let’s learn an effective way of writing your competitive analysis.

1. Determine who your readers are

Know your audience first, because that will change the whole context of your competitor analysis business plan.

The competitive analysis section will vary depending on the intended audience is the team or investors.

Consider the following things about your audience before you start writing this section:

Internal competitor plan (employees or partners)

Objective: The internal competitor plan is to provide your team with an understanding of the competitive landscape.

Focus: The focus should be on the comparison of the strengths and weaknesses of competitors to boost strategic discussions within your team.

Use: It is to leverage the above information to develop strategies that highlight your strengths and address your weaknesses.

Competitor plan for funding (bank or investors)

Objective: Here, the objective is to reassure the potential and viability of your business to investors or lenders.

Focus: This section should focus on awareness and deep understanding of the competitive landscape to persuade the readers about the future of your business.

Use: It is to showcase your market position and the opportunities that are on the way to your business.

This differentiation is solely to ensure that the competitive analysis serves its purpose effectively based on the specific needs and expectations of the respective audience.

2. Describe and Visualise Competitive Advantage

Remember how we determined our competitive advantage at the time of research. It is now time to present that advantage in your competitive analysis.

Highlight your edge over other market players in terms of innovation, product quality, features, pricing, or marketing strategy. Understanding your products’ competitive advantage will also help you write the products and services section effectively.

However, don’t limit the edge to your service and market segment. Highlight every area where you excel even if it is better customer service or enhanced brand reputation.

Now, you can explain your analysis through textual blocks. However, a more effective method would be using a positioning map or competitive matrix to offer a visual representation of your company’s competitive advantage.

3. Explain your strategies

Your competitor analysis section should not only highlight the opportunities or threats of your business. It should also mention the strategies you will implement to overcome those threats or capitalize on the opportunities.

Such strategies may include crafting top-notch quality for your products or services, exploring the unexplored market segment, or having creative marketing strategies.

Elaborate on these strategies later in their respective business plan sections.

4. Know the pricing strategy

To understand the pricing strategy of your competitors, there are various aspects you need to have information about. It involves knowing their pricing model, evaluating their price points, and considering the additional costs, if any.

One way to understand this in a better way is to compare features and value offered at different price points and identify the gaps in competitors’ offerings.

Once you know the pricing structure of your competitors, compare it with yours and get to know the competitive advantage of your business from a pricing point of view.

Let us now get a more practical insight by checking an example of competitive analysis.

Competitive Analysis Example in a Business Plan

Here’s a business plan example highlighting the barber shop’s competitive analysis.

1. List of competitors

Direct & indirect competitors.

The following retailers are located within a 5-mile radius of J&S, thus providing either direct or indirect competition for customers:

Joe’s Beauty Salon

Joe’s Beauty Salon is the town’s most popular beauty salon and has been in business for 32 years. Joe’s offers a wide array of services that you would expect from a beauty salon.

Besides offering haircuts, Joe’s also offers nail services such as manicures and pedicures. In fact, over 60% of Joe’s revenue comes from services targeted at women outside of hair services. In addition, Joe’s does not offer its customers premium salon products.

For example, they only offer 2 types of regular hair gels and 4 types of shampoos. This puts Joe’s in direct competition with the local pharmacy and grocery stores that also carry these mainstream products. J&S, on the other hand, offers numerous options for exclusive products that are not yet available in West Palm Beach, Florida.

LUX CUTS has been in business for 5 years. LUX CUTS offers an extremely high-end hair service, with introductory prices of $120 per haircut.

However, LUX CUTS will primarily be targeting a different customer segment from J&S, focusing on households with an income in the top 10% of the city.

Furthermore, J&S offers many of the services and products that LUX CUTS offers, but at a fraction of the price, such as:

• Hairstyle suggestions & hair care consultation
• Hair extensions & coloring
• Premium hair products from industry leaders

Freddie’s Fast Hair Salon

Freddie’s Fast Hair Salon is located four stores down the road from J&S. Freddy’s has been in business for the past 3 years and enjoys great success, primarily due to its prime location.

Freddy’s business offers inexpensive haircuts and focuses on volume over quality. It also has a large customer base comprised of children between the ages of 5 to 13.

J&S has several advantages over Freddy’s Fast Hair Salon including:

• An entertainment-focused waiting room, with TVs and board games to make the wait for service more pleasurable. Especially great for parents who bring their children.
• A focus on service quality rather than speed alone to ensure repeat visits. J&S will spend on average 20 more minutes with its clients than Freddy’s.

While we expect that Freddy’s Fast Hair Salon will continue to thrive based on its location and customer relationships, we expect that more and more customers will frequent J&S based on the high-quality service it provides.

2. Competitive Pricing

John and Sons Barbing Salon will work towards ensuring that all our services are offered at highly competitive prices compared to what is obtainable in The United States of America.

We know the importance of gaining entrance into the market by lowering our pricing to attract all and sundry that is why we have consulted with experts and they have given us the best insights on how to do this and effectively gain more clients soon.

Our pricing system is going to be based on what is obtainable in the industry, we don’t intend to charge more (except for premium and customized services) and we don’t intend to charge less than our competitors are offering in West Palm Beach – Florida.

3. Our pricing

• Payment by cash
• Payment via Point of Sale (POS) Machine
• Payment via online bank transfer (online payment portal)
• Payment via Mobile money
• Check (only from loyal customers)

Given the above, we have chosen banking platforms that will help us achieve our payment plans without any itches.

4. Competitive advantage

5. SWOT analysis

Why is a Competitive Environment helpful?

Somewhere we all think, “What if we had no competition?” “What if we were the monopoly?” It would be great, right? Well, this is not the reality, and have to accept the competition sooner or later.

However, competition is healthy for businesses to thrive and survive, let’s see how:

1. Competition validates your idea

When people are developing similar products like you, it is a sign that you are on the right path. Having healthy competition proves that your idea is valid and there is a potential target market for your product and service offerings.

2. Innovation and Efficiency

Businesses competing with each other are motivated to innovate consistently, thereby, increasing their scope and market of product offerings. Moreover, when you are operating in a cutthroat environment, you simply cannot afford to be inefficient.

Be it in terms of costs, production, pricing, or marketing—you will ensure efficiency in all aspects to attract more business.

3. Market Responsiveness

Companies in a competitive environment tend to stay relevant and longer in business since they are adaptive to the changing environment. In the absence of competition, you would start getting redundant which will throw you out of the market, sooner or later.

4. Eases Consumer Education

Since your target market is already aware of the problem and existing market solutions, it would be much easier to introduce your business to them. Rather than focusing on educating, you would be more focused on branding and positioning your brand as an ideal customer solution.

Being the first one in the market is exciting. However, having healthy competition has these proven advantages which are hard to ignore.

A way forward

Whether you are starting a new business or have an already established unit, having a practical and realistic understanding of your competitive landscape is essential to developing efficient business strategies.

While getting to know your competition is essential, don’t get too hung up in the research. Research your competitors to improve your business plan and strategies, not to copy their ideas.

Create your unique strategies, offer the best possible services, and add value to your offerings—that will make you stand out.

While it’s a long, tough road, a comprehensive business plan can be your guide. Using modern business planning software is probably the easiest way to draft your plan.

Use Upmetrics. Simply enter your business details, answer the strategic questions, and see your business plan come together in front of your eyes.

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Frequently Asked Questions

Is swot analysis a competitive analysis.

SWOT analysis is just a component of a competitive analysis and not the whole competitive analysis. It helps you identify the strengths and weaknesses of your business and determine the emerging opportunities and threats faced by the external environment.

Competitive analysis in reality is a broad spectrum topic wherein you identify your competitors, analyze them on different metrics, and identify your competitive advantage to form competitive business strategies.

What tools can i use for competitor analysis?

For a thorough competitor analysis, you will require a range of tools that can help in collecting, analyzing, and presenting data. While SEMrush, Google Alerts, Google Trends, and Ahrefs can help in collecting adequate competitor data, Business planning tools like Upmetrics can help in writing the competitors section of your business plan quite efficiently.

What are the 5 parts of a competitive analysis?

The main five components to keep in mind while having a competitor analysis are:

• Identifying the competitors
• Analyzing competitor’s strengths and weaknesses
• Assessing market share and trends
• Examining competitors’ strategies and market positioning
• Performing SWOT analysis

What is the difference between market analysis and competitive analysis?

Market analysis involves a comprehensive examination of the overall market dynamics, industry trends, and factors influencing a business’s operating environment.

On the other hand, competitive analysis narrows the focus to specific competitors within the market, delving into their strategies, strengths, weaknesses, and market positioning.

About the Author

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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How to create a competitive analysis (with examples)

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. In this guide, we’ll outline how to do a competitive analysis and explain how you can use this marketing strategy to improve your business.

Whether you’re running a business or playing in a football game, understanding your competition is crucial for success. While you may not be scoring touchdowns in the office, your goal is to score business deals with clients or win customers with your products. The method of preparation for athletes and business owners is similar—once you understand your strengths and weaknesses versus your competitors’, you can level up. 

What is a competitive analysis?

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. 

Direct competitors market the same product to the same audience as you, while indirect competitors market the same product to a different audience. After identifying your competitors, you can use the information you gather to see where you stand in the market landscape. 

What to include in a competitive analysis

The purpose of this type of analysis is to get a competitive advantage in the market and improve your business strategy. Without a competitive analysis, it’s difficult to know what others are doing to win clients or customers in your target market. A competitive analysis report may include:

A description of your company’s target market

Details about your product or service versus the competitors’

Current and projected market share, sales, and revenues

Pricing comparison

Marketing and social media strategy analysis

Differences in customer ratings

You’ll compare each detail of your product or service versus the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.

How to do a competitive analysis

Follow these five steps to create your competitive analysis report and get a broad view of where you fit in the market. This process can help you analyze a handful of competitors at one time and better approach your target customers.

1. Create a competitor overview

In step one, select between five and 10 competitors to compare against your company. The competitors you choose should have similar product or service offerings and a similar business model to you. You should also choose a mix of both direct and indirect competitors so you can see how new markets might affect your company. Choosing both startup and seasoned competitors will further diversify your analysis.

Tip: To find competitors in your industry, use Google or Amazon to search for your product or service. The top results that emerge are likely your competitors. If you’re a startup or you serve a niche market, you may need to dive deeper into the rankings to find your direct competitors.

2. Conduct market research

Once you know the competitors you want to analyze, you’ll begin in-depth market research. This will be a mixture of primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is information that’s already compiled. Then, keep track of the data you collect in a user research template .

Primary market research may include: 

Purchasing competitors’ products or services

Interviewing customers

Conducting online surveys of customers 

Holding in-person focus groups

Secondary market research may include:

Examining competitors’ websites

Assessing the current economic situation

Identifying technological developments 

Reading company records

Tip: Search engine analysis tools like Ahrefs and SEMrush can help you examine competitors’ websites and obtain crucial SEO information such as the keywords they’re targeting, the number of backlinks they have, and the overall health of their website. 

3. Compare product features

The next step in your analysis involves a comparison of your product to your competitors’ products. This comparison should break down the products feature by feature. While every product has its own unique features, most products will likely include:

Service offered

Age of audience served

Number of features

Style and design

Ease of use

Type and number of warranties

Customer support offered

Product quality

Tip: If your features table gets too long, abbreviate this step by listing the features you believe are of most importance to your analysis. Important features may include cost, product benefits, and ease of use.

4. Compare product marketing

The next step in your analysis will look similar to the one before, except you’ll compare the marketing efforts of your competitors instead of the product features. Unlike the product features matrix you created, you’ll need to go deeper to unveil each company’s marketing plan . 

Areas you’ll want to analyze include:

Social media

Website copy

Press releases

Product copy

As you analyze the above, ask questions to dig deeper into each company’s marketing strategies. The questions you should ask will vary by industry, but may include:

What story are they trying to tell?

What value do they bring to their customers?

What’s their company mission?

What’s their brand voice?

Tip: You can identify your competitors’ target demographic in this step by referencing their customer base, either from their website or from testimonials. This information can help you build customer personas. When you can picture who your competitor actively targets, you can better understand their marketing tactics. 

5. Use a SWOT analysis

Competitive intelligence will make up a significant part of your competitor analysis framework, but once you’ve gathered your information, you can turn the focus back to your company. A SWOT analysis helps you identify your company’s strengths and weaknesses. It also helps turn weaknesses into opportunities and assess threats you face based on your competition.

During a SWOT analysis, ask yourself:

What do we do well?

What could we improve?

Are there market gaps in our services?

What new market trends are on the horizon?

Tip: Your research from the previous steps in the competitive analysis will help you answer these questions and fill in your SWOT analysis. You can visually present your findings in a SWOT matrix, which is a four-box chart divided by category.

6. Identify your place in the market landscape

The last step in your competitive analysis is to understand where you stand in the market landscape. To do this, you’ll create a graph with an X and Y axis. The two axes should represent the most important factors for being competitive in your market. 

For example, the X-axis may represent customer satisfaction, while the Y-axis may represent presence in the market. You’ll then plot each competitor on the graph according to their (x,y) coordinates. You’ll also plot your company on this chart, which will give you an idea of where you stand in relation to your competitors. 

This graph is included for informational purposes and does not represent Asana’s market landscape or any specific industry’s market landscape. 

Tip: In this example, you’ll see three companies that have a greater market presence and greater customer satisfaction than yours, while two companies have a similar market presence but higher customer satisfaction. This data should jumpstart the problem-solving process because you now know which competitors are the biggest threats and you can see where you fall short. 

Competitive analysis example

Imagine you work at a marketing startup that provides SEO for dentists, which is a niche industry and only has a few competitors. You decide to conduct a market analysis for your business. To do so, you would:

Step 1: Use Google to compile a list of your competitors. 

Steps 2, 3, and 4: Use your competitors’ websites, as well as SEO analysis tools like Ahrefs, to deep-dive into the service offerings and marketing strategies of each company. 

Step 5: Focusing back on your own company, you conduct a SWOT analysis to assess your own strategic goals and get a visual of your strengths and weaknesses. 

Step 6: Finally, you create a graph of the market landscape and conclude that there are two companies beating your company in customer satisfaction and market presence. 

After compiling this information into a table like the one below, you consider a unique strategy. To beat out your competitors, you can use localization. Instead of marketing to dentists nationwide like your competitors are doing, you decide to focus your marketing strategy on one region, state, or city. Once you’ve become the known SEO company for dentists in that city, you’ll branch out. 

You won’t know what conclusions you can draw from your competitive analysis until you do the work and see the results. Whether you decide on a new pricing strategy, a way to level up your marketing, or a revamp of your product, understanding your competition can provide significant insight.

Drawbacks of competitive analysis

There are some drawbacks to competitive analysis you should consider before moving forward with your report. While these drawbacks are minor, understanding them can make you an even better manager or business owner. 

Don’t forget to take action

You don’t just want to gather the information from your competitive analysis—you also want to take action on that information. The data itself will only show you where you fit into the market landscape. The key to competitive analysis is using it to problem solve and improve your company’s strategic plan .

Be wary of confirmation bias

Confirmation bias means interpreting information based on the beliefs you already hold. This is bad because it can cause you to hold on to false beliefs. To avoid bias, you should rely on all the data available to back up your decisions. In the example above, the business owner may believe they’re the best in the SEO dental market at social media. Because of this belief, when they do market research for social media, they may only collect enough information to confirm their own bias—even if their competitors are statistically better at social media. However, if they were to rely on all the data available, they could eliminate this bias.

Update your analysis regularly

A competitive analysis report represents a snapshot of the market landscape as it currently stands. This report can help you gain enough information to make changes to your company, but you shouldn’t refer to the document again unless you update the information regularly. Market trends are always changing, and although it’s tedious to update your report, doing so will ensure you get accurate insight into your competitors at all times. 

Boost your marketing strategy with competitive analysis

Learning your competitors’ strengths and weaknesses will make you a better marketer. If you don’t know the competition you’re up against, you can’t beat them. Using competitive analysis can boost your marketing strategy and allow you to capture your target audience faster.

Competitive analysis must lead to action, which means following up on your findings with clear business goals and a strong business plan. Once you do your competitive analysis, you can use the templates below to put your plan into action.

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How Porter’s Five Forces Can Help Small Businesses Analyze the Competition

Use this tool to determine how profitable a business may be compared with other businesses in the industry.

Table of Contents

Knowing who your competitors are and how their products, services and marketing strategies affect you is critical to your business’s survival. Whether you’re a Fortune 500 company or a small, local business, competition has a direct influence on your success.

One way to analyze your competition and determine your industry standing is to use Porter’s Five Forces model. Originally developed by Harvard Business School’s Michael E. Porter in 1979, the Five Forces model looks at five factors that determine whether a business can be profitable in relation to other businesses in the industry. 

Using Porter’s Five Forces and other analytics models will help you understand where your company fits in the industry landscape.

Understanding Porter’s Five Forces model

Porter’s Five Forces model is a competitive analysis method that’s considered a macro tool in business analytics. It looks at the industry’s economy as a whole; in contrast, a SWOT analysis is a microanalytical tool that focuses on a specific company’s data and analysis.

“Understanding the competitive forces, and their underlying causes, reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition (and profitability) over time,” Porter wrote in a 2008 Harvard Business Review article . “A healthy industry structure should be as much a competitive concern to strategists as their company’s own position.” 

Porter theorized that understanding the competitive forces at play and the overall industry structure is crucial for effective, strategic decision-making and the development of a compelling competitive strategy for the future.

Here are the five forces in Porter’s model:

1. Competitive rivalry

This force examines marketplace competition intensity. It considers the number of existing competitors and what each one can do. Rivalry competition is high when these conditions are met:

• Only a few businesses sell a product or service.
• The industry is growing.
• Consumers can easily switch to a competitor’s offering for little cost. 

When rivalry competition is high, advertising and price wars ensue, which can hurt a business’s bottom line.

2. The bargaining power of suppliers

This force analyzes a supplier’s power and control over price increases. When a B2B vendor has extensive control over pricing, their client business’s profit margins can suffer. 

This force also assesses the available number of suppliers of raw materials and other resources. The fewer suppliers in the supply chain there are, the more power they have. Businesses are in a better position when there are many suppliers. 

3. The bargaining power of customers

This force examines consumer power and its effect on pricing and quality. Consumers have power when there are fewer sellers because they can easily switch to another seller. Conversely, buying power is low when consumers depend heavily on a single seller. When a business has more customers, the buying power of each individual customer is low.

4. The threat of new entrants

This force considers how easy or difficult it is for competitors to join the marketplace. The easier it is for a new competitor to gain entry, the greater the risk that an established business’s market share will be depleted. Barriers to entry include absolute cost advantages, access to inputs, economies of scale, and strong brand identity .

5. The threat of substitute products or services

This force studies how easy it is for consumers to switch from a business’s product or service to a competitor’s offering. It examines the number of competitors, how their prices and quality compare with the business being examined, and how much of a profit those competitors are earning — which, in turn, would determine if they can lower their costs even more. The threat of substitutes is informed by switching costs, both immediately and in the long term, as well as consumers’ inclination to change. 

Example of Porter’s Five Forces

There are many examples of how Porter’s Five Forces can be applied to various industries. 

The ultimate goal is to identify the opportunities and threats that could affect a business. 

In this example, the financial education company 365 Financial Analyst looked at the competitive position of retail giant Walmart. Here’s how it breaks down:

• Competitive rivalry: Walmart has a significant reach, a strong brand identity, a physical and online presence, and low prices that make it difficult for small challengers in the retail space to compete. However, Walmart does face sustained challenges from large, established competitors such as Target, Costco and Amazon. Overall, Walmart faces a moderately competitive rivalry space.
• Bargaining power of suppliers: A diverse supplier base limits supplier bargaining power. Additionally, due to Walmart’s size, purchasing power and consumer reach, each individual supplier exerts very little influence on the company.
• Bargaining power of customers: Walmart has a massive customer base of small buyers, weakening the power of any single customer and granting the company significant leverage. The company’s low prices, established locations and online presence further reduce the power of any single customer. However, customers can switch to other retailers at little or no cost, affording them some power. Overall, buyer bargaining power is medium to low.
• Threat of new entrants: Walmart maintains a substantial edge in sales, marketing, distribution and established business locations. It also has a highly developed and deployed online presence to complement its physical locations. Due to its size and established network, Walmart also has the advantage of selling to multiple customers while being able to purchase at scale from various suppliers. All of these factors, as well as the established nature of large rivals such as Amazon, make the threat of new entrants low.
• Threat of substitute products: Walmart’s economies of scale, reach and size ensure it carries almost all brands and products a customer would like, with the exception of specific in-house brands that its rivals offer. Even then, Walmart can leverage economies of scale to offer products and a range of substitutes at low costs. As such, the threat of substitute products is low.

Strategies for success

Once your analysis is complete, it’s time to implement a strategy to expand your competitive advantage. To that end, Porter identified three generic strategies that can be implemented in any industry and by companies of any size.

Cost leadership

Your goal is to increase profits by reducing costs while charging industry-standard prices, or to increase market share by reducing the sales price while retaining profits.

Differentiation

To implement this strategy, your company’s products must be significantly better than the competition’s, thereby improving their competitiveness and value to the public. It requires thorough research and development, plus effective sales and marketing.

Successful implementation entails the company selecting niche markets in which to sell its goods. It requires an intense understanding of the marketplace, as well as deep knowledge of the business’s sellers, buyers and competitors. (Consult Porter’s 1985 book Competitive Advantage for more information.)

Alternatives to Porter’s Five Forces

While Porter’s Five Forces is an effective and time-tested model, it has been criticized for failing to explain strategic alliances. In the 1990s, professors Adam Brandenburger, then at Harvard Business School and now at New York University’s Stern School of Business, and Barry Nalebuff, of the Yale School of Management, created the idea of a sixth force, “complementors,” using game theory insights. (Consult their book, Co-Opetition , for more information.)

In this model, complementors sell products and services that are best used in conjunction with a competitor’s product or service. For example, Intel, which manufactures processors, and Lenovo, a computer manufacturer, could be considered complementors.

These additional modeling tools can inform your understanding of your business and its potential:

• Value chain analysis: A value chain analysis helps companies understand where their best productive advantage lies.
• BCG matrix: The BCG matrix helps companies identify which products will likely benefit most from increased investment.
• PEST analysis: Businesses should also consider conducting either a PEST analysis or a PESTLE analysis. These analyses take into account how external political, economic, sociocultural and technological forces — as well as legal and environmental forces, in a PESTLE analysis — can affect the business environment. This analysis should be conducted alongside Porter’s Five Forces to provide a thorough overview of factors and challenges that influence a business and its industry. 

Navigating the economic environment

All business decisions contain elements of risk and uncertainty. Conducting routine analyses of the business, industry and overall economic environment is vital to the success of any company, regardless of its size. Porter’s Five Forces model provides a clear framework that business leaders can employ to understand how their business fits into the larger industry. 

Using Porter’s Five Forces alongside additional analytical tools and models — like a SWOT analysis, a BCG matrix and a PEST(LE) analysis — can help business leaders navigate the broader economic environment with greater confidence and, ultimately, reap increased odds of success. 

Jeremy Bender and Katherine Arline contributed to this article. 

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What is a Competitive Analysis — and How Do You Conduct One?

Published: April 24, 2024

Every time I work with a new brand, my first order of business is to conduct a competitive analysis. 

A competitive analysis report helps me understand the brand’s position in the market, map competitors’ strengths/weaknesses, and discover growth opportunities. 

In this article, I’ll break down the exact steps I follow to conduct competitor analysis and identify ways to one-up top brands in the market. 

We’ll cover:

What is competitive analysis?

What is competitive market research, competitive analysis in marketing.

• How To Conduct Competitive Analysis in 5 Steps

How to Do a Competitive Analysis (the Extended Cut)

Competitive product analysis, competitive analysis example, competitive analysis templates.

• Competitive Analysis FAQs

Competitive analysis is the process of comparing your competitors against your brand to understand their core differentiators, strengths, and weaknesses. It’s an in-depth breakdown of each competitor’s market position, sales & marketing tactics, growth strategy, and other business-critical aspects to see what they’re doing right and find opportunities for your business.

Competitive analysis gives you a clearer picture of the market landscape to make informed decisions for your growth. 

That said, you have to remember that competitive analysis is an opportunity to learn from others. It isn’t:

• Copying successful competitors to the T.
• Trying to undercut others’ pricing.
• A one-and-done exercise.

Let’s look at how this exercise can help your business before breaking down my 5-step competitive analysis framework.

10 Free Competitive Analysis Templates

Track and analyze your competitors with these ten free planning templates.

• SWOT Analysis
• Battle Cards
• Feature Comparison
• Strategic Overview

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4 Reasons to Perform Competitive Analysis 

If you’re on the fence about investing time and effort in analyzing your competitors, know that it gives you a complete picture of the market and where you stand in it.

Here are four main reasons why I perform a competitive analysis exercise whenever working with a brand for the first time:

• Identify your differentiators. Think of competitor analysis as a chance to reflect on your own business and discover what sets you apart from the crowd. And if you’re only starting out, it helps you brainstorm the best opportunities to differentiate your business.
• Find competitors’ strengths. What are your competitors doing right to drive their growth? Analyzing the ins and outs of an industry leader will tell you what they did well to reach the top position in the market.
• Set benchmarks for success. A competitor analysis gives you a realistic idea of mapping your progress with success metrics. While every business has its own path to success, you can always look at a competitor’s trajectory to assess whether you’re on the right track.
• Get closer to your target audience. A good competitor analysis framework zooms in on your audience. It gives you a pulse of your customers by evaluating what they like, dislike, prefer, and complain about when reviewing competing brands.

The bottom line: Whether you’re starting a new business or revamping an existing one, a competitive analysis eliminates guesswork and gives you concrete information to build your business strategy.

Competitive market research is a vital exercise that goes beyond merely comparing products or services. It involves an in-depth analysis of the market metrics that distinguish your offerings from those of your competitors.

A thorough market research doesn't just highlight these differences but leverages them, laying a solid foundation for a sales and marketing strategy that truly differentiates your business in a bustling market.

In the next section, we’ll explore the nuts and bolts of conducting a detailed competitive analysis tailored to your brand.

10 Competitive Analysis Templates

Fill out the form to access the templates., essential aspects to cover in competitive analysis research .

Before we walk through our step-by-step process for conducting competitor analysis, let’s look at the main aspects to include for every competitor:

• Overview. A summary of the company — where it’s located, target market, and target audience.
• Primary offering. A breakdown of what they sell and how they compare against your brand.
• Pricing strategy. A comparison of their pricing for different products with your pricing.
• Positioning.  An analysis of their core messaging to see how they position themselves. Customer feedback: A curation of what customers have to say about the brand.

Now, it’s time to learn how to conduct a competitive analysis with an example to contextualize each step. 

Every brand can benefit from regular competitor analysis. By performing a competitor analysis, you'll be able to:

• Identify gaps in the market.
• Develop new products and services.
• Uncover market trends.
• Market and sell more effectively.

As you can see, learning any of these four components will lead your brand down the path of achievement.

Next, let's dive into some steps you can take to conduct a comprehensive competitive analysis.

How to Conduct Competitive Analysis in 5 Quick Steps

As a content marketer, I’ve performed a competitive analysis for several brands to improve their messaging, plan their marketing strategy, and explore new channels. Here are the five steps I follow to analyze competitors.

1. Identify and categorize all competitors.

The first step is a simple yet strategic one. You have to identify all possible competitors in your industry, even the lesser-known ones. The goal here is to be aware of all the players in the market instead of arbitrarily choosing to ignore a few.

As you find more and more competitors, categorize them into these buckets:

• Direct competitors. These brands offer the same product/service as you to the same target audience. People will often compare you to these brands when making a buying decision. For example, Arcade and Storylane are direct competitors in the demo automation category.
• Indirect competitors. These businesses solve the same problem but with a different solution. They present opportunities for you to expand your offering. For example, Scribe and Whatfix solve the problem of documentation + internal training, but in different ways.
• Legacy competitors. These are established companies operating in your industry for several years. They have a solid reputation in the market and are a trusted name among customers. For example, Ahrefs is a legacy competitor in the SEO industry.
• Emerging competitors. These are new players in the market with an innovative business model and unique value propositions that pose a threat to existing brands. For example, ChatGPT came in as a disruptor in the conversational AI space and outperformed several brands. 

Here’s a competitive matrix classifying brands in the community and housing space:

Testing It Out

To help you understand each step clearly, we’ll use the example of Trello and create a competitor analysis report using these steps.

Here’s a table of the main competitors for Trello:

able of the main competitors for Trello:

2. Determine each competitor’s market position.

Once you know all your competitors, start analyzing their position in the market. This step will help you understand where you currently stand in terms of market share and customer satisfaction. It’ll also reveal the big guns in your industry — the leading competitors to prioritize in your analysis report.

Plus, visualizing the market landscape will tell you what’s missing in the current state. You can find gaps and opportunities for your brand to thrive even in a saturated market.

To map competitors’ market positions, create a graph with two factors: market presence (Y-axis) and customer satisfaction (X-axis). Then, place competitors in each of these quadrants:

• Niche. These are brands with a low market share but rank high on customer satisfaction. They’re likely targeting a specific segment of the audience and doing it well.
• Contenders. These brands rank low on customer satisfaction but have a good market presence. They might be new entrants with a strong sales and marketing strategy.
• Leaders. These brands own a big market share and have highly satisfied customers. They’re the dominant players with a solid reputation among your audience.
• High performers. These are another category of new entrants scoring high on customer satisfaction but with a low market share. They’re a good alternative for people not looking to buy from big brands.

This visualization will tell you exactly how crowded the market is. But it’ll also highlight ways to gain momentum and compete with existing brands.

Here’s a market landscape grid by G2 documenting all of Trello’s competitors in the project management space. For a leading brand like Trello, the goal would be to look at top brands in two quadrants: “Leaders” and “High Performers.” 

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3. Extensively benchmark key competitors.

Step 2 will narrow down your focus from dozens of competitors to the few most important ones to target. Now, it’s time to examine each competitor thoroughly and prepare a benchmarking report.

Remember that this exercise isn’t meant to find shortcomings in every competitor. You have to objectively determine both the good and bad aspects of each brand.

Here are the core factors to consider when benchmarking competitors:

• Quality. Assess the quality of products/services for each competitor. You can compare product features to see what’s giving them an edge over you. You can also evaluate customer reviews to understand what users have to say about the quality of their offering.
• Price. Document the price points for every competitor to understand their pricing tactics. You can also interview their customers to find the value for money from users’ perspectives.
• Customer service. Check how they deliver support — through chat, phone, email, knowledge base, and more. You can also find customer ratings on different third-party platforms.
• Brand reputation. You should also compare each competitor’s reputation in the market to understand how people perceive the brand. Look out for anything critical people say about specific competitors.  
• Financial health. If possible, look for performance indicators to assess a brand's financial progress. You can find data on metrics like revenue growth and profit margins. 

This benchmarking exercise will involve a combination of primary and secondary research. Invest enough time in this step to ensure that your competitive analysis is completely airtight.

Check out this example of a competitor benchmarking report for workforce intelligence tools:

Here’s how I benchmarked Asana based on these criteria using the information I could find:

4. Deep dive into their marketing strategy.

While the first few steps will tell you what you can improve in your core product or service, you also need to find how competitors market their products.

You need to deep-dive into their marketing strategies to learn how they approach buyers. I analyze every marketing channel, then note my observations on how they speak to their audience and highlight their brand personality.

Here are a few key marketing channels to explore:

• Website. Analyze the website structure and copy to understand their positioning and brand voice.
• Email. Subscribe to emails to learn their cadence, copywriting style, content covered, and other aspects.
• Paid ads. Use tools like Ahrefs and Semrush to find if any competitor is running paid ads on search engines.
• Thought leadership. Follow a brand’s thought leadership efforts with content assets like podcasts, webinars, courses, and more.
• Digital PR. Explore whether a brand is investing in digital PR to build buzz around its business and analyze its strategy.
• Social media. See how actively brands use different social channels and what kind of content is working best for them.
• Partnerships. Analyze high-value partnerships to see if brands work closely with any companies and mutually benefit each other.

You can create a detailed document capturing every detail of a competitor’s marketing strategy. This will give you the right direction to plan your marketing efforts. 

5. Perform a SWOT analysis.

The final step in a competitive analysis exercise is creating a SWOT analysis matrix for each company. This means you‘ll take note of your competitor’s strengths, weaknesses, opportunities, and threats. Think of it as the final step to consolidate all your research and answer these questions:

• What is your competitor doing well?
• Where do they have an advantage over your brand?
• What is the weakest area for your competitor?
• Where does your brand have the advantage over your competitor?
• In what areas would you consider this competitor a threat?
• Are there opportunities in the market that your competitor has identified?

You can use tools like Miro to visualize this data. Once you visually present this data, you’ll get a clearer idea of where you can outgrow each competitor. 

Here’s a SWOT analysis matrix I created for Asana as a competitor of Trello:

• Determine who your competitors are.
• Determine what products your competitors offer.
• Research your competitors' sales tactics and results.
• Take a look at your competitors' pricing, as well as any perks they offer.
• Ensure you're meeting competitive shipping costs.
• Analyze how your competitors market their products.
• Take note of your competition's content strategy.
• Learn what technology stack your competitors use.
• Analyze the level of engagement on your competitors' content.
• Observe how they promote marketing content.
• Look at their social media presence, strategies, and go-to platforms.
• Perform a SWOT Analysis to learn their strengths, weaknesses, opportunities, and threats.

To run a complete and effective competitive analysis, use these ten templates, which range in purpose from sales to marketing to product strategy.

Featured Resource: 10 Competitive Analysis Templates

1. Assess your current product pricing.

The first step in any product analysis is to assess current pricing.

Nintendo offers three models of its Switch console: The smaller lite version is priced at $199, the standard version is $299, and the new OLED version is $349.

Sony, meanwhile, offers two versions of its PlayStation 5 console: The standard edition costs $499, and the digital version, which doesn’t include a disc drive, is $399.

2. Compare key features.

Next is a comparison of key features. In the case of our console example, this means comparing features like processing power, memory, and hard drive space.

3. Pinpoint differentiators.

With basic features compared, it’s time to dive deeper with differentiators. While a glance at the chart above seems to indicate that the PS5 is outperforming its competition, this data only tells part of the story.

Here’s why: The big selling point of the standard and OLED Switch models is that they can be played as either handheld consoles or docked with a base station connected to a TV. What’s more, this “switching” happens seamlessly, allowing players to play whenever, wherever.

The Playstation offering, meanwhile, has leaned into market-exclusive games that are only available on its system to help differentiate them from their competitors.

4. Identify market gaps.

The last step in a competitive product analysis is looking for gaps in the market that could help your company get ahead.

When it comes to the console market, one potential opportunity gaining traction is the delivery of games via cloud-based services rather than physical hardware.

Companies like Nvidia and Google have already made inroads in this space, and if they can overcome issues with bandwidth and latency, it could change the market at scale.

How do you stack up against the competition? Where are you similar, and what sets you apart? This is the goal of competitive analysis.

By understanding where your brand and competitors overlap and diverge, you’re better positioned to make strategic decisions that can help grow your brand.

Of course, it’s one thing to understand the benefits of competitive analysis, and it’s another to actually carry out an analysis that yields actionable results. Don’t worry — we’ve got you covered with a quick example.

Sony vs. Nintendo: Not all fun and games.

Let’s take a look at popular gaming system companies Sony and Nintendo.

Sony’s newest offering — the Playstation 5 — recently hit the market but has been plagued by supply shortages.

Nintendo’s Switch console, meanwhile, has been around for several years but remains a consistent seller, especially among teens and children.

This scenario is familiar for many companies on both sides of the coin; some have introduced new products designed to compete with established market leaders, while others are looking to ensure that reliable sales don’t fall.

Using some of the steps listed above, here’s a quick competitive analysis example.

In our example, it’s Sony vs Nintendo, but it’s also worth considering Microsoft’s Xbox, which occupies the same general market vertical.

This is critical for effective analysis; even if you’re focused on specific competitors and how they compare, it’s worth considering other similar market offerings.

PlayStation offers two PS5 versions, digital and standard, at different price points, while Nintendo offers three versions of its console.

Both companies also sell peripherals — for example, Sony sells virtual reality (VR) add-ons, while Nintendo sells gaming peripherals such as steering wheels, tennis rackets, and differing controller configurations.

When it comes to sales tactics and marketing, Sony and Nintendo have very different approaches.

In part thanks to the recent semiconductor shortage, Sony has driven up demand via scarcity — very low volumes of PS5 consoles remain available. Nintendo, meanwhile, has adopted a broader approach by targeting families as its primary customer base.

This effort is bolstered by the Switch Lite product line, which is smaller and less expensive, making it a popular choice for children.

The numbers tell the tale : Through September 2021, Nintendo sold 14.3 million consoles, while Sony sold 7.8 million.

Sony has the higher price point: Their standard PS5 sells for $499, while Nintendo’s most expensive offering comes in at $349. Both offer robust digital marketplaces and the ability to easily download new games or services.

Here, the key differentiators are flexibility and fidelity. The Switch is flexible — users can dock it with their television and play it like a standard console or pick it up and take it anywhere as a handheld gaming system.

The PS5, meanwhile, has superior graphics hardware and processing power for gamers who want the highest-fidelity experience.

5. Analyze how your competitors market their products.

If you compare the marketing efforts of Nintendo and Sony, the difference is immediately apparent: Sony’s ads feature realistic in-game footage and speak to the exclusive nature of their game titles.

The company has managed to secure deals with several high-profile game developers for exclusive access to new and existing IPs.

Nintendo, meanwhile, uses brightly lit ads showing happy families playing together or children using their smaller Switches while traveling.

6. Analyze the level of engagement on your competitor's content.

Engagement helps drive sales and encourage repeat purchases.

While there are several ways to measure engagement, social media is one of the most straightforward: In general, more followers equates to more engagement and greater market impact.

When it comes to our example, Sony enjoys a significant lead over Nintendo: While the official Playstation Facebook page has 38 million followers, Nintendo has just 5 million.

Competitive analysis is complex, especially when you’re assessing multiple companies and products simultaneously.

To help streamline the process, we’ve created 10 free templates that make it possible to see how you stack up against the competition — and what you can do to increase market share.

Let’s break down our SWOT analysis template. Here’s what it looks like:

9 Best Marketing Research Methods to Know Your Buyer Better [+ Examples]

SWOT Analysis: How To Do One [With Template & Examples]

28 Tools & Resources for Conducting Market Research

Market Research: A How-To Guide and Template

TAM, SAM & SOM: What Do They Mean & How Do You Calculate Them?

How to Run a Competitor Analysis [Free Guide]

5 Challenges Marketers Face in Understanding Audiences [New Data + Market Researcher Tips]

Causal Research: The Complete Guide

Total Addressable Market (TAM): What It Is & How You Can Calculate It

What Is Market Share & How Do You Calculate It?

10 free templates to help you understand and beat the competition.

Marketing software that helps you drive revenue, save time and resources, and measure and optimize your investments — all on one easy-to-use platform

How to Do a Competitive Analysis: A Complete Guide

Digitization has profoundly altered competitive markets. With increased connectivity, industries have experienced exponential growth. And, with the web at our fingertips, customer expectations are higher than ever. To succeed in these competitive markets, you must have a deep understanding of your competitive landscape.

This will provide insights into:

• How the most successful businesses serve your prospects
• What works in your digital space and what doesn’t
• Gaps in the market you can take advantage of

Competitor analysis is a powerful way to help you increase your market share in any market.

In this post, I’ll give you a top-down approach to how to perform a competitor analysis. This big-picture overview is structured from the biggest fundamental aspects of your competitors down to the more granular tactical aspects.

Discover how to do a competitive website analysis, repeat the process regularly, and look forward to seizing opportunities by making actionable decisions that elevate your growth.

What is competitive analysis?

In the marketing world, competitive analysis is the process of finding and evaluating your competitors’ marketing strategies to identify their strengths and weaknesses and find new untapped opportunities. It involves gathering data on your competitors’ products, pricing, marketing strategies, and overall performance to make informed business decisions and gain a competitive edge.

Why is competitor analysis crucial in market research?

Business is inherently competitive, and your marketing strategies don’t exist in isolation. And be assured your competitors aren’t likely to give up a piece of the pie without a fight. So, how do you increase your market share ?

The key is to understand what made them successful in the first place. 

This means analyzing your competitors’ products and marketing strategies. The more thoroughly you understand their business, the better you’ll understand their strengths and weaknesses. You can then evaluate, based on your current business, if you should beat them at their own game or find an uncompetitive sub-niche or micro-consumer demand to play in.

This is true whether you are launching a product in a new market or pursuing growth of any kind. You need a razor-sharp understanding of your competitors.

Build winning marketing strategies

Find gaps in your competitors' marketing strategies and hidden opportunities with our competitor analysis tools.

The key benefits of competitive analysis

Now that you understand why you need competitive analysis, here are some of the benefits you can expect.

1. Build smarter business strategies

It never pays to reinvent the wheel. Almost any industry has tried and tested methods, and when you take a deep dive into competitor strategies and tactics, you’ll find things that you can replicate in your own space. Competitor research can impact your big-picture strategy as well as the marketing tactics you are employing to make your strategy happen.

2. Understand your target audience better

Your competitors might be serving your target audience in ways you never thought possible. Looking at their products and services will not only help you to think of product ideas it’ll give you insight into what your prospects really need. The better you understand your audience, the more likely you are to serve their needs.

3. Surface competitor weak points

Analyzing your competitors’ marketing strategies will help you find their weaknesses. This could be on a marketing or product level. And the better you understand their weaknesses, the more leverage you have to win market share.

4. Make informed, data-based decisions

Running a business without data and analysis is like flying blind. With competitor research, you’ll be able to easily size up your competitive landscape and build a strategy that takes both your competitors and your target audience into consideration.

How to do competitor analysis in 8 easy steps

The first stop on the competitor research train is collecting and analyzing information about your competitors to understand what you’re up against. A methodical approach lets you understand how the different areas impact each other.

You can divide your competitor research into four main areas of competition:

• Company : Information about company size, location, business info, and more
• Customer : Demographics, preferences, and characteristics of the target audience
• Product and pricing : Product-related data such as features, offers, or if they have a mobile app
• Marketing : Strategic approach, SEO tools , use of channels, and marketing campaigns

In this section, we’ll show you how to analyze your competitors systematically. We’ll start off with the big-picture metrics and slowly work our way down to the specific tactical approaches your competitors are taking to achieve the results they are getting.

We’ll be using a combination of data from competitor analysis tools and traditional market analysis methods.

1. Identify your competitors

I always start by mapping out the companies that offer a product or service in the same category as mine. Next, I prepare a list of competitors and categorize them into different levels, using these three factors:

• The audience each one targets
• The problem they solve
• The products they offer

When you approach this task, keep in mind there are two types of competitors: direct and indirect .

Your main competitors are direct, for example, businesses that are identical to you in all three areas: They have the same target audience , offer a solution for the same problem, and are in the same product category. For example, if you sell orthopedic shoes for kids, you’ll want to look for other ecommerce sites or brands on retail sites with similar products and qualities that you want consumers to associate with your brand.

The second category of competitors is indirect – that is, companies that are identical in only two of the three areas. They could be targeting the same audience and offering a solution for the same problem but with an entirely different product. Someone offering a surgical procedure to correct the same issue as your orthopedic footwear would be a good example of an indirect competitor.

Focus on the direct competition, but keep data on indirect competitors as well; they may become more significant over time. Especially in the growing business-to-business (B2B) landscape , companies are always venturing into new sectors outside their original industries.

Indirect competitors may pivot at any point and could introduce something like a new app to their offering seemingly overnight.

The first step in finding who your competitors are is everyone’s favorite search engine.

Start by Googling your keywords

Possibly the most difficult process to master is finding your competitors. Start by searching for common keywords in Google and see what comes up or find search ads that target keywords that are relevant to your business. Search specifically for competitive queries. For example, below, we’ve Googled the query Apple competitors .

Google will help you find competitors, but it is limited.

Speak to your sales team

One of your most accessible resources is your sales team. It really pays to take the time to speak to them, and they’ll give you countless insights if you just take the time. The reason is they literally speak to your customers directly, and they’ve likely heard which competitors your customers are using.

Get feedback from your customers

Although slightly less available than your sales team, speaking directly to your customers is your most valuable information. Simply ask them which competitors they considered before making a purchase.

Use a competitor analysis tool

Using a data-driven approach with a competitor analysis tool is my favorite method, and I find it far more efficient than any other method. The main advantage of using data is it’s scalable. But your data is only valuable if you can filter it to find relevant results.

Let me demonstrate what this might look like. Let’s analyze foodinsight.org using Similarweb’s Website Performance tool.

We’ll first look at the Similar Sites report. This is the ultimate competitor discovery power tool. The reason is it’s based on multiple data points including:

By using multiple data points, you are more likely to find closely related competitors.

As you can see in the example above, the tool brings a number of clear competitors for the site I analyzed. If you find that the sites it brings are not relevant to your market, you can easily filter the results with the industry filter.

Once you’ve done that, take a look at the competitors you’ve found to ensure that they are indeed direct competitors. Again, a direct competitor serves the same audience as you do, solves the same problem, and with the same products or services.

At this stage, you should have a list of sites that share similar metrics in general. Let’s now get a little more granular and focus on Organic competitors and Paid Media competitors.

Find your organic competitors

Organic competitors are not always direct competitors, as an organic competitor is a site that targets similar keywords to your site. And you’ll find that sites in more than one industry often target the same keywords.

This means you should gather organic competitor data but ensure they are in a similar market to yours.

To demonstrate, I’ve entered foodinsight.org into the Similarweb Organic Competitors report. This report considers sites to be organic competitors if they target similar keywords.

Below, you can see organic competitors for foodinsight.org.

Looking at the results, you’ll notice that the tool shows me websites from different industries. Although this might be useful if you are building an SEO strategy , we are now looking for direct or closely related competitors for this analysis and should filter the results to find the most relevant business competitors.

Since foodinsight.org is a content publishing website in the Nutrition Diets and Fitness industry, below I have used the Industry filter and the Website type filter .

Find your paid competitors

You should also look at the sites that are using a paid ad search strategy that targets similar keywords to your site.

Below, Similarweb is displaying a list of paid search competitors for foodinsight.org.

Just like the Organic Competitors report, to find direct competitors, you must find sites that are in a similar industry to you. You can use the same filters as in the Organic Competitors report. This will help you find direct competitors that are running ads.

You now know which competitors you want to target. What’s next?

2. Create a company overview

After you’ve identified your main competitors, it’s time to gather background information on them. It’s best to analyze three to five companies per competitive set.

Make sure your company overview includes the following:

• Basic information such as company size, location, employee count, and year established. Information like this is easily obtainable from national business registers, official government sites, and even social networks like LinkedIn .
• Add financial and business information, including stock value, owners, investors, acquisitions, and mergers. You can view a company’s financial statements or find information on business review sites like Dun & Bradstreet, Hover, etc. For startups and tech companies, check sites such as Indiegogo and Kickstarter.
• Next, define their market position and share, level of brand awareness , range of products, and delivery methods, such as whether they have a mobile app and product categories.

I recommend regularly monitoring your market position, market share, and brand awareness by creating a Custom Industry in the Similarweb Market Intelligence addon .

Set it up by adding your site and your competitors. This will show you how your site is performing within a market defined by you.

For instance, if we look at the market for Food Insight and its competitors, we see that Food Insight owns 8.45% of the market while Diet Doctor is the market leader with 53.46%.

Looking at the Market Quadrant Analysis in the Players report, we see that Diet Doctor is clearly the market leader in terms of brand strength, but with a high level of branded search traffic, Gaps Diet is showing up as a challenger brand. Food Insight is one of the weaker brands, displaying a small amount of branded search volume and direct traffic.

To get deeper insight into these brands, let’s see how their audiences respond to their businesses by looking at Loyalty and Retention . With high levels of returning visitors and exclusive visitors, we see that Diet Doctor, Gaps Diet, and Eat Right are leading the market.

Once you have company overviews for your competitors, your next step is to look at their web traffic and engagement metrics.

If the company you are analyzing has many online entities, it may make sense to do a digital analysis of all of the assets together using the Similarweb Company Analysis tool .

For instance, we noticed that Verizon owns three domains.

• Verizon.com
• Verizon.net
• Myverizon.com

To get big-picture Traffic & Engagement metrics, we created a separate Verizon company asset that combines all three. Below, you can see the total number of Unique Visitors for all of the properties together over a six-month period.

You can also see their Traffic & Engagement over time, including:

• Average monthly visits
• Pages Per Visit
• Visit Duration
• Bounce Rate

Once you have a basic company overview of your top competitors, your next step is to analyze how your company fits into your market in general.

3. Perform a SWOT analysis

SWOT analysis is one of my go-to competitor analysis frameworks. It’s used to assess the internal Strengths (S) and Weaknesses (W) along with external Opportunities (O) and Threats (T) of your business and your competitors. It provides a concise framework for you to gauge your competitive landscape and make informed strategic decisions that take your market into account.

By doing a SWOT analysis, you’ll understand the market forces and players that affect your business. You’ll discover where you are vulnerable and where your biggest opportunities lie.

To get started, break out your whiteboard, call in your team, and start to brainstorm. Break your whiteboard down into four quadrants.

Label them:

• Strengths (S)
• Weaknesses (W)
• Opportunities (O)
• Threats (T)

Now, get your team together and brainstorm. Fill each quadrant with as many points as you can think of.

We recommend starting with opportunities and threats. The reason is these are factors that are external to your business and will give you a general understanding of your competitive landscape. Once you’ve outlined the external factors, move on to your business’s strengths and weaknesses.

Since you have first outlined your external factors, you are likely to find internal factors to address them.

It’s important to point out at this stage that many of the points we cover in this blog will help you ferret out details that you can add to your SWOT analysis. For instance, performing a channel analysis on your competitor sites will often reveal some hidden opportunities as well.

Granular competitive analysis

4. Research your competitors’ 4 P’s

The 4 P’s is a competitor analysis framework, also called the marketing mix, that refers to the fundamental elements businesses use to develop and implement marketing strategies.

The 4 Ps include:

Product: This refers to the actual goods or services that you offer to meet your customers’ wants and needs. It involves decisions related to product design, features, branding, quality, and packaging. A successful product either fulfills a gap in the market or offers something unique.

Price: Price is the amount of money customers are willing to pay for a product or service. Price should not be too high for your customers or be too low for you to make a profit. Pricing strategies consider factors such as production costs, competitor pricing, perceived value, and overall market conditions.

Place: This refers to where people can buy your product. It includes distribution channels, logistics, inventory management, and the overall strategy for ensuring the product reaches your target market. Not every place is suitable for every product. For instance, you would never sell medical equipment for hospitals in a grocery store.

Promotion: Promotion includes how your business informs your audience about your product so that they make a purchase. It includes advertising, public relations, sales promotions, personal selling, and other communication strategies. Timing is a crucial element in any marketing strategy, for example, promoting back-to-school products before the start of a school year.

5. Understand your competitor’s target audience

So far, we’ve looked at your competitors directly. But to get a complete picture, you must examine your customers.

Starting with big-picture metrics, you must first understand your audience demographics . This is crucial and affects every aspect of your marketing, including pricing, tone, and positioning.

To understand geography and demographics, we must look at a competitor analysis tool, which we’ll demonstrate with the Audience tab in Similarweb’s Website Analysis tool .

Looking at the Geography report, we can see the traffic share each competitor has in each country.

Now, to our target audience demographics. Below, we see that foodinsight.org and its competitors’ audience tend to be primarily female . Looking at age metrics, their audience tends to be evenly distributed between 25 and 64 .

Want deeper insights? You can filter the results by gender and age.

Now that we have demographic information, it’s time to see what interests our competitor’s audience. You can do that by simply going to their websites and looking at what appears in their content. You’ll be surprised by how much you find by doing this.

What’s more, take a look at their social media content. Check the number of followers your competitors have and the level of their engagement rate . Also, research what types of posts are popular and how followers engage. Do they like, comment, share, or post themselves? Are there any influencers that sponsor them?

Now, if you want to scale this up and see the topics your audience is interested in, use a data-driven approach.

With the Similarweb Audience Interests report, you can see all the topics that appear in high density in the chosen domain. The report shows you topics that are connected to all industries and if you want to see audience interest topics that are specifically for your industry, use the Industry filter.

Above, you can see the audience interest in hotpot.ai , which is specifically in the Graphics Multimedia and Web Design industry. At this point, you are just looking at audience interests at a high level. This analysis will give you a general idea of the topics and themes that drive web audiences in your industry.

You should also take a look at situational analysis to understand what your audience expects in different scenarios. Investigate the factors that impact a customer’s state of mind, such as their knowledge, level of attention, and ability to process information.

Read customer reviews

How a company presents itself and its products is one thing, but how customers view the company is another thing entirely. To get an unbiased view of your competitors’ performance, try to look through the lens of a customer:

• Read customer reviews and evaluate how well the two match
• Browse the issues and questions raised by users to uncover potential weaknesses and see if and how the company answers comments from users
• Look for reviews in forums and groups on sites like G2 and Trustpilot to find feedback
• Evaluate the feedback on their mobile app — are there any missing features, or are there common areas of complaint? What do people love or hate about their app?

Depending on the industry, there may be review sites that compare your competitors’ products. Keep in mind these are usually run by affiliates (who endorse products in exchange for commissions), and they have an interest in favoring one over another. However, they test products themselves and pin features against each other; therefore, you can get facts on the competitor that it isn’t keen on sharing.

Here’s an example of a review website comparing between Dyson and Shark, two leading cordless vacuums:

6. Website competitor analysis

You now have an overview of your competitors. You’ve assessed their place in the market and conducted an audience comparison.

Now, let’s delve into their website performance to uncover:

• Which channels are performing well for your competitors
• Which sites are your strongest competitors
• Which sites you can compete with to quickly gain market share

Let’s start with some digital data for the Similarweb Website Analysis report.

Here, I’ve created a competitor analysis example for foodinsight.com together with its key competitors. Let’s take a look together:

Looking at Traffic & Engagement metrics, we see that dietdoctor.com is getting substantially more traffic than its competitors, followed by ketocycle.diet . Now, traffic is a limited metric. Let’s qualify our findings with engagement metrics.

Again, we see that dietdoctor.com is a clear winner in the Nutrition Diets and Fitness category.

But, when we look at visits over time, dietdoctor.com shows an obvious downward trend. Let’s move over to Channels.

Above, we can see that dietdoctor.com is winning in Organic Search and Direct traffic. Direct traffic indicates that they have better brand recognition than their competitors.

Moving on to other channels, look how easy it is to spot that ketocycle.diet is investing heavily in advertising, and none of its competitors are competing in this space. This might be a big opportunity for you as this space is mostly untapped.

Pro tip: Keep track of your competitors with a Competitive Tracker

Once you know who your competitors are, I highly recommend tracking them over time with a Similarweb Competitive Tracker . This will give you a benchmark, a plan, and the ability to track your improvement vs your competitors.

The Competitive Tracker enables you to track up to 25 competitors at a time and will help you understand their marketing performance. You can use it to see how your business fits into your market by comparing your site’s performance with your industry competitors.

It will show you where your competitors are gaining or declining in traffic for every marketing channel.

You can also see new ad creatives they have created and discover new trending terms and topics.

What’s more, your tracker will highlight note-worthy insights across all of your metrics.

After you’ve completed your competitor’s website analysis, the next step is to dig into keyword strategies.

7. Analyze your competitors’ keyword and content strategy

At this stage, you have already seen your competitors’ big-picture strategic and tactical approach. It’s now time to go to the Similarweb Keywords report . Looking at keywords will help you understand how your competitors are showing up in search results. This could reveal both SEO strategies and PPC keywords that they are bidding on .

Since you are looking at your competitive market, it makes sense to analyze your top competitors at the same time. This will merge all the keywords your top competitors are ranking for in one table. You can filter the data from there.

Above, we noticed in the Channels report that competitors were investing in SEO. To understand their SEO strategies, we are looking at the non-branded keywords. If, on the other hand, we want to understand how a brand is performing in search, we could look exclusively at branded keywords.

We currently have an overwhelming number of keywords in the table. To make sense of the data, I usually filter it by topic. For instance, since we are looking at sites that are focused on diet, we can start to look at diet plan keywords.

This filter is powerful, as yes, these sites are organic competitors, but not all topics are relevant to your site. The filter will allow you to quickly see the topics your site is competing on. Another way to use this is to look at what topics other sites are competing on. You might find some that are relevant to your site that you never thought of.

See your competitors’ best-performing content

To understand what content is bringing your competitors their best results, look at their top-performing landing pages. Below, you can see the top-performing pages for foodinsight.com.

The report shows you all the keywords the page is ranking on, as well as a trend graph so that you can see how each page is performing.

8. Analyze their lead generation strategies

To get a better understanding of your competitor’s strategic approach, you’ll want to research their lead generation strategies . To do this, you need to put yourself into the shoes of their audience and actually take a trip down their funnel. Read a few blog posts, sign up for whatever you can, and try out any free tools they offer. You can also hone in on top traffic referrers and discover the top sources of referrals for their site.

Don’t forget to use a methodical approach to collecting any responses. This is going to save you time and provide inspiration for future improvements.

Your goal here is to identify:

• The major pain points they address
• The unique solutions they offer (and how)
• Their key messages for customers
• Who is sending referrals to their site
• How they serve their customers (site or app)

You have the data (source), now craft your winning strategy

At this point, you should have a comprehensive grasp of how to analyze your competitors. We’ve covered how you can assess the broader market and dissect your competitors. We’ve also covered how you can analyze audience interests and see what assets your competitors are using to serve them.

Doing this analysis will help you find untapped opportunities in your market so that you can create a strategy that capitalizes on your strengths and addresses your competitors’ shortcomings. Just remember there is one thing at the heart of competitor analysis – Comprehensive and consistent data. With Similarweb you have all the tools and information you need to analyze and conquer your market.

Build winning strategies

Competitive analysis is the process of collecting and reviewing information about your competitive landscape.

What should I include in a competitor analysis? 

In your competitor analysis, you should assess your competitors’ strengths, weaknesses, market share, pricing, marketing strategies, and customer feedback. Also, evaluate their innovation, distribution channels, and overall financial health. This will help you to identify opportunities and threats in your industry.

How can I conduct a successful competition analysis?

Use Similarweb to determine the demographic makeup of your customer base across both web and app sources. Identify the sites consumers are visiting, evaluate emerging or declining performers, and find industry trends and marketing strategies that you can replicate.

What is a competitive analysis framework?

A Competitive Analysis framework is a structured approach to compare your company’s marketing strategy to your competitors in order to inform strategic decision-making. It involves evaluating market dynamics, industry trends, and competitor performance.

by Limor Barenholtz

Director of SEO at Similarweb

Limor brings 20 years of SEO expertise, focusing on Technical SEO, JavaScript rendering, and mobile optimization. She thrives on solving complex problems and creating scalable strategies.

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Competitive Analysis: How To Conduct A Comprehensive Competitive Analysis

In this guide, you will learn how to conduct a competitive analysis: understand market trends, identify your competitors, evaluate opportunities, analyze threats to your organization, and adjust your go-to-market and positioning strategy accordingly.

This article was co-authored with Nandini Jammi.

Table of Contents

Introduction, part 1: the basics of competitive analysis.

• What is a Competitive Analysis?
• Why should You Should Conduct a Competitive Analysis?
• How Not to Use a Competitive Analysis

Part 2: How to Select Competitors for Analysis

• How to select competitors for analysis

Part 3: How to Conduct a Competitive Analysis

• Company Overview
• Go-to-Market Analysis (Customer Acquisition Analysis)
• Product Offering and Pricing
• Customer Experience and Customer Success
• Tools and Resources and Techniques

Part 4: The Next Steps

Checkout my course on How to Conduct Customer Interviews

If the SaaS world feels like a blur these days, it’s not just you. SaaS products and services have proliferated. Product categories have gotten more crowded. A lot of their features and functionality have started to overlap. The subscription economy has made it easier to switch to competing products. The marketplace has turned into a competitive high-stakes, “winner-takes-all” environment.

New product categories are popping up every day and the lines between traditional categories and labels are starting to matter less and less to customers who just have a problem to solve. Now that customers can choose from more options than ever, it’s become much more difficult to eke out a sustainable competitive advantage.

As of 2017, there are over 5,000 products in the martech sphere alone competing for business in complex and overlapping ways. Some companies leverage their expertise and resources to enter new markets. Salesforce is a great example; look at the number of martech categories it’s listed in. With so much competition, SaaS companies can't win on features alone; they must win on brand and customer experience .

It has also become remarkably difficult to distinguish direct competitors from indirect threats - and when you do, you find competition often comes from surprising places. In fact, competition in the SaaS and tech industries is increasingly coming from indirect competitors, whose core technology enables them to invade adjacent verticals and industries.

Between 2016 and 2017, Amazon was mentioned almost 3 times more frequently by senior executives on earning calls than any other company. It’s no wonder executives at public companies are obsessed with the retail giant. Even the threat of an Amazon entrance could result in a seismic shift in the market and put them out of business overnight. In other words, the SaaS world moves fast —  and the only way to keep up is to be one step ahead.

Here’s how this intelligence contributes to a winning go-to-market strategy :

• Research can help orient your business in the marketplace
• Research can help you identify the quickest path forward
• Research can help you unearth overlooked gaps and opportunities

1. What is a Competitive Analysis?

A competitive analysis is the process of identifying your competitors and evaluating their strategies to determine their strengths and weaknesses relative to your own business, product, and service. The goal of the competitive analysis is to gather the intelligence necessary to find a line of attack and develop your go-to-market strategy.

2. Why You Should Conduct a Competitive Analysis

You’ve likely heard the saying “Keep your friends close, but keep your enemies even closer.” When it comes to conducting a SaaS competitive analysis, that’s not the whole story.

In the SaaS industry, keeping your enemy close won’t prevent you from getting ambushed. Sometimes you don’t even know who your enemies are. The “enemy,” after all, could be acquired by Amazon and put you out of business overnight. Or Google could build a competing product in your market.

Here’s why you should conduct a SaaS competitive analysis, or “study the enemy.” Studying the ‘enemy’ can help you understand the battlefield. It can help you identify where the “enemies” are and how they’re approaching the business. It can help you discover strategic areas where you can position yourself for a win.

A competitive analysis won’t help you with pressing business decisions, such as what product feature to build next. Never copy your competitors for the sake of it; they could be 100% winging it! Moreover, if you’re the industry leader, the value of analyzing competitors is limited because you’re the one leading the pack through uncharted territory.

It will, however, help you develop a high-impact go-to-market (GTM) strategy.

Understand Market Conditions

A company rarely competes against just one competitor. In fact, in many cases, the biggest competition in the SaaS and tech industries is coming from indirect competitors. These competitors hold a commanding position in their core market, allowing them to expand into different industries and verticals. Who would have thought that Uber and Google would become die-hard competitors in the autonomous car market? As I wrote previously in my analysis of sales enablement and acceleration industry , it is almost impossible to distinguish direct and indirect competitors. In many SaaS verticals everyone competes with everyone.

Identify Strengths and Weaknesses

A good competitive analysis helps identify the strengths and weaknesses of your company in relation to the alternatives.

You need a keen understanding of your ideal customer and the market so that when you launch, your product is positioned correctly in the ecosystem of all products and services. Since competition can come from anywhere, you need to catalog your strengths and weaknesses relative to both direct and indirect category leaders (i.e., those adjacent to your core business).

Design / Adjust Go-to-Market (GTM) Strategy

An effective GTM strategy requires a deep understanding of your ideal customer, market and competition, product offering and pricing, and channels necessary to reach your customers. Competitive analysis helps you understand market dynamics so you can find an optimal way to reach your target customers. Analyzing your market and competition also helps you determine how your company and your product fits in the current environment.

3. How Not to Use a Competitive Analysis

You’ll never be able to fully understand or duplicate a competitor’s strategy. A competitive analysis is just one input in your growth strategy —  and a limited one at that. You don’t want to look to your competitors for marketing tactics. They might be spending thousands on Facebook ads, but that doesn’t mean it’s working.

You also don’t want to launch a new feature just to keep up with a competitor. For all the talk of the data-driven workplace, you’d be surprised how many product decisions are driven by petty internal politics or a micromanaging HiPPO (Highest Paid Person’s Opinion).

Don’t use competitive analysis to make decisions on what to build next. Your next idea isn’t going to come from your competitors. It should come from customer feedback, talking to prospects , and ideas your colleagues are sharing internally across your company.

Avoid industry research. Industry analysts aren’t good at predicting disruptive companies and cutting-edge trends because such changes occur at the bottom of the market, which is generally not on their radar. Research giants like Forrester and Gartner provide industry consensus after major shifts have already occurred. Plus, they derive their research by analyzing large organizations, so startups won’t find what they’re looking for here.

Don’t spend too much time on it. Treat your competitive analysis as an ancillary activity. It shouldn’t consume too much of your time and resources. Focus on what your customers are telling you, whether through feedback, interviews or their in-app behavior. They will always be your strongest source of data and insights.

4. How to select competitors for analysis

Competitive analysis is an exercise of comparing your business, product, and service to companies and finding similarities and differences. The most critical part of kicking off a competitive analysis is choosing the right competitors to analyze. Otherwise, you will spend tons of time on competitive research with very limited insight to show for it. In other words, the competitors you select determines how you will perceive your company and the final analysis.

Remember that martech landscape map with over 5,000 companies? Almost every product category is made up of over a dozen different players. You can’t reasonably expect to analyze all of them. You don’t need to either. An ideal competitor analysis includes three to five companies that represent the biggest threat to your business. (Go with five if you’re operating in a crowded market.)

But how can you develop a list that accurately reflects your real competitors? Here’s what you need your organization to align on first:

1. Customer (WHO) Who are your target customers (and companies)?

2. Problem (WHAT) What core problem does your product solve for your target customers?

3. Product Category (HOW) How do you solve this problem? Are you solving this problem with a unique technology or process?

Direct competitors are companies that sell to the same customers and solve the same problem using the same or similar solution (technology). The diagram below shows how Customer, Problem and Solution overlap into direct competition.

Direct competitors solve the same problem for the same customer using the same solution. By solution, I mean a similar technology or approach to the problem —  one that seems indistinguishable to the customer. For example, Uber and Lyft are direct competitors.

Direct Competition = same customer + same problem + same/similar solution

Some competitors sell to the same customer using the same (or similar) solution but solve a different problem. For example, UberEats sells to the same customers but solves a different problem: food delivery instead of transportation. For UberEats, DoorDash and GrubHub are good examples of direct competitors.

Different Problem = same customer + different problem + same/similar solution

Some competitors solve the same problem with the same technology but focus on a different customer. For example, Zum provides schoolchildren with rides to school, solving a transportation problem for kids and parents. Zum solves a slightly different problem too: safety. Safety is the primary concern for parents when it comes to kids riding back from school. However, it’s ultimately grounded in the same tech as Uber.

Different Customer = different customer + same/similar problem + same/similar solution

Some companies solve the same problem for the same customer but using a different solution. It can be different in terms of technology or process. For example, Chariot provides group transportation services for commuters and employees, using a completely different approach to solving the same problem for the same customers of taxis.

Different Solution = same customer + same problem + different solution

The table below summarizes how to evaluate companies for competitive analysis selection. This approach is not ideal and might not work for every company since each one operates in its own complicated ecosystem. But it provides a basic framework for selecting competitors.

Limiting your organization to direct competitors only might lead you to a very narrow view of the market. This framework allows you to evaluate companies that aren’t just your direct competitors but companies that could easily move into your turf. You want to consider companies that aren’t currently in your category but could potentially leverage their product or technology in your space.

Outside of direct competition, the most dangerous competitors are those that sell to the same target customer. These companies already have access to customers so it’s much easier for them to provide products or services that solve another problem for the same customers.

Alternatives

Alternatives can satisfy similar or related customer needs with completely different functionality. It’s essential to understand these so you know what you’re up against and can position accordingly. For example, an alternative to Uber is a taking a walk or taking a taxi or riding a bike. Read more about alternatives.

Company Size

It’s a mistake to think you should only analyze competitors of a similar size to your company.The image below was used by Dan Ariely in his book Predictably Irrational to demonstrate the concept of relativity.

This illusion helps illustrate how important it is to consider your relative position against your competitors. Your company can look bigger and further ahead compared to smaller competitors and can look unreasonably smaller and behind when compared to larger competitors.

You can set up a much more balanced view if you look at both market leaders (often larger companies), as well as smaller, often more agile and younger companies.

This allows you to calibrate where you fall along the spectrum. Are you growing faster than a company of your size and age? Are you doing about as well as a current market leader back when it was a smaller business too?

That context becomes helpful as you are deciding which companies to include in your competitive analysis. The more comprehensive your view of the competitive landscape, the more effectively you can identify potential opportunities for your company.

Now that you’ve finalized a short list of competitors, you’re ready to begin the real work. To kick off a competitor analysis, start by collecting the basics and drilling down from there.

5. Company Overview

Why is it important to track your competitors’ founding date, fundraising rounds and employee count? So you can use it as a benchmark against your own growth. If your company is a year old, how fast did your competitor grow when it was at your stage? How much revenue was it generating? How many customers did it have?

If you’re a startup facing off against the dominant market leader, you could use this data to set yearly goals and projections for your business. You can easily find a company’s “biographical” information on sites like Crunchbase, LinkedIn, Owler, and AngelList.

Employee Count

If you can’t find a company’s revenues online, Jason Lemkin of SaaStr offers a simple formula you can use to calculate a ballpark revenue estimate, simply based on the number of employees at the business ( read more ). Linkedin is usually the best source to find an active employee count.

Founding Year

Knowing a company’s founding year helps you put things in context in your overall analysis. You’ll find it useful as you chart their past growth over the years —  a helpful comparison as you establish your own business goals.

Typically, VCs make just one bet in a product category to avoid cannibalizing their investments. You are either an Uber or Lyft investor. This is a commonly accepted view in the Valley. If you see a VC’s name missing from the category you’re competing in, they might be a good candidate to approach for fundraising. They missed the chance to invest in your competitor, but now they have the opportunity to work with you.

Number of Customers

It’s unlikely that you will find an exact customer count for your competition. But a good guess is all you need —  as long as you have a relative sense of where each competitor stands in the hierarchy.

You can often find some clues by researching press releases. Companies often brag about reaching certain milestones in revenue or number of customers. Technology tools such as Datanyze can tell you how many websites include your competitor’s product tag. Product review platforms such as G2Crowd can be helpful too.

Mergers and Acquisitions

Mergers or acquisition is one of the easiest ways for companies to enter a new market or get rid of a competitor. When a web analytics company acquires a mobile application monitoring company, the writing is on the wall. It’s about to enter a new market. Research your competitor’s M&A history to get a sense of the direction it’s moving in.

Market Share

It’s not easy to find information on market share. Large companies invest millions of dollars to investigate market share but most SaaS companies don’t have such resources. The best shortcut is to conduct a survey with a sample size of 200-300 respondents, asking them what tools and solutions they are using. That’s usually just enough to get a ballpark estimate of market share in the SaaS industry.

Organizational Strength and Weakness

Before we look at product strengths and weaknesses (which we’ll do in a bit), it’s worth understanding what makes your competitor unique from an organizational perspective.

For example, is the CEO considered an industry influencer? Does he or she have a significant social media following? That’s important to make note of, as this is a unique strength that can’t be easily replicated.

You should also consider how company culture and internal processes impact the business and its bottom line. Netflix is widely admired for its “no brilliant jerks” policy at the company. This is one of many factors that helps it recruit and retain top talent year after year.

This goes back to the DNA of the business —  it’s a strength you can’t just copy.

I can’t resist mentioning Travis Kalanick, who, in my opinion, was always the strength and weakness of Uber. You can hardly imagine a person with any other personality creating a once-in-a-generation company in the transportation industry, with its complex ecosystem. Think otherwise? Brad Stone covers the rise of Uber in his book Upstarts.

Surprisingly, you can mine a lot of useful intelligence from employee reviews on Glassdoor. Because employees leave anonymous feedback, they don’t hold back on what they love (and don’t love) about their employer. You can often uncover cultural aspects of the organization by reading how employees perceive senior leadership and whether or not they enjoy working there.

Summary of questions:

• What is the total number of employees your competitors have?
• Are your competitors expanding or scaling down?
• How old is your competitor?
• In what geographical market do they operate?
• How much have your competitors raised thus far?
• Who are your competitor’s investors?
• What is your competitor’s customer count?
• Can you estimate your competitor’s growth rate or revenue?
• Have your competitors acquired companies? If so, in what industries?
• What is your competitor’s market share?
• What are your competitor’s top organizational strengths and weaknesses?

6. Go-to-Market Analysis (Customer Acquisition Analysis)

Now that you’re done collecting company information about your competitors, it’s time to dive deep into their go-to-market and customer acquisition strategy.

Remember: An effective GTM strategy requires an understanding of these five elements:

• Target customer & strategic messaging
• Product offering and pricing
• Customer acquisition strategy

These are a sampling of the questions you’ll need to answer as you do your research:

• What are the characteristics and needs of each competitor’s ideal customers?
• How does each competitor acquire new customers?
• What type of content do they publish and what topics do they cover?
• What is their sales process - what channels does it involve, how long does it take, how involved is the sales team?
• How easy is it for customers to switch away from your competitors?
• What are the barriers to entry in the industry and in relation to each competitor?

6.1 Target customer

In B2B, the term target customer (or ideal customer profile ) refers to both the company and decision maker profiles. We can’t fully grasp the pains and challenges of a decision maker without looking into his/her organization —  and their stakeholders. Larger organizations can throw more money at problems than a smaller, more agile company. Even decision makers with the same title, same goals, and same challenges might have different priorities and stakeholders to convince depending on the size of their organization.

Put yourself in the shoes of your competitors and understand their customers:

• What kind of companies do your competitors sell to (size, revenue, vertical)?
• Who is the primary decision maker and economic buyer?
• What are the primary goals for your competitor’s customer?
• For your competitor’s customer, what are their daily activities, success metrics, and challenges?
• What organizational functions are involved in the buying decision?

Here are a few places to look for this information.

Competitor’s website Most companies display customer logos and case studies on their website. Look for patterns in the types of customers they’re featuring, including characteristics like size, location, industry, and revenue. Those will give you some pretty strong clues into the kind of customers they’re targeting.

Data analytics and enrichment product Want to know what tech stack your competitors are using? Datanyze is a great tool for finding out. It analyzes millions of websites and finds snippets of code that tell you what integrations, platforms and plugins are behind a company’s product.

Product reviews Of course, your goal isn’t to compile a list of your competitor’s customers. You should be on the hunt for patterns that help you identify why your customers are choosing your competitors.

Mining product reviews helps you get valuable voice-of-customer data —  including pains and problems that you can use to develop your own strategy.

Customer reviews are also a great place to find so-called “trigger events” that lead customers to look for a new product or service solution.

For example, if a company opens a new office, it needs services that will help find a new office, set it up, and move furniture to a new location. Therefore, opening a new office can be a trigger for searching for a solution that helps companies assist in this process.

This is an important part of the buying process and customers are usually happy to share this information in their reviews.

6.2 Strategic messaging

Strategic messaging is the most visible part of your marketing, including your copy and brand. Companies often go into full messaging wars against each other because it gets so easily noticed. You change a headline message on your homepage, then your competitor retaliates with a new message of their own.

Strategic messaging isn’t a brand exercise nor is it a copywriting project —  it goes beyond conveying feelings and emotions.

Strategic messaging is a value-based communication framework that companies employ in all interactions with stakeholders — employees, prospects, customers, partners and investors.

Strategic messaging communicates product value in a way that resonates with each stakeholder involved in the buying journey.

Read your competitor’s press releases, analyze their website (including their About Us page), and read their content to understand:

• What story are your competitors communicating to customers?
• How does your competitor position its product?
• How does your competitor describe its value proposition and benefits?
• What words and phrases does your competitor use to describe their company, product, and value?
• What is your competitor’s one-sentence company description?

Product positioning Software products often include many features and solve multiple problems. But what problems does your competitor's product focus on most?

Look for patterns that highlight your competitor’s product focus.

Content Strategy

• What does your competitor write about?
• What topics are covered on the company blog, and in their whitepapers, research, videos, podcasts and other resources?
• How do prospects/customers respond to your competitors’ content - do they share it, comment on it, like it?

7. Product Offering and Pricing

After you understand your competitor’s customers and messaging, you can move to analyzing its product offering. First, outline what your competitor’s product can and can’t do.

Product Feature Analysis List all the features that your competitor offers and outline the value that each feature brings to customers. Create a map of your own features and values that overlap with your competitors.

• What are your competitor’s core product features?
• What product features are unique to your competitors?
• How do your product features compare to the same features of your competitor?
• Does your competitor support multiple environments (e.g., web, iOS, Android)?

Pricing and Average Selling Price (ASP)

• What is the minimum price your competitor charges?
• What is the ASP?
• What are the main factors that impact price (number of seats, volume etc.)?

Product strength / weaknesses

• What are the strengths of your competitor’s product?
• What are the weaknesses of your competitor’s product?
• How do customers perceive your competitor’s product design, quality, and price?

7.1 Customer Acquisition Model (Freemium vs Free Trial)

A customer acquisition strategy explains how companies attract and convert prospects into customers.

• How does your competitor market its product?
• Does your competitor offer a free trial or freemium?
• How difficult is it to switch away from your competitor?

Switching costs The SaaS revolution drastically reduced switching costs across the board. On-premise solutions required expensive servers and software and an often onerous onboarding process. Today, it is much easier to swap one SaaS product for another.

But switching costs, or the cost that a customer incurs as a result of switching products, still exist. Technology can be a driver of higher switching costs. When a product is integrated with multiple systems and APIs, switching to another product becomes increasingly difficult. Such a switch usually results in business interruption and the need to retrain staff, among other unwelcome effects.

Switching costs are a significant barrier to switching to a new product, which makes it a key part of your competitive analysis.

Unique Barriers to Entry Barriers to entry are high costs or other obstacles that prevent new competitors from easily entering an industry or area of business.

Tom Tunguz highlighted the three barriers that prevent competitive entrance: data network effect, network effects, and ecosystem creation ( read more ). Do your competitors have any of these core barriers to entry?

Protecting your company with one of the core barriers is smart. Nailing down two barriers is even better. Slack is a great example of a company that has a network effect, having successfully created widespread demand through word-of-mouth referrals and a highly engaging product. It has also invested in building strong relationships with developers. Slack’s developer platform roadmap and its commitment to transparency for developers has helped the company build a strong ecosystem around its product.

Today, Slack’s rich ecosystem is one of the many competitive advantages the company has strategically cultivated over time.

Business Models When you conduct your competitive analysis, it's worth analyzing the sales models of your competitors. In his article Three SaaS Sales Models , Joel York describes the three most common SaaS sales models based on the relationship between price and product complexity. Companies with low priced and low-complexity products must focus on developing a self-service option so they can maintain a healthy relationship between customer acquisition cost (CAC) and customer lifetime value (CLV). Slack, Trello, Dropbox, GitHub are all low-price, low-complexity products.

A transactional sales approach to customer acquisition is best for products with a higher average selling price (ASP) then self-service solutions. Customers expect to see a demo, or even try the product. In fact, when customers are paying more, they expect more hand-holding throughout the process. While this can drive up organizational costs and complexity for a SaaS vendor, it can yield significant revenues and long-term customer loyalty. For this approach, companies need to optimize their sales, marketing, and support in a way that allows them to build a relationship with the customer over the customer lifetime. Most SaaS companies fall under this category.

The enterprise sales process is reserved for highly complex products sold at a high price. Because enterprise products provide so much value and prospects take longer to evaluate the product, companies must adopt a complex selling process and longer sales cycles. Selling to large enterprises with a high ASP means competing against rivals with high-touch sales models.

If your competitor is focused on a self-service model, you need to position your product and sales process to be more focused on the customer relationship. If you also rely on a self-service model, you need to compete on brand or some other factor. In other words, you won’t be able to compete on product since switching will be fairly easy.

If you are selling a high-priced, complex product then you should focus on competitors pursuing similar enterprise clients. However, remember that self-service competitors are always a threat so you need to continually monitor their feature releases.

You and your competitors are competing for the attention of potential customers. That’s why it's useful to know how your competitors use social media channels and paid acquisition channels to reach their target audience. While digital channels are key in today’s marketplace, you also need to pay attention to offline channels like events, meetups, conferences, and direct mail. This is where the face-to-face interactions occur that are often the key to establishing connections and sealing deals. You can usually find out information about offline events by visiting the “Events” section of your competitors’ websites and also searching for their names in relation to conferences and events on the wider web.

• Where do your competitors advertise?
• What keywords do they buy on Adwords?
• Do they advertise on Youtube, Facebook, Linkedin, Twitter or other social media platforms?
• Do your competitors focus on selling in specific verticals?

This article features 13 tools you can use to analyze your competitors’ marketing channels.

9. Customer Experience and Customer Success

It pays to understand how satisfied are customers with a competitor product. In the end, nothing matters more than the customer experience in determining a company’s success. The best way to get this information is from review platforms

• How do customers like your competitor’s product?
• What do they like the most about your competitor?
• What do the like the least about your competitor (top complaints)?
• What’s the Net Promoter Score (NPS) of your competitors?
• How loyal are customers to your competitor’s product?
• What is the one thing that’s most highlighted in customer case studies?
• Do customers complain about support or product failures?
• How quickly do your competitors respond to customer service questions on social media?

A few great places to find customer reviews: G2 Crowd, Trust Radius, Capterra, Software Advice, GetApp, Founderkit, and Appbot, among others. Another option is to interview your customers and prospects to learn how they view your product and competitor's product.

10. Tools and Resources and Techniques

As you conduct your competitive analysis, you can call upon many tools and techniques to get the job done effectively. I’ve mentioned a few throughout this guide, but here’s an at-a-glance list with additional resources.

Technology and techstack:

• Datanyze - As mentioned earlier, this tool analyzes millions of websites and finds snippets of code that tell you what integrations, platforms and plugins are behind a company’s product.
• Similartech - Similar to Datanyze.
• Builtwith - Find out what technologies are being used on specific websites.

Company Profiles:

• Crunchbase - Discover industry trends, investments, and news about your competitors.
• LinkedIn - Where you can find out a competitor’s “biographical” info. Usually the best source to find an active employee count.
• Angel.co - See which startups are hiring and for what positions.
• Owler - Similar to Crunchbase.
• DataFox - Its database shows which companies use more than 14,000 technology solutions, which you can search through using the Similar Company Algorithm.
• Mattermark - See company profiles, key personnel, and growth signals related to your competitors.
• Slideshare - Find competitor product or funding slide decks here.

Product reviews:

• G2Crowd - The best resource to learn what customers think about your products and competitors.
• GetApp - Similar to G2Crowd.
• TrustRadius - Similar to G2Crowd.
• Quora - See questions or discussions about certain products or topics that might be helpful in your competitive analysis.
• YouTube - Find product demos and presentations.

Website traffic:

• SimilarWeb - Provides website traffic comparison.

SEO & SEM:

• SEMrush - Helps you understand your competitors’ focus in search engine marketing, including best-performing keywords, along with their spend.

It's quite likely that no prospect or customer reads your press releases as carefully as your competitors do. Press releases are helpful in understanding a company’s strategic focus. Sometimes PRs show your competitors’ customer count. The About section in a press release shows your competitor's strategic messaging. These two to five sentences are how your competitor wants their customers and prospects to perceive the company and its products.

The primary goal of a competitive analysis is to understand the marketplace and how you can differentiate from other players. At the end of a competitive analysis, you should create a battlecard for each competitor. A competitive battlecard is essentially a quick visual reference for your sales and marketing team, guiding them as they position your organization against competitors.

Sample Battlecard: PublishNOW vs WordPress Here’s a fictitious battlecard using two real companies, describing how a new PublishNOW product will be positioned against WordPress. PublishNOW is a content publishing platform for marketers and writers to improve content engagement, content stickiness, and reach. WordPress is a blogging platform.

The battlecard helps sales understand the strengths and weaknesses of WordPress and how to win customers when going up against them.

By following the steps outlined in this guide, you can effectively conduct a competitive analysis:

• Select competitors for analysis, including both direct and indirect competition
• Gain an overview understanding of each competitor
• Figure out how each competitor goes to market and acquires customers
• Analyze the product offering, including features, price, strengths, weaknesses, whether it’s offered as a freemium or free trial, and the competitor’s overall business model
• Identify the channels competitors use to advertise and deliver their products
• Analyze the satisfaction level of your competitors’ customers
• Use all this information to populate your competitive analysis framework and competitor battlecards

Remember: The idea of a competitive analysis isn't to overly focus on the competition but to understand where your company stands in the marketplace and identify opportunities to further differentiate. At the end of the day, a focus on the customer will serve your company far more than a focus on the competition. Done well, a competitive analysis can help you find ways to outplay the competition by better serving customers —  theirs and yours.

• SaaS Startup Strategy | Three SaaS Sales Models by Joel York
• The 3 Competitive Defenses of Enduring SaaS Companies by Tomasz Tungus
• A Step-by-Step Guide to Conducting Competitive Analysis by Svitlana Graves
• Stop Ignoring Your Competitors And Learn How To Do Competitor Analysis Instead by Product Habits
• How to Write a Great Business Plan: Competitive Analysis by Jeff Haden
• Why Competition Is So Bitter in SaaS: Oligopolies and Dominant Strategy Equilibriums by Jason Lemkin
• How do B2B SaaS markets evolve with 10+ competitors? by Jason Lemkin

If you like this article please recommend and share.

Follow me on Twitter , Medium , Quora , Instagram , connect on Linkedin . Join my Telegram channel - Marketing Journal - to discover interesting articles, books, and resources on marketing, product growth, startups, and SaaS.

Send me email with comments and questions: myk[at]myxys.com.

• Freemium vs Free Trial vs Hybrid Customer Acquisition Model in SaaS: How To Develop a Customer Acquisition Strategy
• How to Design Marketing Campaigns: The Importance of Market Segmentation
• Strategic Communication: How to Develop Strategic Messaging and Positioning

5 Competitive Analysis Frameworks Explained with Visuals

• Post author: Daniel
• Reading time: 8 mins read
• Post last modified: November 10, 2022

Competitive analysis is an essential part of the job description for most marketers. It would be best to thoroughly understand your competitors’ strategies to develop an impactful marketing strategy . That’s where a competitive analysis framework comes in. This article uses visuals to explain five popular competitive analysis frameworks and discusses what each is best suited for.

Page Contents

What Is a Competitive Analysis Framework?

A competitive analysis framework is a model you can use to help shape how you go about researching your competitors. It helps you home in on specific information by giving a structure to guide your  market analysis .

There are several frameworks you can use for competitive analysis in marketing. But how do you choose the right one for your needs? If you’re a digital marketing agency aiming to get a sense of a new client’s competitors, your needs may differ from an in-house marketing director.

Here, we explain five of the most popular competitive analysis frameworks with visuals and discuss what each is best suited for.

1. SWOT Analysis

The SWOT framework helps you evaluate the internal (Strengths and Weaknesses) and external factors (Opportunities and Threats) that impact your business or a course of action.

When to Use a SWOT Analysis

SWOT analysis is often used in strategic planning to help identify a potential competitive advantage.

For example, your strong relationships with suppliers might allow you to offer lower prices than your competitors. But you can also apply it in much narrower situations. You can use it to evaluate a decision by looking at your strengths, weaknesses, opportunities, and threats relative to the decision, for example.

Marketing agencies often perform a  marketing SWOT analysis as part of their clients’ competitive landscape analysis (CLA). They may compare strengths and weaknesses across competitors for various marketing channels, such as websites, blogs, social media, digital ads, and organic search. This helps them determine recommendations for a client’s strategy.

2. Porter’s Five Forces

Porter’s Five Forces is a framework that examines the competitive market forces in an industry or segment. It helps you evaluate an industry or market according to five elements: new entrants, buyers, suppliers, substitutes, and competitive rivalry.

According to Michael Porter’s model, these are the fundamental forces that directly affect how much competition a business faces in an industry.

When to Use Porter’s Five Forces

This framework is practical when you want to analyze the competitive structure of an industry . For example, the five forces can provide insights into how attractive it is to enter a new market. This is helpful if you are considering whether you should expand your product offering to reach new customers.

Competitor analysis using Porter’s Five Forces can also provide insights to help you shape your strategy for the competitive landscape of your industry. For instance, if the threat of substitutes is high, you may seek to mitigate that competitive force with a strategy focused on building brand affinity among your customers.

3. Strategic Group Analysis

Strategic Group Analysis is a competitive analysis framework that lets you analyze organizations in clusters based on the similarity of strategy. By identifying the set your firm falls into for any given strategic dimension, you can get a sense of the impact of the different strategic approaches. You can also see those you are most closely competing with.

When to Use Strategic Group Analysis

This framework is handy when you have a hypothesis about the effect of a business dimension. For example, you can create strategic groups according to digital marketing tactics and analyze the performance of the groups to explore potential causality.

How do competitors who rely heavily on paid search campaigns fare when it comes to sharing of voice? Which competitors fall into the same cluster as your firm regarding their pricing strategy?

By exploring different dimensions, you can surface critical factors for success and evaluate your position relative to others in the industry.

4. Growth-Share Matrix

The  Growth-Share Matrix is an analysis framework that classifies the products in your company’s portfolio against the competitive landscape of your industry. Developed by the Boston Consulting Group (BCG) founder in 1970, the model gained widespread acceptance  for helping companies decide which products to invest in based on competitiveness and market attractiveness.

[novashare_tweet tweet= “The Growth-Share Matrix is an analysis framework that classifies the products in your company’s portfolio against the competitive landscape of your industry.” theme= “simple-alt” cta_text= “Click to tweet” hide_hashtags=” true”]

According to BCG, products fall into one of four quadrants in the matrix, each with a corresponding strategy:

• Question marks are high-growth but low-market-share products, often new products with high potential. These should be invested in or let go, depending on how likely a product is to become a star.
• Stars are products that are likely to achieve high growth and high market share. Your firm should invest heavily in these products.
• Cash cows are low-growth but high-share products. These products bring in cash and can fund investment in your stars.
• Pets are low-share, low-growth products considered failures. Your business should reposition these products or stop investing in them.

When to Use the Growth-Share Matrix

The traditional use of this competitive analysis framework is to help large firms determine their product portfolios — which products to invest in further and which to cut, based on expected cash flow produced.

However, it holds other uses, too. Smart Insights notes that this model  can also be applied to analyzing digital marketing strategies . By plotting channel growth against the ROI of the channel and evaluating similar to how you would determine products, a marketer can see which channels to invest in or stop using, for example.

5. Perceptual Mapping

Perceptual mapping is a visual representation of perceptions of your product relative to competing alternatives. It’s also called positioning mapping because it shows the position of your brand, product, or service mapped against your competitors.

The first step is to determine two attributes you’ll use as the basis for comparison. Next, you plot where your product and those of your competitors fall on the spectrum of those two attributes.

Here we can see a competitor analysis framework example that maps perceptions of quality against price:

When to Use Perceptual Mapping

Perceptual mapping helps understand how your customers perceive your product offering in relation to your competitors. Market researchers use perceptual mapping  to show the results of customer input they have collected.

As a marketer, mapping helps understand how customers view you and your competitors. This will help you know whether your existing positioning strategy is registering with your target audience. It can also provide insight into gaps to target.

Finding the Right Competitive Analysis Framework is Just the First Step

Once you identify the competitive analysis framework that fits your situation, you’ll need to start researching. We offer valuable tools and guides to help you gather data and analyze your competitors’ online presence.

Firstly published on: blog.alexa.com.

Here are a few of our best guides:

• How to Do a Competitive Analysis
• 4 Ways to Use a Competitive Matrix to Find Growth Opportunities
• Your Complete Guide to Marketing Research
• The 10 Best Sites for Market Research

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Industry Analysis Using Porter’s Five Forces: Guide + Example

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How to Write a Competitive Analysis for Your Business Plan

11 min. read

Updated January 3, 2024

Do you know who your competitors are? If you do, have you taken the time to conduct a thorough competitor analysis?

Knowing your competitors, how they operate, and the necessary benchmarks you need to hit are crucial to positioning your business for success. Investors will also want to see an analysis of the competition in your business plan.

In this guide, we’ll explore the significance of competitive analysis and guide you through the essential steps to conduct and write your own. 

You’ll learn how to identify and evaluate competitors to better understand the opportunities and threats to your business. And you’ll be given a four-step process to describe and visualize how your business fits within the competitive landscape.

• What is a competitive analysis?

A competitive analysis is the process of gathering information about your competitors and using it to identify their strengths and weaknesses. This information can then be used to develop strategies to improve your own business and gain a competitive advantage.

• How to conduct a competitive analysis

Before you start writing about the competition, you need to conduct your analysis. Here are the steps you need to take:

1. Identify your competitors

The first step in conducting a comprehensive competitive analysis is to identify your competitors. 

Start by creating a list of both direct and indirect competitors within your industry or market segment. Direct competitors offer similar products or services, while indirect competitors solve the same problems your company does, but with different products or services.

Keep in mind that this list may change over time. It’s crucial to revisit it regularly to keep track of any new entrants or changes to your current competitors. For instance, a new competitor may enter the market, or an existing competitor may change their product offerings.

2. Analyze the market

Once you’ve identified your competitors, you need to study the overall market. 

This includes the market size , growth rate, trends, and customer preferences. Be sure that you understand the key drivers of demand, demographic and psychographic profiles of your target audience , and any potential market gaps or opportunities.

Conducting a market analysis can require a significant amount of research and data collection. Luckily, if you’re writing a business plan you’ll follow this process to complete the market analysis section . So, doing this research has value for multiple parts of your plan.

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3. Create a competitive framework

You’ll need to establish criteria for comparing your business with competitors. You want the metrics and information you choose to provide answers to specific questions. (“Do we have the same customers?” “What features are offered?” “How many customers are being served?”)

Here are some common factors to consider including: 

• Market share
• Product/service offerings or features
• Distribution channels
• Target markets
• Marketing strategies
• Customer service

4. Research your competitors

You can now begin gathering information about your competitors. Because you spent the time to explore the market and set up a comparison framework—your research will be far more focused and easier to complete.

There’s no perfect research process, so start by exploring sources such as competitor websites, social media, customer reviews, industry reports, press releases, and public financial statements. You may also want to conduct primary research by interviewing customers, suppliers, or industry experts.

You can check out our full guide on conducting market research for more specific steps.

5. Assess their strengths and weaknesses

Evaluate each competitor based on the criteria you’ve established in the competitive framework. Identify their key strengths (competitive advantages) and weaknesses (areas where they underperform).

6. Identify opportunities and threats

Based on the strengths and weaknesses of your competitors, identify opportunities (areas where you can outperform them) and threats (areas where they may outperform you) for your business. 

You can check out our full guide to conducting a SWOT analysis for more specific questions that you should ask as part of each step. 

• How to write your competitive analysis

Once you’ve done your research, it’s time to present your findings in your business plan. Here are the steps you need to take:

1. Determine who your audience is

Who you are writing a business plan for (investors, partners, employees, etc.) may require you to format your competitive analysis differently. 

For an internal business plan you’ll use with your team, the competition section should help them better understand the competition. You and your team will use it to look at comparative strengths and weaknesses to help you develop strategies to gain a competitive advantage.

For fundraising, your plan will be shared with potential investors or as part of a bank loan. In this case, you’re describing the competition to reassure your target reader. You are showing awareness and a firm understanding of the competition, and are positioned to take advantage of opportunities while avoiding the pitfalls.

2. Describe your competitive position

You need to know how your business stacks up, based on the values it offers to your chosen target market. To run this comparison, you’ll be using the same criteria from the competitive framework you completed earlier. You need to identify your competitive advantages and weaknesses, and any areas where you can improve.

The goal is positioning (setting your business up against the background of other offerings), and making that position clear to the target market. Here are a few questions to ask yourself in order to define your competitive position:

• How are you going to take advantage of your distinctive differences, in your customers’ eyes? 
• What are you doing better? 
• How do you work toward strengths and away from weaknesses?
• What do you want the world to think and say about you and how you compare to others?

3. Visualize your competitive position

There are a few different ways to present your competitive framework in your business plan. The first is a “positioning map” and the second is a “competitive matrix”. Depending on your needs, you can use one or both of these to communicate the information that you gathered during your competitive analysis:

Positioning map

The positioning map plots two product or business benefits across a horizontal and vertical axis. The furthest points of each represent opposite extremes (Hot and cold for example) that intersect in the middle. With this simple chart, you can drop your own business and the competition into the zone that best represents the combination of both factors.

I often refer to marketing expert Philip Kohler’s simple strategic positioning map of breakfast, shown here. You can easily draw your own map with any two factors of competition to see how a market stacks up.

It’s quite common to see the price on one axis and some important qualitative factor on the other, with the assumption that there should be a rough relationship between price and quality.

Competitive matrix

It’s pretty common for most business plans to also include a competitive matrix. It shows how different competitors stack up according to the factors identified in your competitive framework. 

How do you stack up against the others? Here’s what a typical competitive matrix looks like:

For the record, I’ve seen dozens of competitive matrices in plans and pitches. I’ve never seen a single one that didn’t show that this company does more of what the market wants than all others. So maybe that tells you something about credibility and how to increase it. Still, the ones I see are all in the context of seeking investment, so maybe that’s the nature of the game.

4. Explain your strategies for gaining a competitive edge

Your business plan should also explain the strategies your business will use to capitalize on the opportunities you’ve identified while mitigating any threats from competition. This may involve improving your product/service offerings, targeting underserved market segments, offering more attractive price points, focusing on better customer service, or developing innovative marketing strategies.

While you should cover these strategies in the competition section, this information should be expanded on further in other areas of your business plan. 

For example, based on your competitive analysis you show that most competitors have the same feature set. As part of your strategy, you see a few obvious ways to better serve your target market with additional product features. This information should be referenced within your products and services section to back up your problem and solution statement. 

• Why competition is a good thing

Business owners often wish that they had no competition. They think that with no competition, the entire market for their product or service will be theirs. That is simply not the case—especially for new startups that have truly innovative products and services. Here’s why:

Competition validates your idea

You know you have a good idea when other people are coming up with similar products or services. Competition validates the market and the fact that there are most likely customers for your new product. This also means that the costs of marketing and educating your market go down (see my next point).

Competition helps educate your target market

Being first-to-market can be a huge advantage. It also means that you will have to spend way more than the next player to educate customers about your new widget, your new solution to a problem, and your new approach to services. 

This is especially true for businesses that are extremely innovative. These first-to-market businesses will be facing customers that didn’t know that there was a solution to their problem . These potential customers might not even know that they have a problem that can be solved in a better way. 

If you’re a first-to-market company, you will have an uphill battle to educate consumers—an often expensive and time-consuming process. The 2nd-to-market will enjoy all the benefits of an educated marketplace without the large marketing expense.

Competition pushes you

Businesses that have little or no competition become stagnant. Customers have few alternatives to choose from, so there is no incentive to innovate. Constant competition ensures that your marketplace continues to evolve and that your product offering continues to evolve with it.

Competition forces focus & differentiation

Without competition, it’s easy to lose focus on your core business and your core customers and start expanding into areas that don’t serve your best customers. Competition forces you and your business to figure out how to be different than your competition while focusing on your customers. In the long term, competition will help you build a better business.

• What if there is no competition?

One mistake many new businesses make is thinking that just because nobody else is doing exactly what they’re doing, their business is a sure thing. If you’re struggling to find competitors, ask yourself these questions.

Is there a good reason why no one else is doing it?

The smart thing to do is ask yourself,  “Why isn’t anyone else doing it?”

It’s possible that nobody’s selling cod-liver frozen yogurt in your area because there’s simply no market for it. Ask around, talk to people, and do your market research. If you determine that you’ve got customers out there, you’re in good shape.

But that still doesn’t mean there’s no competition.

How are customers getting their needs met?

There may not be another cod-liver frozen yogurt shop within 500 miles. But maybe an online distributor sells cod-liver oil to do-it-yourselfers who make their own fro-yo at home. Or maybe your potential customers are eating frozen salmon pops right now. 

Are there any businesses that are indirect competitors?

Don’t think of competition as only other businesses that do exactly what you do. Think about what currently exists on the market that your product would displace.

It’s the difference between direct competition and indirect competition. When Henry Ford started successfully mass-producing automobiles in the U.S., he didn’t have other automakers to compete with. His competition was horse-and-buggy makers, bicycles, and railroads.

Do a competitive analysis, but don’t let it derail your planning

While it’s important that you know the competition, don’t get too caught up in the research. 

If all you do is track your competition and do endless competitive analyses, you won’t be able to come up with original ideas. You will end up looking and acting just like your competition. Instead, make a habit of NOT visiting your competition’s website, NOT going into their store, and NOT calling their sales office. 

Focus instead on how you can provide the best service possible and spend your time talking to your customers. Figure out how you can better serve the next person that walks in the door so that they become a lifetime customer, a reference, or a referral source.

If you focus too much on the competition, you will become a copycat. When that happens, it won’t matter to a customer if they walk into your store or the competition’s because you will both be the same.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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How to Perform a Best-in-Class Competitor Analysis (w/ Template)

Get a full competitive analysis framework that's been real-world tested, and learn the tips and tricks for capturing competitor data and conducting research

You will learn

• The value of running a competitor analysis and how to get your stakeholders on board
• Clear and actionable steps for figuring out who your competitors are
• An easy-to-follow playbook for creating a competitor analysis steeped in research and data

Competitor analysis can be hard .

It’s particularly hard (and confusing and incredibly time-consuming) if you’re relatively new in business . Most of the data is ridiculously difficult to get. Even if you manage to dig something up, you always seem to be left with more questions than answers.

How did they manage to get $10M in funding?

Did that absurdly expensive ad campaign pay off?

Did their CEO leave because things aren’t going well at the company?

What does it all mean?

At least that’s what I felt when I was just getting started with competitive analysis. Whether you’re facing a similar struggle or just aren’t sure where to start, I hope this article will help you navigate through every step of the process.

In this article, I will share the competitive analysis framework my team and I have developed (through weeks of research and dozens of iterations), and give you some tips on where to look for data that isn’t publicly available so you can have a competitive advantage .

But before we start…

What is competitor analysis?

Competitor analysis is the process of evaluating your direct competitors’ companies, products, and marketing strategies.

To make your analysis truly useful, it’s important to:

• Pick the right competitors to analyze
• Know which aspects of your competitors’ business are worth analyzing
• Know where to look for the data
• Understand how you can use the insights to improve your own business.

Which brings us to why competitor analysis is worth doing in the first place.

Who can benefit from an analysis framework?

This framework will work well for entrepreneurs , business owners , startup founders , product managers , creators , and marketers .

It covers business metrics, a product analysis, and a marketing assessment, with the marketing bit being a little more in-depth. Feel free to skip certain parts if you’re only interested in one aspect, or better yet, delegate some steps to respective teams if you can.

It doesn’t matter much what kind of product you’re selling or how mature your business is. To use this framework, you may already have a fully functional product, an MVP, or even just a product idea. I’ll be using certain analysis tools to facilitate and automate certain bits of the process. Most of them are either freemium or have a free trial available, so all that you’ll need to invest into the analysis is your own time.

Done properly, competitive analysis will give you plenty of quantitative and qualitative data to back your own business decisions and business strategy (and no, I’m not talking about cloning your competitors’ strategies to come up with a second best product, although this can sometimes work ).

Namely, it can help you:

• Develop (or validate) your Unique Value Proposition
• Prioritize your product development by focusing on the aspects of competitors’ products customers value the most
• Improve your product by capitalizing on competitors’ weaknesses customers complain about
• Find your competitors' strengths to get benchmarks to measure your growth against
• Uncover market segments that aren’t fully served by competitors
• Create a new product category by identifying gaps between what your competitors offer and what the customers need

Who even are your competitors?

I can sense you rolling your eyes at me, but hear me out.

If you’re serious about competitive analysis, it’s not enough to just evaluate the two Industry Leaders everyone’s talking about (that kind of analysis will likely get you depressed real quick).

The competitors you pick for the analysis determine the insights you’ll get at the end, and the decisions you’ll make, based in part on those insights. That’s why including different kinds of competitors (big and small, direct and indirect) into the analysis is critical if you want the results to be comprehensive.

Here’s a handy way to think about your competition that’s based off of Myk Pono’s classification :

It’s best to include at least one competitor from each category into your analysis to make it truly comprehensive.

Whether you can instantly think of over a dozen competitors or can barely recall five, it’s a good idea to turn to Google or a different a search engine ( DuckDuckGo , anyone?) and look up your product category. Examine the products within the top 50 results, along with the ads that are displayed in response to your query — more likely than not, you’ll come across companies you’ve forgotten about, or maybe even learn about a few newcomers.

To give you an example, I’m going to imagine I’m launching a vacation rental website — an alternative to AirBnB. Here’s what my list of competitors may look like broken down by categories:

Now that you have a comprehensive list of your competitors with similar products, it’s time to start the actual analysis.

As you go through the process, feel free to use this Google Sheets template I’ve created.

In the spreadsheet, I like to divide the factors into collapsable sections (yes, these do get pretty lengthy). I also tend to add comments under each aspect with details or links that provide more info. Depending on the stage you’re at with your business, you can also add in a column for your own product to quickly see how it compares to competitors.

What’s included in a competitor analysis framework

• Business & Company metrics 1.1. Company overview 1.2. Funding 1.3. Revenue & customers
• Product 2.1. Product features 2.2. Pricing 2.3. Perks 2.4. Technology
• Customers & awareness 3.1. Share of Voice 3.2. Sentiment 3.3. Key topics 3.4. Geography 3.5. Social media platforms
• Marketing 4.1. SEO 4.2. Social media 4.3. Advertising 4.4. Influencers and other partners 4.5. Content Marketing 4.6. Customer acquisition 4.7. Sales 4.8. Customer service 4.9. Unique strengths

I’ll go into depth about each section below, and again feel free to grab this competitor analysis template to follow along .

1. Business & Company metrics

1.1. company overview.

Your analysis should start with digging up the basic info about your competitors: things like the company’s founding year, the names of the CEO and other key people, locations of the company’s offices, how many employees work there, etc.

You’ll usually find bits of this information on competitors’ websites.

The company’s LinkedIn profile is often useful, particularly for employee counts.

And for info on key people, offices, and founding date, CrunchBase is a great resource.

Your competitors’ job openings can also be found on their websites, LinkedIn, and job search sites like Glassdoor and Indeed . Knowing who they are hiring and which teams they are expanding will give you an idea of what steps they’re about to take, both product- and marketing-wise. Are they about to hire their first sales rep or content marketer? Are they looking for a developer with a specific skill set? Combined with what you know about your industry, your competition’s job openings will tell you a lot about where they are going with their business.

You could also take things one step further and see if you can get an understanding of competitors’ corporate culture. The best place to dig through employee reviews is Glassdoor . There, you can find out what employees think about the culture, the team, the pay, the management – and those are often honest opinions because a lot of the feedback is anonymous.

1.2. Funding

Knowing when, how much, and from whom your competitors received funding can also be important, particularly if you plan on raising capital yourself. It will give you a solid idea on how much funding you can expect to get.

On top of that, venture capitalists (VCs) tend to invest in only one company in a given category so as not to cannibalize their own investments. If an VCs’ name is missing from your competitors’ funding history, they might be a good candidate for you: they missed out on the chance to work with a successful competitor, but now they have the opportunity to invest into a promising startup in the industry (you!).

1.3. Revenue & customers

Your competitors’ revenue and number of customers deserve a separate section in your spreadsheet. For some companies, you’ll be able to find estimates on Owler , but those will often be very rough. A Google search for the name of your competitor combined with the words “revenue,” “customers,” etc. might lead you to interviews or press releases where the companies share this information (because, well, everyone likes to brag).

That said, I bet you won’t be able to find every competitor’s revenue figures this way. To help you dig deeper, I have two hacks to share that go beyond a simple Google search:

Hack #1: Set up alerts for competitors’ interviews and conference presentations.

This one requires some time, but it’s very effective in the long run: you’ll be surprised at just how much your competitors give away at event presentations and in interviews, without being aware of you listening. All you need to do is sign up for Awario (there’s a free 14-day trial available), create an alert for the names of your competitors’ CEOs or other key figures (don’t forget to put the names in double quotes to search for an exact match), and select YouTube as the source for the search. And that’s it! You can now binge-watch those videos right in Awario, without having to leave the tool for a minute, noting your findings along the way.

Hack #2: Use this revenue formula

Jason Lemkin of SaaStr offers a simple formula you can use to calculate a competitor’s revenue estimate, provided you know how many people work there. Take the number of employees the company has listed on its LinkedIn profile and multiply that by $150,000 if well-funded ($200,000 if modestly funded). This should give you an estimate you can work with.

Employee count * $150,000 = Revenue estimate

These details, combined with company info like founding year and employee counts, are important so you can use them as a benchmark against your own growth. How much time did it take each of your competitors to get to the revenue figures they have today? Are you doing as well as a current market leader back when it was an early-stage business?

It’s time to evaluate your competitors’ products or services, the actual things they’re selling. What kind of technology are they using to build it? What is their core selling point? Are there any perks that come with the product: a freemium version, complementary free tools, or services?

2.1. Product features

Let’s get down to the core of your competitors’ business – their product and its key features. A word of caution: this will likely be the longest bit of your spreadsheet.

It’s a good idea to divide the features into groups of related ones to keep things organized.

2.2. Pricing

Assessing competitors’ pricing pages is another crucial step in your analysis (if pricing isn’t available on their website, try reaching out to their sales team).

Here are some questions to consider:

• Can you uncover a segment of the market that doesn’t seem to be fully served by competitors’ plans?
• Say, do they have an affordable plan for startups or small businesses? Discounts for students or non-profits?
• Are there data-heavy options available for agencies and big brands, with Enterprise features like an API or white-label options?

Another thing you can draw from competitors’ pricing strategies is great ideas for A/B testing . Do they offer monthly or annual plans? (If it’s both, what is the default option?) How many packages have they got? Identify the opportunities for your experiments, and prioritize the ones that are common for several competitors.

Dig through your competitors’ websites to see if they offer something complimentary with their product. Do they have a free trial or a freemium version? Are there any “free” tools their customers get access to, or perhaps a perks program in partnership with other tools?

2.4. Technology

Competitors’ technology is an important aspect to assess for tech companies. BuiltWith is a great (and free) tool to figure out the tech stack that a competitor uses. Just type in the URL, and you’ll be able to see what technology the website runs on, along with any third-party scripts and plugins it uses, everything from analytics systems, email marketing services, to A/B testing tools, and CRMs.

A lean alternative to BuiltWith is What Runs , which is a browser extension that analyzes any webpage you’re on.

On top of that, looking at competitors’ job postings (yes, again) is a great way to see what kind of technology stack they’re using by analyzing the skills they require from candidates. To look for job openings, check your competitors’ websites and job search sites like Glassdoor and Indeed .

3. Customers & awareness

Your next big step in analyzing the competition is looking at what their customers have to say about them. In this section, you’ll look at each brand’s Share of Voice, the sentiment behind their mentions, the key topics customers bring up when they talk about your competitors, and more. To measure these, you’ll need a social listening tool like Awario or Mention .

3.1. Share of Voice

Ideally, you’d want to measure the market share for each of your competitors. But alas, it’s nearly impossible. One substitute metric you could use is Share of Voice – the volume of mentions your competitors get on social media and the web compared to each other.

To measure share of voice , create an alert for each competitor’s brand in Awario, give the tool some time to collect the mentions, and jump to the Alert Comparison report to see how much each competitor is talked about on social and the web.

It’s a good idea to keep these alerts running for the long-term (as opposed to just looking at Share of Voice once). This way, you’ll be able to see spikes in their volume of mentions, track what their customers are saying, and see how their (and your own) Share of Voice evolves over time.

3.2. Sentiment

The caveat of measuring the level of awareness a competitor has is that awareness isn’t always a good thing. What if there’s been a data scandal one of the competitors is involved in? What if their customer service is horrible, causing an influx of negative mentions?

That’s not the only reason why measuring the sentiment behind the mentions of your competitors is important. It will also help you understand what these companies’ customers love and hate about their product the most.

On top of that, it can also serve as a benchmark when you analyze the sentiment behind the mentions of your own brand and product. Let’s say, 40% of your mentions are positive, 20% are negative, and the rest are neutral. How do you know if that’s a good thing or a bad thing without a benchmark?

3.3. Key topics

What do your customers focus on when they mention your competitors’ products or write customer reviews?

What do they love and hate the most?

Identifying the key topics within your competitors’ mentions will give quick answers to these questions so you don’t have to dig through mentions by hand. You can find these topic clouds in a social listening dashboard. From there, you can click on any topic to explore the mentions in-depth.

Interestingly, these topic clouds can also offer insight into various aspects of your competitors’ business – and they may help you fill the gaps in other sections in your competitor analysis spreadsheet. Here’s one example: those are the key topics for Loom, a screen recording app, from which you can learn a few useful things if you look closely.

Looks like the company a) has just raised some money, b) offers remote jobs, and c) has just announced a new feature they’re building. And you discovered all that at a glance! Of course, you can further explore any topic by clicking on it to see all the mentions that contain the word/phrase.

3.4. Geography

Looking at the geography and demographics of your competitors’ mentions will let you figure out which markets they are focusing on the most (and, with any luck, find an area that isn’t too saturated yet). You’ll find a map of each brand’s mentions in Awario’s dashboard and reports, along with the breakdown of mentions by language.

Try adjusting the date range in the report to see if there’s been any changes in languages/countries recently. This could mean that your competitors are focusing on a new emerging market – an opportunity you might be interested to explore.

3.5. Social media platforms

Just like with geography, this one will give you an idea on where your competitors’ audience hangs out so you can use these findings in your own marketing strategy and social media strategy. On top of that, if you see platforms that appear to be heavily underused (but do look relevant), those may also be worth experimenting with. Just like with the previous factors, you can compare the platforms side-by-side using Awario’s Alert Comparison report.

4. Marketing

From the SEO perspective, there are two most important things about competition you should focus on: the keywords they rank for and the backlinks they’ve got. The former will give you a solid idea on what type of search terms bring them traffic and sales (so you can shape your own keyword strategy), and the latter will show what authoritative websites in your niche link to them (those will likely be relevant to your website too).

For both tasks, you can use SEO PowerSuite (you can get the free version here ). The toolkit includes 4 apps for different aspects of SEO, but we’ll only need 2 of those to analyze competitors.

Rank Tracker will help you with the keywords. Navigate to the tool’s Ranking Keywords module and type in a competitor’s URL. You’ll see a list of terms they rank for, along with the search volume for each term in your country of choice. It’s a good idea to move the most popular terms to Target Keywords right away so you can keep them for your records. Repeat the process for every competitor, noting their estimated search traffic and top keywords they rank for.

For backlink analysis, you’ll need SEO SpyGlass. Launch the tool and create a project for one of your competitors. Next, jump to Domain Comparison . One by one, specify your competitors’ websites and take a look at how they compare.

Next, jump to Link Intersection – a module that shows you the domains that link to more than one of your competitors. You can sort them by InLink Rank to see the most authoritative websites on your list. Those are likely relevant industry websites that will make a great addition to your backlink profile – make sure to save them so you can reach out and see if you can get a backlink from there.

4.2. Social media

The next step is analyzing what, when, and how your competitors are doing on social media. Rival IQ is a useful tool for this task, and they have a 14-day free trial available. Once you’ve signed up for the tool, specify your competitors’ websites, and the platform will automatically pull their social media profiles.

From there, you’ll be able to see which social networks they’re active on, how many followers they have, how much engagement their posts get, etc. Those insights will be handy to benchmark your own strategy against. The tool will also show you the best times and days of the week to post, based on the engagement competitors’ posts get.

On top of that, it may be a good idea to research if your competitors have a community on social media – a Facebook group or a subreddit dedicated to their product. How big is the community? Are the users engaged?

4.3. Advertising

To get an idea of your competitors’ ad strategy, SimilarWeb is a great (and free) starting point. Enter the URL of a competitor’s website and navigate to the Search section – it will show you if your competitors have any search ads running, and, if they do, what their target keywords are.

The Display section below will show you whether a competitor is running any display ads, and, if they are, which platforms bring them the most traffic.

For Facebook ads, simply open a competitor’s Facebook page and click on Info and ads .

Alternatively, you can use Facebook’s Ad Library to search for your competitors’ ads. Unfortunately, these tools won’t reveal targeting rules your competitors use, but you’ll still get a solid idea of how many ads they’re running, and perhaps get inspiration for your own advertising efforts.

If native ads or other kinds of paid content are a thing in your niche, you can also try searching for “sponsored by [competitor]”, “author” “[competitor]”, etc. in a search engine of your choice (the quotes will make sure you’re looking for an exact match, and all of the words in the query are taken into account). Take note of authoritative platforms you come across and try reaching out to them to inquire about sponsored posts.

4.4. Influencers and other partners

At this point, we’re interested in exploring the partnerships your competitors have that help spread the word about their products. We’ll look at influencers endorsing your competition, publishers they work with, and media platforms they guest blog on, if any.

For the analysis, you’ll need the same social media monitoring alerts for your competitors’ brand you’ve already created in Awario. In your feed, make sure to group the mentions by Authors and sort them by Reach to see the most influential posts first (Reach is calculated based on the number of followers and engagements on social media, and based on the site’s estimated traffic for results from news, blogs, and the web).

This will let you see the most influential posts that mention your competition, including social media posts and blog articles from around the web. Take note of the influencers or publishers they work with – chances are they will be happy to work with you as well.

On top of that, you can also turn to SimilarWeb to see what referral sources are bringing the most visits to your competitors’ websites. Chances are you’ll also find a bunch of blogs and media platforms that generate substantial traffic to their sites.

4.5. Content Marketing

If content is part of your competitors’ strategy, it’s important that you analyze their blog and what they tend to write about. Are the readers engaged? Do the posts get shared around social media a lot? Does the competitor accept guest posts?

BuzzSumo is a great tool to help you out. It will show you the most shared posts on any blog within the past year, so you can get inspiration for your own posts and a better idea of what kind of content resonates with your target audience the best.

4.6. Customer acquisition

I know, a lot of the points above were actually customer acquisition techniques; but this section is reserved for the ones that weren’t outlined before. Do your competitors have a referral strategy? Do they have an affiliate program? Do they sponsor or exhibit at industry conferences? Do they acquire customers in any other creative way?

If applicable, it’s also important to analyze your competitors’ sales strategy. Do they do product demos? What does contacting a rep look like? Is there a phone number you can call?

The best thing to do is try and book a demo (or a call) with every company yourself, taking careful note of every step. Do they require filling out dozens of fields for you to talk to sales? Will they refuse to hold a demo just because your company is “too small”? Is their time zone convenient? How long does it take them to reply?

All of this will help you spot strengths and weaknesses in your competitors’ sales strategy to help you shape your own.

4.8. Customer service

Does every competitor offer Customer Support for all customers, or does it start with a particular plan? What channels do they provide support on: is it email, live chat, phone, social media, or all of the above? What is their response time? Do they offer Account Management for Enterprise customers?

Analyzing your competitors’ customer service will help you improve your own. The truth is, in large companies, customer care is often almost non-existent; for a new business in the industry, that’s a great area to capitalize on. If that’s true in your case, make sure to highlight the quality of your customer service on your website.

4.9. Unique strengths

Is there anything else that gives a competitor on your list an unfair advantage over everyone else? For example, is their CEO or somebody else on the team an industry influencer? Does the company publish amazing books that are also free? Have the founders launched successful products before? Make note of each competitor’s unique strengths that are hard to emulate.

What’s next?

Once you’re done with every step of competitive analysis, I’m sure you’ve got a clear understanding of the market and more than a handful of ideas on how to improve your own product. While the research is still fresh in your mind, one bonus step I’d highly recommend to everyone performing the analysis is to map your competitors on a Strategy Canvas (from the book Blue Ocean Strategy ).

A Strategy Canvas is a chart that breaks down your competitors by various aspects of their businesses and products (the pricing and other aspects specific to your product category).

The easiest way to plot this is a line chart, with each factor assigned a score depending on how well it is executed.

Here’s an example from the book: a Strategy Canvas for Southwest, one of the first low-cost airlines in the US, compared to the 2 categories that could be considered its competitors: air travel at the time and car travel.

Source: Blue Ocean Strategy

Depending on the kind of competitors you’ve analyzed, you’ll likely see that most of them follow one or two distinct patterns: those will be the major categories you’re competing with (though they may not be as different as cars and airplanes). It’s time to plot your own product on the canvas and see how it compares to the competitors.

Finally, think of ways to make your product stand out. From your research, recall the things your audience needs more and less of. Blue Ocean Strategy offers a nice way to think about the factors on the canvas in terms of applying them to your own product, called the Eliminate-Reduce-Raise-Create Grid.

• Think of features you could eliminate to lower the cost of your solution : the ones that seem superfluous, are rarely mentioned by customers, and are particularly costly. For Southwest vs. traditional airlines, those were seating class choices and hub connectivity.
• Think of the factors you can reduce way below the industry standard : the ones that need to be there, but can be leveled down significantly. It’s great if price is going to be one of them! For Southwest, those were the prices, meals, and lounges.
• Time to think about the aspects you’ll raise well above the industry standard , especially if they won’t cost you a fortune. What do customers wish they’d get more of? For Southwest, that was the friendliness of the service and the speed of travel.
• Lastly, try and create new features that your closest competitors don’t offer (or borrow them from another product category). With Southwest, it was the frequent departures that traditional airlines didn’t have – but car travel did.

Remember: the idea of a competitive analysis isn’t to steal what they’re doing, it is to understand where your business falls in the market and find new opportunities to make your product stand out.

Eventually, focusing on your customers and gaps between supply and demand will serve you much better than focusing on the competition. And that’s what competitor analysis is for – finding ways to serve the customer better.

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What Is Competitive Analysis and How to Do It Effectively

• 15 min read

Rebecca Strehlow, Copywriter at Crunchbase

Whether you’re an entrepreneur, market researcher or marketing enthusiast, knowing your competitors inside and out is a crucial part of the job. 

Competitive analysis is more than a quick online search; instead, it’s a systematic process that allows you to gain valuable insights into your competitive environment. By examining the strengths, weaknesses, strategies and market positions of rival companies, you can make informed decisions that help you come out on top.

Let’s dive into what competitor analysis is and how to do it, as well as the tools and templates you need to thrive in the modern market.

What is competitive analysis? 

Competitor analysis, often referred to as competitive analysis, is the systematic process of gathering and evaluating information about your competitors to gain a deep understanding of the competitive landscape in your industry. It involves delving into your competitors’ business models, marketing practices, product offerings, target audiences and much more.

This practice helps you keep a pulse on competing products in the market and make well-informed decisions for your business. It also enables you to find opportunities for growth, anticipate trends and proactively respond to potential threats.

Benefits of competitor analysis

The advantages of doing competitive analysis can have a meaningful impact on your bottom line. Here are just some of its key benefits: 

• Informed decision-making: By understanding your competitors’ strategies, you can make well-informed decisions about your own business. This includes choices related to product development, marketing and pricing.
• Identification of market opportunities: Competitor analysis can reveal gaps in the market or areas where your competitors may be underperforming. These insights can help you identify new opportunities for growth and expansion.
• Risk mitigation: By staying aware of your competitors’ activities, you can better anticipate potential threats and challenges. This proactive approach enables you to develop strategies to effectively mitigate risks and overcome threats before they happen.
• Benchmarking: Comparing your business to competitors helps establish benchmarks for performance. This allows you to measure your progress and identify areas where you excel or need improvement.
• Product and service enhancement: Analyzing competitors’ products and services can inspire improvements in your offerings, leading to increased customer satisfaction and loyalty.
• Improved marketing strategy: Understanding how your competitors market their products or services can help you refine your own marketing strategy to better reach your target audience.
• Adaptation to market shifts: The business environment is constantly evolving. Competitor analysis helps you stay agile and adapt to changes in customer preferences, technology and market trends.
• Competitive advantage: Armed with insights from competitive analysis, you can develop strategies to gain a competitive advantage in your industry.
• Long-term sustainability : Consistent competitor analysis allows your business to plan for the long term by identifying potential challenges and opportunities that may arise in the future.

Together, these benefits can empower you to thrive in the face of competition and establish a strong presence in the market. 

How to do competitor analysis 

To harness these advantages, you’ll need to learn how to perform competitive analysis effectively. The process is quite structured and involves several key steps to ensure that you gather relevant data and gain actionable insights.

• Identify your competitors
• Define your objectives
• Collect data
• Look for the 4 Ps
• Conduct a SWOT analysis

1. Identify your competitors

To pinpoint your competitors, create a list of organizations that compete with you both directly and indirectly in the marketplace. 

Direct competitors are organizations that offer similar products or services to the same target audience. In other words, they’re the businesses that potential customers could choose instead of your company.

To identify your direct competition, start by examining businesses that operate in the same industry or niche. Ask yourself questions such as:

• Who offers products or services that are nearly identical to ours?
• Who targets the same customer segments and geographical areas as we do?
• Who are our primary rivals when it comes to market share and sales?

Once you have identified these direct competitors, you can create a list or spreadsheet to keep track of their names, key characteristics and any available data that will be useful in your analysis.

Next, you’ll want to identify your indirect competitors. Indirect competitors serve a similar target market as your company, but may offer different products or services. They are indirect rivals because they can influence consumer choices, even though they are not in direct competition with your business. To identify indirect competitors:

• Look for businesses that serve the same customer needs, even if their products or services are not identical to yours.
• Consider how customers might choose between your offerings and those of indirect competitors.
• Examine businesses that could potentially expand into your market.

Including both direct and indirect competitors in your analysis provides a more holistic view of your competitive landscape and helps you anticipate shifts in consumer preferences or market dynamics.

Remember that the business environment is constantly changing, and new competitors may emerge over time. Regularly updating your list of competitors is essential to ensure that your competitor analysis stays relevant.

2. Define your objectives

The next step in competitive analysis is to clearly outline your objectives. This will ensure that you’re gathering relevant information that directly supports your business strategy. Here’s how to define your objectives effectively:

• Clarify your goals: Begin by outlining your overarching goals. Common objectives may include improving market share, optimizing pricing strategies, enhancing product development or refining marketing tactics.
• Identify your information needs: Use your goals to determine exactly what kind of information you’ll need. Ask yourself: What kind of data or insights will be most helpful in achieving your stated objectives? For example, if you want to improve product development, you may need data on your competitors’ product features, customer reviews and pricing.
• Develop KPIs: Write down the key performance indicators that are most relevant to your objectives. KPIs are quantifiable metrics that will help you measure your progress. For instance, if your goal is to enhance marketing strategies, relevant KPIs might include website traffic, conversion rates or social media engagement.
• Determine a time frame: Understanding the time frame of this project will influence the depth and scope of your analysis. Are you conducting a one-time competitor analysis, or is this an ongoing process? 
• Align with business strategy: Ensure that the above aligns with your overall business strategy. Your competitor analysis should directly contribute to the success and growth of your business.
• Adapt when necessary: Be open to adjusting your objectives as needed. The business landscape can change rapidly, and you may need to adapt in response to new opportunities or challenges.

When you define your objectives, you give yourself a clear roadmap for your research. This helps you focus on gathering the most pertinent data and ensures that your analysis directly benefits your business. Whether you’re looking to outperform competitors in a particular area or gain a broader understanding of the competitive landscape, well-defined objectives are the cornerstone of a successful analysis. 

3. Collect data

Effective data collection is another fundamental step in the competitor analysis process, as the quality and relevance of the data you gather directly influence the insights you gain. Begin by identifying data sources that will give you the information you’re looking for. These sources can include both online and offline channels.

Online sources are often the richest and most accessible. Common data sources for competitive monitoring include:

• Crunchbase : Crunchbase is a valuable resource for gathering data about companies, including your competitors. It offers details about a company’s firmographics, funding, leadership team, investor relationships and key metrics. This data helps you understand your competitors’ financial health, investment history, growth strategies and potential areas of expansion. 
• Company websites: Competitor websites are valuable sources of information about your competitors’ products, services, pricing and promotional strategies. They provide direct insights into how your competitors present themselves to customers and the market. 
• Social media: Social media platforms such as Facebook , X (formerly Twitter) , Instagram and LinkedIn offer a glimpse into your competitors’ marketing and promotional efforts. Analyze their posts, content engagement and follower interactions to understand their messaging and customer engagement strategies. You can also use social media to monitor comments, reviews and conversations to gauge customer sentiment and identify your competitors’ strengths and weaknesses.
• Customer review sites: Review sites like G2 , Capterra or dedicated industry-specific review platforms also offer candid customer feedback. Analyze the reviews to understand customer satisfaction levels, identify pain points and discover areas where your competitors excel or underperform. Some reviews may also mention pricing, which can help you determine how customers perceive the value of your competitors’ products or services.
• Market reports: Market research companies like Nielsen , Gartner , Forrester and Euromonitor International often produce comprehensive market reports across various industries. They often include data on market size, growth projections and emerging opportunities, helping you assess the overall landscape your competitors operate in. Market reports may also include company profiles, giving you information about their market share, strategies and financial performance. 
• Industry publications: Business publications and journals often publish in-depth articles and analysis about trends, innovations and market players. They can provide valuable information about your competitors’ strategies, market positioning and noteworthy developments. Crunchbase News , which offers data-driven reporting on private markets, is a great place to start.
• Government databases: Government databases can provide access to financial and regulatory information about companies, including your competitors. This data may include financial statements, business registrations and industry-specific regulatory compliance, helping you understand their financial health and legal compliance.

As you gather this data, make sure you have an organized place to put it. A good idea is to create a competitor matrix, also referred to as a competitor grid, which is a spreadsheet for organizing your research. List out your competitors on one axis of the grid (either the horizontal or vertical axis is fine). On the other axis, list the data points you’re looking to collect, such as company location, market position, price and branding.

A couple additional notes: pay attention to both your data accuracy as well as any ethical considerations. Confirm that the information you gather is up to date and reliable, as outdated or inaccurate data can lead to erroneous conclusions. On top of that, be mindful of legal requirements. Respect privacy rights, copyright and intellectual property laws when gathering data.

4. Look for the 4 Ps

Next, you’ll want to analyze your competitors’ marketing strategies. A systematic way to approach this is by looking at the 4 Ps of marketing, also known as the marketing mix. These are product, price, place and promotion, which you can break down into the following questions:

• What are the key features and attributes of our competitors’ products?
• How does the quality of our competitors’ products compare to ours?
• Are there any unique or innovative features in our competitors’ products that we should be aware of?
• What is the product life cycle of our competitors’ offerings, and how does that impact their market presence?
• How do our competitors brand and position their products in the market?
• Do our competitors offer a wide product range, or do they focus on a niche market?
• What are the customer reviews and feedback on our competitors’ products, and what strengths or weaknesses do they highlight?
• How do our competitors handle product updates, customer support and warranties?
• What are the pricing strategies employed by our competitors (e.g., premium, value, competitive or penetration pricing)?
• How do our competitors price their products or services compared to our pricing?
• What types of discounts, promotions or special offers do our competitors use, and how frequently do they change them?
• Do our competitors offer bundle pricing or product packages?
• How do our competitors handle pricing changes and adjustments based on market conditions or demand?
• What is the perceived value of our competitors’ products or services in relation to their pricing?
• Are there any loyalty programs or customer rewards related to pricing that our competitors offer?
• How do competitors communicate their pricing to customers, and does it align with their branding and positioning strategies?

Place (distribution)

• What distribution channels do our competitors use to reach their customers (e.g., direct sales, retailers, e-commerce or wholesalers)?
• How extensive is the geographic reach of our competitors’ distribution networks?
• Are there specific partnerships or collaborations that our competitors have with distributors or retailers?
• What is the availability and accessibility of our competitors’ products or services, both online and offline?
• How do our competitors handle inventory management, logistics and fulfillment to ensure timely delivery to customers?
• Do our competitors have a physical presence, and how does it impact their brand and customer engagement?
• What is the overall customer experience with the distribution and availability of our competitors’ offerings?
• Are there any supply chain or distribution challenges that our competitors face?
• What are the core elements of our competitors’ marketing and advertising strategies (e.g., online ads, content marketing, social media, traditional media)?
• How do our competitors position their brand, and what is their unique selling proposition?
• What messaging and tone do our competitors use in their advertising and marketing campaigns?
• How do our competitors engage with customers on social media, and how do they manage their online reputation?
• What content marketing tactics do our competitors employ to educate and engage their audience?
• Do our competitors use influencer marketing or partnerships with other brands or organizations?
• What customer feedback, testimonials or case studies do our competitors use in their promotional materials?
• How do our competitors measure the success and impact of their promotional efforts, and what adjustments do they make based on these metrics?

These questions will force you to think hard about your competitors and the ways they position their product or service in the market. Be sure to make a note of these data points so you have an organized spreadsheet with your competitive analysis. 

5. Conduct a SWOT analysis

Now, conduct a SWOT analysis using all the data and insights you’ve gathered. A SWOT analysis is a competitive analysis framework for systematically evaluating your competitors’ strengths, weaknesses, opportunities and threats. Create a table or slide deck with the following notes about each competitor:

• Strengths: Consider areas like product quality, brand reputation, financial stability and unique capabilities. What does your competitor excel at? What are their key assets and resources? What advantages do they have over your business and other competitors?
• Weaknesses: Analyze your competitors’ weaknesses, which are internal factors that put them at a disadvantage. Evaluate areas where they struggle, such as customer service issues, product limitations or operational inefficiencies. Where does your competitor fall short? What are their operational or financial weaknesses? Are there aspects of their products or services that receive consistent criticism?
• Opportunities: Consider the external factors and opportunities that your competitors can capitalize on. These may include market trends, emerging customer needs, technological advancements or changes in regulations. Here, you’ll want to ask yourself the following questions: What market opportunities are your competitors pursuing? Are there emerging trends that they are well-positioned to benefit from? How do they adapt to changing market conditions and customer demands?
• Threats: Evaluate the external factors and threats that pose risks to your competitors’ business. These could be increased competition, economic downturns, changing consumer preferences or regulatory challenges. What are the external threats that our competitors face? How do market or industry conditions pose risks to their operations? Are there competitive pressures that could erode their market share?

After identifying the strengths, weaknesses, opportunities and threats of your competitors, it’s time to analyze the findings. Look for connections and relationships between these factors. For example, how do strengths offset weaknesses, or how can opportunities be leveraged to mitigate threats? Consider how these factors impact your competitors’ overall competitive positioning.

Competitive analysis templates

Competitive analysis is a complex task, but you don’t have to start from scratch. These competitor analysis templates provide a structured framework for gathering and analyzing data about your competitors:

• Competitor research template
• Competitor matrix template
• Social media competitor analysis template
• SWOT analysis template

1. Competitor research template

This advanced search template is a helpful starting point for gathering data about competing companies. You can customize the template by adding multiple search filters, such as industry, geographic location and funding information, to pull up the companies that match your competitor profiles. The more you fine-tune your search, the more precise your list of competitors will be.

2. Competitor matrix template

A competitor matrix template , like this one from HubSpot , allows you to systematically compare key features, pricing and other attributes of your products or services with those of your competitors. By comparing these attributes side by side, you can better assess your biggest threats and identify areas where your business can excel.

3. Social media competitor analysis template

This social media competitor analysis template offers a structured framework for assessing and comparing your social media performance with that of your competitors. With sections for tracking key metrics, content strategies, audience engagement and more, this template simplifies the process of understanding how your social media efforts stack up against the competition. 

4. SWOT analysis template

This SWOT analysis template represents one of the most important types of competitive analysis templates. A template can simplify the SWOT analysis process and ensure that nothing falls through the cracks, helping you identify areas for improvement, capitalize on advantages and mitigate potential risks.

Competitive analysis examples

To understand how competitive analysis works in practice, let’s explore a few real-world examples that highlight its significance within different industries:

1. Apple vs. Samsung

Tech giants Apple and Samsung have long been rivals in the smartphone market. Both companies must scrutinize each other’s product launches, innovations and market share to stay competitive. Their competitive analysis involves a deep dive into one another’s product features, pricing strategies, branding and marketing tactics. 

2. Coca-Cola vs. Pepsi

Coca-Cola and PepsiCo have engaged in one of the most iconic and enduring business rivalries. Competitor analysis here includes assessing their advertising campaigns, product diversification, distribution networks and customer preferences. These two giants need to continuously monitor each other’s market positioning in order to win over consumers.

3. Amazon vs. Walmart

Amazon and Walmart are leaders in e-commerce and retail. They must perform ongoing competitive analysis to compare delivery speeds, pricing structures, customer experience and market expansion strategies. Both companies are committed to staying ahead by understanding the strengths and weaknesses of the other.

4. Airbnb vs. Booking.com

Another iconic competitor analysis example is within the online travel industry. Airbnb and Booking.com are key competitors that need to evaluate each other’s user reviews, property listings, pricing and website user experience. Both platforms continuously track each other’s offerings to enhance their competitive position.

5. Nike vs. Adidas

Nike and Adidas are major players in the athletic apparel industry. These companies closely follow each other’s strategies to dominate the market. Their competitive analysis includes examining product innovations, brand endorsements, athlete sponsorships and global market presence. 

Competitor analysis tools 

In order to conduct robust competitive analysis like the companies above, you’re going to need the right tools. These include everything from online databases to website monitoring platforms. Here are our top recommendations: 

1. Crunchbase

Crunchbase is a comprehensive business intelligence tool that provides best-in-class data about both public and private companies, including your competitors. You’ll get insights into funding, leadership teams, key metrics and investor relationships, allowing you to understand your competitors’ financial health, investment history and market focus. This information is vital for identifying potential threats in the market, as well as opportunities to differentiate yourself. Learn more about market research on Crunchbase .

2. Brandwatch

Brandwatch is a social listening and consumer intelligence platform that helps you monitor your competitors’ social media mentions, customer sentiment and brand reputation. This allows you to gauge public sentiment about your competitors and identify areas where you can strengthen your brand’s image and stand out in the market.

SEMrush is most commonly known as an SEO platform, but it’s also a useful competitive analysis tool. It helps you analyze your competitors’ digital marketing strategies, keywords, backlinks and advertising efforts. Ultimately, this gives you insights into your competitors’ online presence and helps you identify their strengths and weaknesses in the digital space. Note that you can view SEMrush web traffic data directly from Crunchbase .

4. SimilarWeb

SimilarWeb is a market intelligence platform that offers insights into website traffic, audience demographics and online performance. It allows you to benchmark your website’s performance against those of your competitors, discover their traffic sources and understand their online audiences.

IPqwery is a competitive analysis tool that offers insights into your competitors’ patent portfolios, technological innovations and intellectual property strategies. This allows you to assess innovation, identify potential partnerships, and evaluate the intellectual property landscape. IPqwery data is available with Crunchbase Data Boost .

Achieve sustainable growth with competitor analysis

Competitive analysis doesn’t only involve gathering information, but it’s also about turning insights into actions that drive your business forward. Competitor analysis is an important part of market research for startups and large companies alike, as it’s fundamental for long-term success. By carefully assessing your rivals and industry trends, you can adapt your strategies and stay ahead of the curve. 

• market research
• Originally published October 26, 2023, updated December 19, 2023

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What Are Porter's Five Forces?

Michael Porter's five-force strategic analysis model, introduced in a 1979 article published in the Harvard Business Review , remains a fundamental tool for strategic analysts plotting the competitive landscape of an industry.

In a bid to mirror the complexity real strategists would face while keeping their strategic analysis manageable, Porter set out five forces at play in a given industry: internal competition, the potential for new entrants, the negotiating power of suppliers, the negotiating power of customers, and the ability of customers to find substitutes. Below, we take you through each of Porter's five forces, detail the significant critiques of his approach, and show how to apply the model to specific markets.

Key Takeaways

• Porter's five forces are used to identify and analyze an industry's competitive forces.
• The five forces are competition, the threat of new entrants to the industry, supplier bargaining power, customer bargaining power, and the ability of customers to find substitutes for the sector's products.
• The model guides businesses in determining the intensity of competition and potential profitability within their market, helping them better understand where power lies in their sector.
• Porter's model was meant to critique "perfectly competitive" business models, unlike real-world markets where competitors aren't just rivals and firms in specific industries tend to rise and fall together.
• Criticisms mounted against the model include that it's too static, doesn't speak to the advantages or problems of specific companies, doesn't account enough for collaborative business models, and doesn't apply as well to quick-changing markets.

Investopedia / Xiaojie Liu

Understanding Porter's Five Forces

Strategic analysis at the time of Porter's article tended not only to love acronyms (SWOT, PEST, PESTEL, BCG Matrix, ETPS, etc.) but also models focused on the internal dynamics of individual companies.

While it would be unfair to suggest they ignored the competitive environment companies face, they were typically vague while doing so; e.g., the "opportunities" and "threats" of SWOT analysis were too "macro" for many dealing with the challenges of specific industries.

Porter's 1979 article was also a broadside against the theoretical models found in the curriculums of the major business schools, where future strategists dealt with a " perfectly competitive " market characterized by equilibrium and no specific firm influencing prices—a model they were unlikely to find in the real world.

The first sentence of Porter's 1979 article could hardly be less controversial: "The essence of strategy formulation is coping with competition."

It's the following sentence that, in its understated way, would prove far more consequential: "Yet it is easy to view competition too narrowly and too pessimistically."

Rather than viewing competition narrowly as rivalry among existing competitors, which is his first force, Porter expanded the concept to include four others: the bargaining power of suppliers and buyers, the threat of new entrants, and the threat of substitute products or services. Let's take these in turn.

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Porter's Five Forces

1. competitive rivals.

Porter's first force is what we usually mean when discussing business competition . We think of Pepsi and Coca-Cola for soft drinks, Apple and Samsung for smartphones, Nike and Adidas for sneakers, and Ford and General Motors for autos.

Indeed, some of these rivalries are so influential that consumers split almost culturally among those who have an iPhone, drive a Ford, or prefer Netflix to Hulu. Thus, it's no accident that we also consider business competition chiefly a war among rivals.

Such rivalries can lead to price wars, high-priced marketing battles, and races for slight advances that could mean a competitive advantage. These tactics can stimulate companies to make ever better products but also erode profits and market stability.

Several factors contribute to the intensity of competitive rivalry in an industry:

• The number of competitors : The more competitors in an industry, the more fierce the rivalry, each fighting for scraps of market share.
• Industry growth : In an expanding industry, competition is usually less dramatic because the market is growing so fast that competitors have little need to fight for customers—think of the automobile industry of the early 20th century and the dot-com boom of the late 1990s. However, in a stagnant or declining industry, competition can be ferocious as firms fight for a larger piece of a shrinking pie, such as in the global coal mining or print media industries of today.
• Similarities in what's offered : When the products or services in a market are awfully similar (think of the lower page of results in any Amazon product search), competition tends to be intense because customers can easily switch. However, if a company offers a unique product or service or has earned brand loyalty, this can reduce competitive rivalry. Apple, Inc. ( AAPL ) comes to mind in tech goods, just as Rao's Italian sauces or King Arthur flour do in your supermarket aisles, each charging a higher price given its style, taste, or whatever makes it unique.
• Exit barriers : When it's difficult or costly for companies to leave the industry due to specialized assets, contractual obligations, or emotional attachment, they may choose to stay and compete, even if the market's prospects grow dimmer by the day. The airline industry is a classic example. Airlines have high costs for their assets, contractual obligations (leasing agreements and labor contracts), and regulatory requirements, which means that when airlines face a shrinking market—or even an unprofitable route—they can't retreat from the market quickly.
• Fixed costs : Porter notes that if an industry has high fixed costs, companies have a "strong temptation" to cut prices rather than slow production when demand slackens. Paper and aluminum manufacturing are two good examples that Porter gives.

2. Potential for New Entrants in an Industry

Industries where new firms can enter more easily almost always have lower profit margins, and the firms involved each have less market share.

The sector for local restaurants has relatively low entry requirements : there aren't significant investments or regulatory hurdles to surmount before opening to the public. Thus, it's also the case that your favorite restaurant may not stay open for long, given the hypercompetitive environment and constant entrance of new restaurants opening.

Here are factors in measuring how much new entrants threaten an industry:

• Economies of scale : Industries where large-scale production leads to lower costs face less of a threat from new entrants. New firms would need to achieve a similar size to compete on price, which might be difficult or costly.
• Product differentiation : When existing firms have strong brand identities or customer loyalty, it's harder for new entrants to gain market share, reducing the threat of entry.
• Capital requirements : High startup costs for equipment, facilities, etc., can deter new entrants. For example, starting a car manufacturing business requires significant investment, so until Tesla Inc.'s ( TSLA ) growth in the early 2010s, Americans from the 1950s could have named the major U.S. car brands of the early 2000s.
• Access to distribution channels : If existing firms control the distribution channels —retail stores, online platforms, cable infrastructure, etc.—then new entrants would need to find a way to replicate that structure while competing with the established firms on price, a tricky proposition.
• Regulations : Licenses, safety standards, and other regulatory standards can create barriers, making it too ungainly or costly for new firms to enter the market. Examples would include those looking to build new hotels in downtown areas or supply power to a region.
• Switching costs : If it's costly or difficult for customers to switch from existing firms to new entrants, the threat of entry is lower.

3. Supplier Power

Suppliers are powerful when they are the only source of something important that a firm needs, can differentiate their product, or have strong brands.

When the power of suppliers in an industry is high, this raises costs or otherwise limits the resources a firm needs. Here are some factors used to measure the supplier power of an industry:

• The number of suppliers : When few firms can give a company something it needs to stay in business, each has greater negotiating power. They can raise prices or reduce quality without fear of losing business.
• Uniqueness : If a supplier provides a unique product or it's not easy to find a substitute, it is more dominant. Businesses can't easily switch to another supplier .
• Switching costs : If it's costly or time-consuming to switch suppliers, then they have more power. Businesses are less likely to switch, even if prices increase.
• Forward integration : If suppliers can move into the buyer's industry, they have more power. They already have access to the necessary supplies, making it difficult for their former buyers to compete once they decide to enter the market themselves.
• Industry importance : Some sectors are tightly intertwined, such as automotive suppliers and the major auto companies or the semiconductor and tech industries, which can balance the power between the suppliers and those in the sector. This is because the supplier needs these buyers to do well so that it can, too. When a supplier can just as easily sell its products elsewhere, that gives it a great deal more power.

4. Customer Power

When customers have more strength, they can exert pressure on businesses to provide better products or services at lower prices. This force intensifies under certain conditions:

• The number of buyers : The fewer the buyers, the more they have power. In sectors like aerospace manufacturing, each major airline, the industry's customers, has significant leverage in negotiations and can demand favorable terms because the sellers depend on their business.
• Purchase size : Just like you head off to the big box stores to buy in bulk for a cheaper per-unit cost on whatever now fills up your garage, major retail chains like Walmart Inc. ( WMT ) buy in large volumes and can negotiate better terms and discounts.
• Switching costs : In industries like telecommunications, where it's easy for consumers to switch providers, companies such as Verizon Communications, Inc. ( VZ ) and AT&T Inc. ( T ) have to offer competitive terms.
• Price sensitivity : In the fast-fashion industry, where customers are highly price-sensitive, brands must keep their prices low to attract cost-conscious consumers.
• Informed buyers : In many sectors, the customers are savvy, know the competitive terrain well, and thus can negotiate better prices.

Porter chose the metaphor of forces because they aren't static, so business must constantly adjust their strategies as forces in an industry change.

5. Threat of Substitutes

When customers can find substitutes for a sector's services, that's a major threat to the companies in that industry.

Here are some ways that this threat can be magnified:

• Relative price performance : If the cost of a substitute is lower and its performance is comparable or better, customers are likely to switch to the substitute. For instance, streaming services like Netflix became a substitute for traditional cable TV, providing a lower price that soon threatened the cable industry.
• Customer willingness to go elsewhere : The threat is high if buyers find it easy to switch to a substitute. For example, in the early 2010s, customers found switching from taxis to ride-sharing apps like Uber or Lyft cheaper and easier.
• The sense that products are similar : If buyers perceive that there are few differences between your product and a substitute, even if there are, they may be more likely to switch.
• Availability of close substitutes : Though this sounds the same as the last bullet point, you have to strategize differently around it. There are times when potential substitutes are very different from a company's products but consumers still treat them as the same. But in other cases, there are genuinely similar products in the market and the threat of substitutes is high, such as between brand-name and generic medications.

When published, Michael Porter's framework marked a departure from the then-dominant models of business strategy, steeped in classic competition theory.

Those models, still echoed in Economics 101 textbooks, rested on several key, if questionable, assumptions: markets as arenas for many small firms with no significant market power, homogeneous products, perfect information symmetry, and no barriers to market entry or exit.

While helpful for learning basic principles, this idealized view could be taken to an extreme when strategizing with neatly constructed supply and demand curves, assuming, for instance, new market entrants would stabilize rising prices by increasing supply.

Business strategists need to deal with sectors where information asymmetry, product differentiation, and significant entry and exit barriers are common. Firms do have some control over prices, contradicting classical assumptions.

In short, where economists assumed most markets acted like the model, for Porter, most firms are in industries with entrenched interests and different supplier and customer relations. They need strategies for dealing with anything but perfect competition.

Mild-to-Intense Competition

Porter's five forces come together in different ways for any given sector. He labeled industry competition as ranging from "intense" to "mild," with profits harder to achieve as the intensity in a sector rises. In intensely competitive industries, all or most of the five forces have a strong influence.

The fast food industry is Porter's own example, which still remains the case.

In this sector, there's a fierce rivalry among established players like McDonald's and Burger King, high bargaining power for suppliers and customers, and a relentless threat of new entrants and substitutes, all of which means profits are constantly getting squeezed for anyone in the sector.

Meanwhile, in "mild" industries, such as commercial aircraft manufacturing, there are weaker forces. Here, low supplier bargaining power, a minimal threat of new entrants, and a lack of direct substitutes (like commercial aircraft for long-distance travel) help form a sector more conducive to higher profits.

Since his 1979 Harvard Business Review article, Porter has published many books on strategic analysis, including works where he has expanded on his five-force model. He's also become very concise in providing the specific steps in performing an industry analysis:

• Define the industry : The process begins with a clear description of the industry, helping you to focus your analysis.
• Identify the key players : Specify and group the major actors in the sector into strategic categories based on relevant criteria.
• Assess the strategic strengths : This means evaluating the firm and its industry to determine the better and worse strategies that can be applied.
• Analyze the industry structure : This involves examining the overall structure of the industry, particularly the factors that influence how profitable it is.
• Evaluating the competitive forces : Only once you've done the above does Porter advise doing a detailed analysis of the five competitive forces, assessing their positive and negative effects, and then looking forward to any changes in these forces ahead.
• Identify the factors you have some control over : Here, you want to pinpoint aspects of the industry structure that could be influenced by competitors, new market entrants, or your firm. In sum, what can be changed?

Porter’s model helped reframe the understanding of competition. It wasn’t confined to direct rivals but extended to suppliers and customers—traditionally viewed in a transactional light.

Suppliers, especially those with unique resources or enjoying a monopoly, could dictate terms, lower profits, or, in extreme cases, forward-integrate into the buyer’s industry. Customers, too, wield power, especially when buying in bulk or when they can just go elsewhere quickly or choose to bypass companies for in-house products.

But the model has its pitfalls . For example, many have critiqued the model’s emphasis on sector affiliation. Porter concentrates on industry-wide forces, which can sideline an individual company’s unique strategies and advantages. This industry-centric view may not fully capture how distinct company characteristics can change the game, not just play within an industry’s preset rules.

The model assumes clear lines among sectors, which may not be tenable given the increasingly blurred lines in today’s business world, where companies are simultaneously in several sectors. Industries are no longer isolated silos; instead, they often intersect and interact, leading to a far more complex environment than the model suggests.

Porter’s five-force model has also been critiqued for not adequately addressing the role of partnerships and collaboration.

While Porter certainly entertained a competitive model where rivalry wasn’t just a war to the death, the problem is that he didn’t go far enough. In an interconnected global economy, alliances and cooperative strategies are often as pivotal to success as having a competitive advantage, a factor that the model doesn’t explicitly consider.

Another critique that can be filed under “going in the right direction but not far enough” is that the model is too static and fails to account for industries with rapid changes in technology and consumer preferences . While effective in stable sectors, critics say it doesn’t apply well to industries marked by fast-paced innovation and shifting demand.

Most strikingly, Porter’s model generalizes competition, implying a seemingly uniform industry structure for every market.

This might overlook the unique competitive scenarios in different sectors and the increasing importance of the nontraditional strategies involved in digital transformation and platform-based competition.

How Does Porter's Five Forces Differ From SWOT Analysis?

Both are strategic planning tools, but they serve different purposes. The five-force model analyzes the competitive environment of an industry, looking at its intensity and the bargaining power of suppliers and customers. SWOT analysis, meanwhile, is broader and assesses a company's internal strengths and weaknesses as well as its external opportunities and threats.

It can assist in strategic planning by pinpointing areas where the company excels and faces obstacles, helping to align the company's strategy with its internal resources and prospects in the market while mitigating its vulnerabilities and external challenges.

How Can Porter's Five Forces Address the Effects of Globalization on an Industry?

Porter's model has been used to analyze how globalization affects industry competition. For instance, globalization lowers barriers to entry in specific industries, intensifying the threat of new entrants from different regions.

It can also expand the pool of potential substitutes and alter the power dynamics with suppliers and customers worldwide. While Porter and others were doing this analysis for industries facing global competition decades ago, it's still applicable to sectors undergoing this process in the 2020s.

How Does Porter's Five-Forces Model Apply to the AI Sector?

Using the model, we would begin by looking at the competitive rivalry. The AI sector is marked by high competition with key players ranging from tech giants to small startups. Rapid advances mean companies have to move quickly simply to maintain relevance. We would then need to gauge the power of suppliers of data sets and specialized hardware, which have ample power since AI firms rely heavily on these resources.

Moving to consumers, we would need to review the needs of individual consumers and whether larger companies can force AI firms to negotiate better services and prices for them. The field of AI has been attracting many new entrants, but there are significant barriers to entry, including high initial research and development costs. Lastly, the threat from the last force, the possibility of substitutes, depends on what a firm wants to do with its AI-based technology. The more complicated the tasks the AI is given, the more likely other goods and services can't substitute for it.

Porter's five-forces model sets out essential criteria for considering a company's competitive landscape: the power of suppliers and buyers, the threat of new entrants and substitutes, and competitive rivalry.

While the economic terrain has evolved significantly since the 1970s and Porter has updated his work ever since, the principles underlying Porter's model remain current. It's still the case that companies don't rise and fall on their portfolio of products alone but are jockeying with others in industries that have their own logic and structural forces at play.

Today, while the five-forces model may require adapting it to rapid technological change and the importance of collaboration across many industries, it's a reliable way to help guide companies needing to navigate industry-specific challenges in their competitive strategy.

Porter, Michael. " How Competitive Forces Shape Strategy ." Harvard Business Review . March-April 1979. pp. 137-145.

J. Ateljević, et al. " Business Strategy and Competitive Advantage: A Reinterpretation of Michael Porter's Work ." Taylor & Francis Group, 2023. Pages 55-80.

Michael Porter. " On Competition: Updated and Expanded Edition ." Harvard Business Review Press, 2008.

M. Kunc. " Strategic Analytics: Integrating Management Science and Strategy ." Newark: John Wiley & Sons, 2018. Pages 80-85.

A. Aliekperov. " Creating Business and Corporate Strategy: An Integrated Strategic System ." Milton: Taylor & Francis Group, 2021. Pages 29-35.

J. Ateljević, et al. " Business Strategy and Competitive Advantage: A Reinterpretation of Michael Porter's Work ." Taylor & Francis Group, 2023. Pages 31-34.

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The Five Forces

• Strategic Positioning
• The Value Chain
• Operational Effectiveness vs. Strategy

Threat of New Entrants

Bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services, rivalry among existing competitors.

• Competitors are numerous or are roughly equal in size and market position
• Industry growth is slow
• There are high fixed costs, which create incentives for price cutting
• Exit barriers are high
• Rivals are highly committed to the business
• Firms have differing goals, diverse approaches to competing, or lack familiarity with one another

Key Industry Structure Concepts

Every industry is different, but the underlying drivers of profitably are the same in every industry.

The Five Forces determine the competitive structure of an industry, and its profitability. Industry structure, together with a company's relative position within the industry, are the two basic drivers of company profitability. 

Analyzing the Five Forces can help companies anticipate shifts in competition, shape how industry structure evolves, and find better strategic positions within the industry. 

How the Five Forces Work

Industry Structure is Dynamic

Industry structure changes over time, and is not static. Over time, buyers or suppliers can become more or less powerful. Technological or managerial innovations can make new entry or substitution more or less likely. Changes in regulation can change the intensity of rivalry, or affect barriers to entry. Choices by competition, such as new pricing or distribution approaches, can also affect the path of industry competition.  

Five Forces analysis is essential to anticipate and exploit industry structural change.

Related Resources

• 01 Jan 2008
• Harvard Business Review

The Five Competitive Forces That Shape Strategy

• 16 Dec 2012
• Harvard Business School Publishing

Understanding Michael Porter: The Essential Guide to Competition and Strategy

• 09 Sep 2008

On Competition, Updated and Expanded Edition

View All Related Resources

Competitive Analysis: The Definition & 7 Frameworks That You Should Know

What Is Competitive Analysis?

Competitive analysis is a strategic approach in marketing where businesses identify and evaluate their competitors to understand their strengths, weaknesses, opportunities, and threats. This process involves scrutinising various aspects such as market share, product quality, marketing strategies, customer service, and pricing. 

By gathering this data, a company gains insights into what makes its competitors successful or where they fall short. This analysis helps businesses in benchmarking their performance against others in the industry and in identifying gaps in the market.

How Does Competitive Analysis Help Marketing?

Understanding the competitive landscape is crucial in marketing as it enables businesses to make informed decisions and develop strategies that provide them with a competitive edge. It helps in identifying market trends, potential areas for innovation, and unmet customer needs. 

Moreover, competitive analysis aids in anticipating competitors’ moves, enabling businesses to stay ahead or effectively counteract them. This strategic tool is vital for adapting to changing market conditions, targeting marketing efforts more effectively, and ultimately driving business growth.

Understanding Competitive Analysis Frameworks

1. SWOT Analysis

SWOT analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favourable and unfavourable to achieving that objective. 

Internal Factors

• Strength: This component involves identifying the internal attributes of the organisation that are advantageous and can contribute positively towards achieving its objectives. Strengths are resources and capabilities that the organisation excels in, differentiating it from its competition. 

Examples include a strong brand reputation, a loyal customer base, unique technology, a skilled workforce, strong financial resources, efficient processes, or any other aspect that adds value to the organisation and enhances its competitive position.

• Weakness: These are internal factors that may hinder or negatively impact the organisation’s performance. Weaknesses are areas where the organisation is lacking or performs poorly compared to competitors. 

This might include inadequate research and development facilities, outdated technology, insufficient marketing strategies, weak brand recognition, financial constraints, or gaps in expertise. 

External Factors

• Opportunities: Opportunities are favourable situations in the external environment that can be used to strengthen the organisation’s position. These might include market growth, changes in consumer tastes, technological advancements, regulatory changes that might open up new avenues for business, or other external conditions that can be advantageous if seized upon.
• Threats: These are external factors that could negatively affect the organisation. Threats are potential problems or risks posed by unfavourable trends or developments in the external environment. 

They might include emerging competitors, changes in regulatory policies, shifts in consumer preferences, economic downturns, supply chain disruptions, or technological changes that could make current products or services obsolete. Understanding threats is important for an organisation to develop strategies to mitigate or avoid them.

2. Strategic Group Analysis

This framework helps in identifying groups of companies that have similar business models or strategies. Companies within the same strategic group are direct competitors, whereas companies in different groups may not be competing directly with each other. 

The concept is based on the idea that industries often have groups of companies engaging in similar strategies, such as targeting the same customer base, using similar distribution channels, or adopting similar pricing strategies.

The steps of this competitive analysis are:

• Identification of Strategic Groups: Companies in an industry are clustered into groups based on key dimensions like price, quality, target customers, geographical coverage, and distribution channels.
• Understanding Competitive Rivalry: This analysis can show the intensity of competition within and between these groups.
• Analysing Mobility Barriers: It involves studying the barriers that prevent companies from moving from one group to another, such as brand loyalty, or technological capabilities.
• Strategic Opportunities and Threats: Identifying groups allows companies to assess opportunities and threats more accurately. For instance, a group with few competitors and high entry barriers could be very attractive.

Now, let’s put this into a real-world scenario. Imagine you’re building a new e-commerce that is entering the Australian market. You need to analyse the steps mentioned to understand where are the gaps in the market and how should you position yourself strategically.

Analysis and Insights:

• Differentiation in Market Positioning: There’s a clear distinction in the market positioning between generalist platforms and niche/speciality retailers.
• Digital Marketing Approaches : Generalist platforms rely heavily on broad-reaching digital marketing tactics, while niche platforms focus more on content and community engagement.
• Customer Base : The generalist platforms cater to a wide audience, whereas niche platforms have a more targeted customer base.
• Barriers to Entry and Mobility: Moving from one group to another (e.g., from a niche platform to a generalist platform) requires significant changes in business models and marketing strategies.
• Opportunities for New Entrants: New entrants might find opportunities to address gaps in niche markets or offer unique value propositions that aren’t well-served by existing players.

3. PEST Analysis 

PEST stands for Political, Economic, Social, and Technological factors . Each of these elements can influence a business’s operations, profitability, and strategies in various ways. By analysing these external factors, businesses can gain insights into potential opportunities and threats in their market environment.

Political Factors: This includes government policies, political stability or instability in a market, tax policies, trade restrictions and tariffs, labour laws, and environmental regulations. Political factors can influence business operations significantly, affecting costs, demand, and overall business stability.

Economic Factors: These are related to the economic environment in which the business operates. Factors include economic growth, exchange rates, inflation rates, interest rates, disposable income of consumers and businesses, and broader economic trends. Economic factors can impact purchasing power, business costs, and investment opportunities.

Social Factors: This aspect involves cultural, demographic, and social influences on a market. It includes population demographics, cultural trends, attitudes towards certain products and services, lifestyle changes, education levels, and social mobility. Social factors help businesses understand consumer needs and preferences and can influence marketing strategies.

Technological Factors: These include technological advancements and innovations, the rate of technological change, research and development activity, automation, and the adoption of new technology. Technological factors can impact operations, product development, and market positioning. They can offer opportunities for innovation but also pose threats by rendering existing products or processes obsolete.

4. Business Model Canvas

The Business Model Canvas is a strategic management tool used for developing new business models or documenting and improving existing ones. In the context of digital marketing and competitive analysis, it offers a structured visualisation to understand and analyse how different components of a business relate to each other and the market environment. 

The Business Model Canvas is divided into nine key segments:

• Value Propositions: What unique value does the business offer to its customers? This could involve unique content, user experience, personalised services, or innovative online solutions.
• Customer Segments: Who are the business’s target customers? marketing strategies are often tailored based on different customer segments’ behaviours, preferences, and needs.
• Channels : How does the business reach its customers? This includes various digital marketing channels like social media, email, search engines, and websites.
• Customer Relationships: What type of relationship does the business maintain with its customers? Digital marketing plays a crucial role in building and maintaining these relationships through engagement strategies, customer service, and personalised communication.
• Revenue Streams: How does the business earn revenue? Understanding this helps in aligning digital marketing strategies with revenue goals, like increasing online sales, subscription services, or advertising.
• Key Resources: What key resources are required to make the business model work? This might include digital platforms, marketing tools, data analytics capabilities, and skilled personnel.
• Key Activities: What are the most important activities in the business model? These could include content creation, online campaign management, data analysis, and SEO optimisation.
• Key Partnerships: Who are the key partners and suppliers necessary for the business model? 
• Cost Structure: What are the business’s major cost drivers? Costs might include advertising spend, software subscriptions, content production costs, and labour.

In competitive analysis, the Business Model Canvas helps in understanding not only your business model but also that of your competitors. By mapping out competitors’ business models, you can identify their strengths and weaknesses, revenue strategies, key customer segments, and how they leverage digital marketing channels. This analysis can reveal gaps in the market, areas for improvement in your strategy, or potential competitive advantages.

5. Porter’s Five Forces

Porter’s Five Forces is a framework developed by Harvard Business School professor Michael E. Porter in 1979. It is used to analyse the industry structure and corporate strategy. The framework considers five forces that determine the competitive intensity and, therefore, the attractiveness and profitability of an industry. These forces are:

Threat of New Entrants: This force examines how easy or difficult it is for new competitors to enter the industry. Factors like initial investment, access to technology, economies of scale, and government policies can influence this threat. High barriers to entry can make an industry more attractive and profitable.

Bargaining Power of Suppliers: This force looks at the power of suppliers to drive up the prices of inputs. Industries where suppliers are more concentrated or where there are few substitutes for the supplies have stronger bargaining power, potentially reducing profitability for companies in the industry.

Bargaining Power of Buyers: This force assesses how much pressure customers can place on businesses. This is driven by the number of buyers, the importance of each buyer to the business, and the cost to the buyer of switching from one supplier to another. Strong buyer power, where customers have many choices and low switching costs, can reduce industry profitability.

Threat of Substitute Products or Services: This force is about the availability of products or services outside of the industry that can be used as replacements. A high threat of substitutes can reduce industry attractiveness as customers might switch to alternatives.

Rivalry Among Existing Competitors: This force looks at the degree of competition between existing players in the industry. High competition, indicated by many competitors, similar products and services, and low switching costs, can lead to price wars and reduced profitability.

6. Perceptual Mapping

Perceptual mapping, also known as positioning mapping, is a technique used in marketing and competitive analysis to visually display the perceptions of customers or potential customers towards a product, brand, or company. The map is created using a two-dimensional graph, illustrating how consumers view a brand about its competitors based on various attributes and qualities. This tool is particularly useful for understanding how a brand is positioned in the market compared to its competitors.

Key Aspects of Perceptual Mapping:

• Attributes Selection: Commonly, two key attributes are selected that are most relevant to the target market and industry. These attributes could be anything from price, quality, luxury, reliability, user-friendliness, innovation, etc. The choice of attributes is crucial as it determines the basis of comparison.
• Consumer Perceptions: Data for perceptual maps usually comes from market research, where consumers are asked about their perceptions of different brands based on the selected attributes.
• Spatial Representation: Brands are plotted on the map according to how they score on the chosen attributes. The proximity of brands to each other indicates how similar they are perceived in the minds of the consumers.
• Identifying Market Gaps : The map can reveal gaps in the market where there are consumer needs or preferences not effectively met by current offerings.

7. Growth-share Matrix

The Growth-Share Matrix, also known as the BCG Matrix, is a strategic business tool developed by the Boston Consulting Group in the early 1970s. It’s used in competitive analysis to help companies allocate resources among their different business units or product lines. The matrix categorises these units into four quadrants based on two dimensions: market growth rate (indicating market attractiveness) and relative market share (indicating competitive strength).

The Four Quadrants of the Growth-Share Matrix:

• Stars: These are units with high market share in fast-growing industries. Stars are seen as market leaders and can generate significant income. However, they also require substantial investment to maintain their position and support growth. The strategy often focuses on investing and growing these units.
• Question Marks (or Problem Children): These units have a low market share in a high-growth market. They are opportunities that require a lot of resources and investment to increase market share. The strategic decision is usually between investing heavily to turn them into Stars or divesting if the chances of turning them into market leaders are slim.
• Cash Cows: These are units with a high market share in a slow-growing industry. They typically generate more cash than is required to maintain the business. Cash Cows are often the financial backbone of a company, providing the cash necessary to support other units. The strategy usually involves maintaining these units for continuous cash flow with minimal investment.
• Dogs: Units with low market share in a low-growth market. Dogs may barely break even or even be unprofitable. Strategic options might include divestiture or liquidation, as these units are often considered drains of resources.

In summary, understanding and effectively utilising competitive analysis frameworks is crucial for businesses striving to remain relevant and competitive in today’s rapidly evolving market. With a plethora of tools and techniques available, the key to success lies in choosing the right framework to gain actionable insights. 

This is where The Digital Cellar, your all-in-one digital marketing agency, steps in. Our team of experts specialises in bespoke competitive analysis tailored to your unique business needs, ensuring you’re not just equipped with data, but with strategic insights to drive your business forward. Whether you’re looking to refine your market position, explore new opportunities, or simply understand your competitive landscape better, The Digital Cellar is here to illuminate your path to success. Get in touch with us today, and let’s transform data into your competitive advantage.

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Porter’s Five Forces: Definition & How To Use The Model

Updated: Feb 12, 2024, 3:52am

Table of Contents

What are porter's five forces, example of porter's five forces, advantages of porter's five forces, disadvantages of porter's five forces, bottom line, frequently asked questions (faqs).

Porter’s Five Forces is a classic model that organizations use to assess their competitive environment and make informed decisions. The framework, developed by renowned Harvard Business School professor Michael E. Porter, lets companies evaluate the environmental forces shaping the future of their industry.

In this article, we’ll explain how you can use Porter’s Five Forces to analyze your competitive landscape, identify opportunities and solidify your position in the market.

Michael E. Porter’s Five Forces framework is one of the most widely regarded business strategy tools. Born out of his work in 1979, this framework offers organizations a systematic approach to assessing their competitive environment and making strategic decisions that can influence their long-term success.

The five forces include the factors that influence every industry. The five critical dimensions which shape the competitive business landscape are:

Competitive Rivalry

Supplier power, buyer power, threat of substitution, threat of new entrants.

Competitive Rivalry evaluates the number of existing players and how established they are in the industry. How many competitors do you have? Are their products better than your own?

In industries with cutthroat competition, companies often lower prices and invest in expensive marketing campaigns to increase market share. That means suppliers and buyers can quickly move towards your competitors. Conversely, businesses in less competitive sectors enjoy more comfortable profit margins.

For example, the airline industry has intense competition. Major players such as American Airlines, Delta Air Lines and United Airlines often differentiate themselves by reducing costs, improving customer experience and launching new routes to attract passengers.

Suppliers provide the essential ingredients for a business’s operations. How much influence does a supplier wield over a company’s profits?

When only a few suppliers can provide a product, they can dictate terms and pressure businesses to accept higher prices. Even if terms are unfavorable, some get pressured to take them because of the costs of moving to another supplier.

In an ideal scenario, companies must be able to diversify their supplier base. By reducing their dependency on a supplier, businesses can safeguard their supply chains, control costs and maintain a competitive edge.

For example, the automotive industry has many suppliers for engines, electronics and tires. However, a relatively small number of companies supply critical components such as semiconductor chips, which grants them substantial power.

Buyer Power refers to the influence customers wield over a business. If an industry has strong buyer power, consumers can demand lower prices, higher quality or improved service, affecting a company’s profitability.

Buyers wield more power in a market with fewer customers and more sellers. In this scenario, businesses can differentiate themselves by formulating unique value propositions to justify their higher prices. Some examples include loyalty programs, excellent customer service and novel experiences.

The electronics industry provides a compelling example of buyer power within Porter’s Five Forces framework. Consumers can access various electronic products, from smartphones and laptops to smartwatches and home entertainment systems. Price comparisons are easily accessible online, so finding the best deals and discounts is easy.

For example, companies such as Apple let consumers customize their devices with various features, colors and accessories. They consistently upgrade their products with new features because it’s easy to transition to alternative brands or products.

The Threat of Substitution refers to the likelihood that customers might switch to a different product or service. When substitution threats are high, businesses are vulnerable to sudden shifts in consumer preferences.

One notable example of the threat of substitution occurs in the beverage industry. Consumers can choose from many beverages including carbonated soft drinks, bottled water, juices, energy drinks, coffee, tea and alcoholic beverages. That’s why beverage companies must explore niche markets, introduce limited-edition flavors and change their packaging to differentiate themselves.

How easy is it for new competitors to enter the market and threaten existing players? Threat of New Entrants involves evaluating the barriers to entry in an industry.

High barriers such as high starting capital costs and a small pool of suppliers can deter new rivals from early success. For example, an established company with significant resources can lower prices to maintain a competitive edge over new entrants. However, new competitors can easily weaken your business’s position and quickly disrupt the status quo.

Let’s put Porter’s Five Forces into action through a real-world example—the retail industry. Understanding the five forces in this competitive sector can spell the difference between success and stagnation.

In the retail world, competition is intense. Businesses of all sizes demand consumers’ attention, often resulting in price wars and thin profit margins. Dominant companies in this sector—including Walmart and Amazon—use various strategies to outshine their rivals. They often lower prices, optimize their supply chain and expand their product offerings, which makes it difficult for small businesses to compete with them.

Finding reliable suppliers and securing favorable terms is vital to success. Large retailers such as Costco have immense buying power, so they can negotiate advantageous deals with suppliers and acquire quality products. Most companies choose suppliers based on strict criteria such as cost-effectiveness, quality and reliability.

Customers in the retail industry are discerning and price-sensitive, which leads to significant buyer power. Brands that excel in customer service and providing exceptional experiences, such as Nordstrom, can command premium prices and build brand loyalty.

The retail industry faces an ongoing threat from e-commerce and online marketplaces. Companies such as eBay and Etsy provide alternative options for quality and affordable products, so traditional retailers must continually innovate to remain relevant.

It’s easy to set up an online store, which means there’s a lower barrier to entry in the retail sector. Platforms such as Shopify allow new small businesses to attract customers and establish themselves quickly. However, the cost of competing with established giants in terms of marketing and logistics makes it difficult to dominate the market.

Porter’s Five Forces is an indispensable resource for businesses seeking sustainable growth and competitive advantage. Here are some of its key benefits:

• Holistic Analysis: Porter’s Five Forces provides a comprehensive overview of the competitive landscape. As a result, organizations can allocate their resources and make decisions based on multiple factors existing in the environment.
• Strategic Insight: The model lets businesses think critically about their position in their industry and their existing competitors. That way, they can make informed decisions.
• Risk Mitigation: By identifying potential threats, companies can address challenges ahead of time. For example, it offers a unique value proposition to remain relevant for consumers.
• Opportunity Identification: Recognizing industry gaps and unmet needs can help businesses differentiate themselves or develop innovative solutions.
• Long-Term Sustainability: When strategies consider Porter’s Five Forces, they are more likely to withstand market fluctuations.

Porter’s Five Forces is a robust framework but comes with limitations. Here are some of its disadvantages:

• Oversimplification: The model oversimplifies complex market dynamics and fails to evaluate “why” some observations occur. As a result, it can be easy to miss subtle nuances.
• Inaccurate Strategic Analysis: The framework needs to account for the dynamic nature of industries and markets. They may evaluate their competition on broad or narrow terms while failing to consider shifting boundaries.
• Backward-Looking: Porter’s Five Forces provides an overview of an industry based on the past, which makes it ideal for short-term analysis. However, factors including globalization and rapid technological advancements can make its analysis inaccurate.
• Need To Understand the Purpose of Porter’s Five Forces Framework: Porter’s Five Forces can help you analyze an industry to create a business strategy. It is not used to analyze an individual company or determine whether an industry is attractive.

Porter’s Five Forces provides a timeless framework for organizations that want to evaluate their competitive environment, identify opportunities and fortify their positions against threats. By understanding the different forces, businesses can make informed decisions and adapt to evolving markets.

Are Porter's Five Forces still relevant?

Yes, Porter’s Five Forces remain relevant in today’s business landscape. The core concepts of competition, supplier power, buyer power, substitution threats and new entrants continue to shape businesses’ future.

What is the primary purpose of Porter's Five Forces model?

Porter’s Five Forces model mainly aims to help organizations assess their competitive environment. It provides a structured framework for understanding the forces that impact a company’s profitability and long-term sustainability so businesses can make strategic decisions.

What's the difference between Porter's Five Forces and SWOT analysis?

Porter’s Five Forces primarily focuses on external factors that affect a business’s competitiveness. In contrast, SWOT analysis examines internal and external factors, such as a company’s strengths, weaknesses, opportunities and threats, to provide a broader perspective on strategic planning.

Is competitive advantage still relevant?

Having a competitive advantage is crucial in today’s business landscape. Businesses can harness their competitive advantage by offering unique value to customers, reducing costs or differentiating themselves in the market.

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Monique Danao is a highly experienced journalist, editor, and copywriter with an extensive background in B2B SaaS technology. Her work has been published in Forbes Advisor, Decential, Canva, 99Designs, Social Media Today and the South China Morning Post. She has also pursued a Master of Design Research at York University in Toronto, Canada.

Porter's Five Forces: Complete Guide, Examples & Template

Every business aims to prevent existing competitors from stealing its profits. With the increasing competition in today's business world, it's not a question of if but how...

Porter’s Five Forces is a strategic framework that helps you answer these questions and reduce profit leakage to rivals:

• What forces beyond direct competitors shape your industry?
• What makes your industry profitable?
• Where can you find a profitable and defensible position among your competitors?

You can use Porter’s Five Forces Model to gain a comprehensive understanding of your industry structure and competitive landscape before making strategic decisions.

In this article, we provide an overview of Porter’s Five Forces framework, explain key pitfalls to avoid during industry analysis, give real-world examples of the model, and suggest strategies to create a winning position in your industry.

🎁 Bonus!  We also include  free templates  to help you implement this framework to strengthen your  business strategy .

⚠️ Avoid Porter's Pitfall! This framework is a strategic compass, but true value comes from action. Cascade Strategy Execution Platform bridges the gap, turning Porter's insights into actionable plans. Book a call with a strategy expert and see real results from your Porter analysis.

What Are Porter's Five Forces?

Porter's Five Forces model is  a strategic framework  that helps to identify and analyze five competitive forces that affect a company’s profitability in any given industry.  This framework was developed by Harvard Business School professor Michael Porter in 1979.

These five forces are:

• Threat of new entrants
• Bargaining power of suppliers
• Bargaining power of buyers
• Threat of substitute products or services
• Competitive rivalry

Porter’s Five Forces model is a critical element of strategic analysis that helps companies understand and shape the industry structure to balance competitive forces and maximize profitability. By analyzing the five forces, companies can gain insights into the intensity of the competitive landscape and the factors influencing profitability.

Based on the framework, companies should position themselves where forces are weakest, exploit changes in the forces, and design those forces to their advantage (Porter, 2008).

The Five Competitive Forces

An analysis of all five competitive forces gives you a comprehensive view of the factors affecting industry profitability. When you understand each force, you can formulate a strategy that will allow the company to better cope with competitive forces and increase profit potential. Let's take a closer look at each force:

1. Threat of New Entrants

When an industry starts becoming profitable, it will entice new entrants. If the barriers to entry are low, new entrants can easily capture market share and threaten profitability.

New entrants undercut prices and offer valuable alternatives to what your industry currently provides.

A practical example of a new entry and high threat to existing players is  Apple’s  entrance into the music distribution industry with the iPod. Apple entered into a new market, stole market share from existing players, and completely changed the way we consume music and audio content today.

On the other hand, if barriers to entry are high, it’s much harder for new entrants to threaten your industry’s profitability.

According to Porter, there are 7 main sources influencing the height of entry barriers:

• Supply-side economies of scale:  High production volumes and low costs per unit force new entrants to start large or face cost disadvantages.
• Network effect:  Buyers are willing to pay more as the number of users grows. Customer brand loyalty and preference for a larger network limit new entrants. Having a strong brand identity can be a big advantage.
• Switching costs:  Higher costs for customers to switch suppliers raise the entry barrier.
• Capital requirement:  High starting capital costs are needed for new entrants. However, if industry returns are high, investors might provide the needed capital.
• Unfair advantage:  Industry leaders have advantages from hard-to-copy resources like patents, exclusive raw materials, strong brands, or favorable locations.
• Unequal access to distribution channels:  New competitors might struggle to enter existing channels. Alternatives include bypassing traditional channels or creating new ones, like low-cost airlines selling tickets on their own websites.
• Government policies: Policies can influence entry barriers by either raising them through licensing requirements or lowering them through subsidies.

Questions you can use during analysis:

• How expensive and time-consuming would it be for a new competitor or startup to enter your market?
• Is there strong customer loyalty in your industry? Would it be hard for a new competitor to attract your customers?
• Are there additional barriers to entry (e.g. regulation, intellectual property, access to distribution channels)?
• What’s your industry structure? How strictly is it regulated?
• Is your key technology protected?

2. Bargaining Power of Suppliers

Suppliers offer your industry the needed inputs to operate (e.g. components, materials, and services). When the bargaining power of suppliers is high, there’s a strong chance your suppliers could set higher prices for those inputs or reduce quality without retaliation.

If you have a number of suppliers to choose from, their bargaining power is likely low, so you will not have a problem switching suppliers if needed.

As an example, let's take a look at the automotive industry.

Volkswagen Group's  suppliers have limited bargaining power due to VW's global presence with suppliers scattered around the globe. Volkswagen also has at least 1 or 2 backup suppliers for each part and can shift demand between them.

On the contrary, many automotive suppliers manufacture only a specific part and are heavily dependent on the industry. These automotive industry dynamics put Volkswagen in a superior position while its suppliers have relatively low bargaining power.

If you don’t have multiple supplier options, there are no substitutes, or switching costs are high, the supplier bargaining power increases, and you will need to rethink your business strategy. Companies facing fewer suppliers or relying solely on one supplier often find themselves at a disadvantage in negotiations.

• Who are your key suppliers?
• How many competent suppliers can your company choose from?
• How many alternative suppliers are available?
• How difficult or costly would it be to switch suppliers?

3. Bargaining Power of Buyers

In Porter's Five Forces model, buyers are your customers. At the expense of industry profitability, strong buyer power can lower prices, pit rivals against each other, and demand higher quality or service.

The power of customers is higher when they are few in number and have many sellers to choose from. Beyond this, if a large portion of a seller’s revenue is determined by a handful of buyers, those buyers will have more power.

Buyer switching costs should also be considered when determining their bargaining power.

In the fashion world, brands like Zara or H&M deal with a lot of bargaining power from shoppers who have tons of choices, from fast-fashion giants to boutique stores. With so many options, consumers can push for better prices, higher quality, and even more sustainable practices. This puts a lot of pressure on brands to keep up and constantly improve their products.

• How many buyers are in your industry compared to sellers?
• Do a few buyers make up most of your revenue?
• What size are your orders?
• How easy is it for buyers to switch sellers?

4. Threat of Substitute Products or Services

All firms within an industry face competition from other industries offering substitute products or services. For instance, a messaging app can replace email, just as an airline's website can supplant travel agents by providing its own ticket booking system.

When buyers can meet their needs with an alternative product or service from a different industry, it limits how high your industry can set its prices. The more appealing the substitute, the stricter the cap on your industry's profits. The threat of substitution is high if numerous substitutes can serve a similar function as your product or service. Conversely, if only a few substitutes exist, the threat is low.

Take the beverage industry, for example. The rise of health drinks is a big threat to traditional sodas. More and more consumers are looking for healthier options, which is creating a growing market for drinks with nutritional benefits, less sugar, and natural ingredients. This change in consumer preferences is shaking up the dominance of traditional sodas and pushing companies to innovate and adapt.

• How many substitute products/services exist in your industry?
• How functionally similar are they to yours?
• What sets your products/services apart from these substitutes?
• Are these substitutes affordable?
• What is the cost for buyers to switch to a substitute? Is it low or high?
• Can you introduce a new product/service to compete with a market leader? If so, what is it?

5. Competitive Rivalry

Although rivals face the same industry forces as you, competitive rivalry is often the largest determinant of an attractive industry because it is influenced by the four previous forces . To capture market share, rivals will compete on price, quality, service, marketing spend, and more.

Intense competition arises when buyers have numerous alternatives, there is little product or service differentiation, and industry growth is slowing. In such a competitive environment, buyers can initiate bidding wars, reducing profits.

When differentiation between rivals is minimal, your product or service may be seen as a commodity, and buyers will make decisions based solely on price. If industry growth is decelerating, existing firms will fiercely compete to maintain their market share.

Just look at the fast-food industry: McDonald's and Burger King are in constant competition to outdo each other. They invest heavily in marketing campaigns, innovative product development, and customer engagement strategies. Whether it’s launching new menu items, offering limited-time deals, or using tech to improve customer service, these giants are always on the hunt to keep their competitive edge.

We've written extensively about VRIO Analysis to help you identify your competitive advantage and transform it into a sustainable competitive advantage.

• What is the number of existing competitors in your industry?
• Who is your biggest competitor?
• What makes your product/service different from others?
• Are there any barriers preventing customers from switching providers? If so, what are they?
• Is your industry shrinking or growing?

Examples of Porter’s 5 Forces

Here are some practical applications of Porter’s Five Forces.

Example in Manufacturing

Porter's Five Forces framework can be applied to analyze the competitive environment of any industry. Here’s an example for the manufacturing industry based on the Deloitte 2024 Manufacturing Industry Outlook .

Under each force, you should evaluate the threat, ranging from low to high. As shown in this example, the most important threats in the manufacturing industry are the high bargaining power of suppliers and very high competitive rivalry .

Example in the Airline Industry: IATA

Consider this example of a Five Forces Analysis for the airline industry, developed and framed by Michael E. Porter for the International Air Transport Association (IATA):

As you can see in this example, there are times when you will need to prioritize and make a decision . If you detect high threats in all 5 forces, think about where you need to focus to make the most impact.

Example in the Music Industry: Spotify

Spotify has revolutionized the music industry and transformed the way people listen to music. However, the competitive landscape is ever-changing, and it's crucial to continually update your Porter Five Forces Analysis to stay informed about shifts in your market position.

In Spotify’s example, the highest threats are:

• Bargaining power of suppliers : music labels and artists hold significant control over licensing agreements and royalty rates.
• Competitive rivalry : streaming platforms such as  Apple  Music and  Amazon  Music intensify the pressure on Spotify to differentiate its offerings and retain subscribers.

Example in Retail: Walmart

In today's dynamic business landscape, the retail industry constantly changes with market dynamics and consumer preferences. Even for a dominant player like Walmart , these changes bring both threats and opportunities.

Walmart operates in an industry with intense competition from traditional retailers and e-commerce giants like Amazon. This pressure forces Walmart to innovate, offer competitive prices, and provide a superior shopping experience to maintain its market share.

Example in Transportation: Uber

Uber , the trailblazer in the transportation industry, has revolutionized the way people get around and explore cities. As the industry continues to evolve, it presents a dynamic mix of challenges and opportunities for Uber's growth and success.

Uber faces threats from the  bargaining power of buyers  (riders). With strong competition from ride-hailing alternatives, traditional taxis, and high car ownership, riders have numerous options to choose from, giving them significant influence over pricing and service quality.

Uber also encounters fierce  competitive rivalry , along with the rise of numerous locally-focused  new entrants . This dual challenge has the potential to weaken Uber's financial standing and allow regional players to capture market share in their specific areas.

Advantages Of Porter’s Five Forces Model

The advantages of Porter’s model are:

• Insight into Profit Distribution : Organizations can gain a deep understanding of how profits are distributed among the five forces within a specific industry.
• Industry Structure Analysis : It helps organizations comprehend the industry's structure and competitive environment, identifying key players who control and establish the industry's rules.
• Baseline for Evaluation : The model offers business leaders a foundation to assess their company's strengths and weaknesses relative to the industry.
• Comprehensive Industry Overview : It provides a thorough overview of an industry, highlighting critical factors that can impact a company's market position.
• Holistic Strategic Thinking : The model encourages strategists to think comprehensively about industry competition and dynamics, revealing hidden opportunities for investment and growth.

Weaknesses Of Porter’s Five Forces Model  

Michael E. Porter and other experts have identified several limitations and potential pitfalls of the model:

• Superficial Analysis: Insufficient effort to uncover the underlying reasons behind observations can undermine the analysis.
• Stakeholder Engagement: Failing to involve stakeholders during the competitive analysis may lead to avoidable obstacles.
• Purpose Misinterpretation: The framework is intended to inform business strategy, not merely to assess industry attractiveness.
• Scope Definition: Strategies often falter because managers define the competitive landscape too broadly or too narrowly. Additionally, strategists must remain open to the possibility of shifting industry boundaries.
• Innovation Consideration: While some argue that innovation should be a driving force in industry competition, Porter believes that technology and innovations are transient factors and do not alone determine an industry’s attractiveness.

There are also many resources criticizing that Porter's Five Forces model is a static tool. The main argument is that the framework gives a snapshot of competitive forces at a single point in time. However, Porter never stated that these five forces remain unchanged.  Strategists have to periodically reassess five forces as well as keep an eye out for creative approaches taken by their new or existing competitors .

TIP: Porter’s 5 Forces model is an outside-in-facing tool that analyzes only external factors that impact a company’s profitability. You can do a comprehensive strategic analysis using additional tools and frameworks, like  SWOT analysis ,  PESTLE analysis ,  Blue ocean strategy , or  Value chain analysis .

📚 Recommended read: 6 Competitive Analysis Frameworks: How to Leave Your Competition In the Dust

How To Apply Porter’s Five Forces Framework?

Using Porter's 5 Forces, you should start to understand the forces that shape your industry. The next step is to identify how your company is going to compete and formulate a competitive strategy.

Ideally, you want to sit in a position where you can balance the 5 Forces and maximize your profit. The key question to answer here is how you are going to achieve a competitive advantage that will put your organization in a winning position.

Porter developed three generic strategies that can be used to create a defendable position and outperform existing competitors. These strategies are  cost leadership, differentiation, and focus on a particular niche .

Here’s a quick overview of each:

Cost Leadership Strategy

Cost leadership  is a strategy for reducing the costs involved in providing a product or service. You'll maintain healthy margins and profits by running a lean operation and reducing costs across different departments.

Differentiation Strategy

A  differentiation strategy  focuses on providing a product or service that is perceived as unique and hard to replicate. Buyers won’t find anything like your product or service in the market, allowing you to charge higher prices.

Focus Strategy

A  focus strategy  looks at serving niche markets better than anyone else in this industry. By deeply understanding your particular customer, you can deliver services more effectively and efficiently than competitors who cater to the entire market.

Pitfalls To Avoid During Industry Analysis

While Porter's Five Forces framework is a valuable tool for understanding an industry, there are common pitfalls that businesses should avoid during their analysis:

• Focusing too much on the present: It's important to also consider potential future changes and trends in the industry and how they may impact the competitive landscape.
• Ignoring complementary products or services: Sometimes, other industries can have an indirect impact on the competition within an industry. For example, the rise of online streaming services has greatly impacted traditional cable TV companies.
• Neglecting company-specific factors: While Porter's Five Forces looks at external factors, it's important to also consider a company's individual strengths and weaknesses when evaluating its position in the market.

Don't Get Stuck In The Middle

Which strategy is your organization working towards? It’s not uncommon for organizations to successfully pursue more than one strategy, especially if your industry is growing and profitable.

However, as industries mature, the companies that are unclear about their strategy often see their profits dwindle. When companies fail to focus their efforts on any one of these 3 strategies they are, as Porter calls it, “stuck in the middle”.

Companies that are stuck in the middle lack the investment and resolve needed to be a cost leader, the unique product offering to pursue differentiation, and the attention required to pursue focus… in the long run, it’s a losing strategy.

If you are stuck in the middle, it’s important to start aligning your company with one of these strategies. Not sure which strategy to pick? Choose a strategy that is hardest to replicate and that is best suited for your company's strengths.

If you’re interested in easy-to-follow methods for identifying your strengths, check out our  internal analysis  article that covers different tools that can help you in the process.

Interestingly, the idea of focusing on a strategy is omnipresent in the realm of   strategic planning .

Whether you’re reading Michael Porter’s Competitive Strategy, Stephen Covey’s 4 Disciplines of strategic execution (BHAG), or Jim Collins’ Good to Great (Hedgehog Concept), keeping an acute focus on one strategy is vital for success.

👉🏻 Get the insights and learnings of your Porter 5 Forces analysis into an execution-ready strategic plan. See how Cascade can help you achieve tangible results.

Porter’s 5 Forces Templates

To streamline your analysis, we've created easy-to-use templates for Porter’s 5 Forces Model.

This free Cascade template is user-friendly, comes with examples to inspire your analysis, and can be tailored to fit your organization’s needs.

The best part is, once you implement Porter’s Five Forces Framework with this template in Cascade , you can track your objectives and goals from the analysis in the same platform. No need to juggle multiple tools and risk losing context!

👉🏻How to use it? Click on this link and create a free forever account in Cascade. That’s it!

While we recommend the Cascade Template, we know some people prefer PDFs. If that’s you, we have a PDF Porter’s 5 Forces Template for you!

As you can see, this is the typical template that is used for this framework. You can download it here and add your organization’s information.

Focus + Strategy Execution = 🏆

Once you’ve gone through analyzing your company’s position with Porter’s Five Forces Model, it’s time to take those learnings and insights and put them into action!

But wait! Before going into formulating your  strategic plan , think about the  metrics  that you want to achieve and start building your plan backward from there. We call this “ reverse engineering your business ,” and the best part of this approach is that it ensures you’re focused on the metrics that matter.

Once you know those metrics, start crafting the KPIs, projects, objectives, and focus areas that you’ll need to work on to get to those key metrics you set. This is basically the process of creating your strategic plan.

📚 Check out our detailed guide that will take you step-by-step into  writing a successful strategic plan !

💡 Pro tip : To prevent being “stuck in the middle,” remember to keep your strategy top-of-mind at all times. For example, if you’re looking to pursue a cost leadership position, make sure you create goals focused on cost reduction and growing market share.

One final recommendation from our team of strategy experts:  know that you cannot do this alone . Change requires buy-in from your people.  Aligning your strategy  across your organization can be difficult - it’s even more difficult for everyone to keep strategy top-of-mind.

With  Cascade , you can create and execute your strategy rooted in reality to ensure the implementation of your Porter’s 5 Forces Analysis findings and initiatives is successful. You can invite your teams to collaborate and ensure company-wide alignment like never before. You can also leverage  integrations  to import data from multiple business tools.

Cascade allows you to connect your metrics, initiatives, and investments to your business performance and  make better decisions, faster .  

Sign up today for a free forever plan  or  book a guided 1:1 tour  with one of our Cascade in-house strategy execution experts.

FAQs About Porter’s Five Forces

What are the 5 elements in porter’s 5 forces .

The 5 elements in Porter’s 5 Forces are the Threat of new entrants, Bargaining power of buyers, Bargaining power of suppliers, Threat of new substitutes, and Competitive rivalry.

Is Porter’s Five Forces model still relevant today? 

Porter’s Five Forces model remains relevant despite being on the scene for more than 40 years. It has its own limitations and can’t be used as a standalone tool but it’s an evergreen strategic tool that helps strategists make better decisions.

Who developed the model?

Porter’s 5 Forces model was developed and published by Michael E. Porter in 1979. The model was later updated by the author itself in 2008 and published in Harvard Business Review.

What is the difference between Porter's Five Forces and SWOT Analysis?

The main difference between Porter's Five Forces and SWOT Analysis is the fact that Porter's model analyzes only external forces, while  SWOT Analysis  takes into account both internal and external factors.

• Porter, M. E. " How Competitive Forces Shape Strategy ." Harvard Business Review 57, no. 2 (March–April 1979): 137–145.
• Porter, Michael E. " The Five Competitive Forces That Shape Strategy. " Special Issue on Harvard Business School (HBS) Centennial. Harvard Business Review 86, no. 1 (January 2008): 78–93.

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11 Types of Competitive Analysis Frameworks To Find an Edge

August 11, 2022 (Updated: February 20, 2024)

As much as you’d like it to, your brand doesn’t exist in a bubble. Your business decisions aren’t the only things that affect your sales or success. The global market and the choices of your competitors also influence brand strategy. And while you can’t control what your competitors do, you can track their behavior. Monitoring what your competitors are doing can help you make predictions about where the market is going, and what you need to do to keep your business ahead. This guide covers the types of competitive analysis frameworks you can use to make your job easier.

Jump ahead:

What Is a Competitive Analysis Framework?

Types of competitive analysis frameworks to try, why should you use a framework for your competitive analysis.

• What Information Influences the Competitive Analysis Framework You Choose?

A competitive analysis framework is a structure or data workflow marketers and business professionals use to research the competition in their industry. Some frameworks also look at other factors that influence business, such as the global market, politics, or audience behavior and beliefs.

Competitive analysis frameworks help you collect information on the competition’s strategies, marketing plans, sales, products, and services. Some include  data visualization models  that make it easier to understand multiple streams of data in one image.

The type of framework that works best for your brand may vary by campaign or even by the competitor you want to analyze. It’s good to have your marketing toolbox stocked with many types of competitive analysis frameworks that you can pull out, depending on the type of information you want to gather. Here are some options to choose from as you plan your marketing strategy research:

The “7Ps of Marketing” Framework

The 7Ps or marketing is a basic analysis model to determine what a brand is selling and how they’re doing it. While this is most often a framework you use to analyze your own brand’s marketing strategy, you can use it to get basic information about your direct and indirect competitors. The 7Ps are:

• Product:  What is the competition selling?
• Price:  How much does the product or service cost?
• Place:  Where does the competition sell the product or service?
• Promotion:  How does the competition share information about the product or service with the audience?
• People:  Who plays a role in developing, producing, and selling the product or service?
• Process:  How does the competition deliver the product or service to the customer?
• Physical evidence:  How does the competition prove to the audience that it exists and provides the right solution?

Business Model Canvas

The business model canvas framework allows you to look at the most basic and important factors that affect the success of a company. This model looks at nine influential areas of marketing and sales to learn more information about a brand:

• Cost structure.
• Customer relationships.
• Customer segments.
• Key brand activities.
• Key company resources.
• Marketing channels.
• Prominent brand partnerships.
• Revenue streams.
• Value propositions.

Typically, you’d run this kind of analysis on your own brand first and then on each of your competitors. Compare the fundamentals of each company to find similarities and differences in your business structures.

Competition Identification Diagram

Sometimes, finding out who your real competitors are is just as important as discovering who has the edge with your audience. The brands you  think  are your top competitors might not be your most direct competitors at all. If you want to get the most accurate results from any other type of analysis, make sure you’re looking at and targeting the right competition. You can use a competition identification diagram to help. This Venn diagram framework helps you identify competitors that are big, small, direct, and indirect, as seen in the following image:

Image via  Buffer

The blue segment contains competitors that target the same customers as your brand. These are a type of indirect competitor that provides a different solution to the same problems you solve for your audience. The green segment shows competitors that offer the same solutions as your brand. These are indirect competitors that solve problems with similar solutions but target a unique set of customers. For example, they may target bigger brands, clients with more income, or those in another industry.

Finally, the place where the two circles intersect includes competitors that provide the same solutions to the same customer base. These are your direct competitors and the brands you would target for competitive analysis. But, depending on the business moves you want to make, any brands that fit within this Venn diagram could be worth assessing in a competitive analysis.

Customer Journey Map

A customer or user journey map shows a visual representation of how a client or consumer interacts with a brand. The map includes all the customer channels the brand uses to interact with leads, like social media, face-to-face services, or email marketing. Then, the map explains how a lead interacts with the brand on that channel, like a lead who finds a brand through social media and then browses the company’s feed. Here, the person may like a post or share it before clicking the follow button to see more updates from the account.

The customer journey map also lets you keep track of engagement metrics, such as follower counts, phone calls, or email replies. This data gives insight into how popular and responsive a brand is when interacting with customers on each channel. Journey maps help you identify customer pain points and challenges that leads might encounter when interacting with a brand on certain channels. These maps can also give you insight into various opportunities to improve brand channels and create a better user experience than the competition provides.

Growth-Share Matrix

A growth-share matrix shows how a company’s products or services compare to others in the same competitive market. This type of analysis is popular with big organizations or ones with many product and service offerings. The matrix breaks down into four quadrants where you can place products and services based on their market share and growth potential, like the chart below:

Image via  Similarweb

In the above example, your products and services would fall under four categories:

• Stars:  These products or services have high growth potential and a high market share. Stars make for excellent investments for a brand.
• Question marks:  These products or services have high market growth potential but low market share, often because they’re new. You may need more information and time to decide if they’re worthy investments or ideas to abandon.
• Cash cows:  These products and services have low market growth potential but a high market share. These items may be things a brand offers to help fund investment in star products and services.
• Pets:  These products and services have low growth potential and a low market share. In cases like these, companies might plan rebranding strategies to reposition themselves within target markets.

Perceptual Mapping

Perceptual or positioning mapping plots the customer perception of your brand and your competitors on a graph. Marketers often use this type of analysis to understand how leads and clients view products and services throughout an industry.

Like a graph, perceptual mapping uses an X and Y axis to chart to compare perception between customers and competing businesses. You can plot any two factors in relation to the campaign data you want to collect. One example may include the perceived quality of products and services versus the price. For something like this, you’d plot the points that come between those two factors to get an idea of where your company and your competitors fall within this range.

Using this framework, you’re able to analyze multiple competitors at once compared to looking at broad industry overviews or just one competitor at a time. A perceptual map helps you see how you can adjust business factors to help your brand. So, for instance, if you have a product or service with higher perceived value but a low price point than competitors, you’d increase prices while still offering better quality than the competition.

PEST Analysis

The PEST analysis, also called the Broad Factors Analysis, looks at the external factors affecting business decisions. It stands for political, economic, social, and technological factors, which are valuable indicators of your business’s growth among the competition. Breaking down each aspect of the PEST analysis, you’ll have a better idea of your position in the market and what driving factors are influencing it the most:

• Political:  Political influencers can be industry-specific policies or regulations that affect the ease of doing business in a market.
• Economic:  Economic influencers, like inflation, exchange rates, and interest rates, affect a business’s ability to make and spend money.
• Social:  Social influencers encompass human behaviors and patterns, population growth, demographics, and trends that affect how audiences make purchases.
• Technological:  Innovative factors like technological and systems advancements also affect the ease of conducting business in an industry.

Use the PEST analysis any time you want to dive into the advantages and challenges your brand and competitors face in the current market. The data can also show you which brands are more prepared to handle changes and setbacks, giving you even more insight into how competitors increase their market shares.

Porter’s Five Forces

This framework got its name from Harvard Business School professor Michael Porter, who created it in 1979. The model examines five market forces that affect companies in any industry, including:

• Industry competition and rivalries.
• Probability of new competition entering the industry.
• Supplier power.
• Customer power.
• Threats of substitute products or services entering the industry.

Rather than looking at one individual competitor, Porter’s Five Forces is an excellent analysis tool for understanding the overall competitive structure of an industry. It’s an excellent starting point and provides valuable insight, especially when:

• Creating a new business strategy.
• Understanding if a new product or service could be profitable in your industry.
• Finding rival’s weaknesses and avoiding their mistakes.
• Looking for a complete competitive overview of your industry or market.
• Maximizing profitability in your industry.

The  STP  model stands for segmentation, targeting, and positioning. It looks at how a company addresses its audience and then delivers relevant, personalized messages to the group to encourage conversions and sales. Each letter of the  STP  acronym functions as follows:

• Segmentation divides the audience into smaller niche groups.
• Targeting shows which segment will be most receptive to each message, product, or service.
• Positioning uses tactics to make a product or service most appealing to the desired segment.

While the  STP  model is more common for planning your own brand’s marketing strategies, you can conduct it for your competitors, too. Use information from their marketing channels to identify the audience segments they’re targeting and how they’re positioning their brands as the best solutions. This process may help you find weaknesses in competing  marketing messages , giving you the opportunity to improve yours and get ahead of your competitors.

Strategic Group Analysis

The strategic group analysis framework organizes your competitors into groups based on the similarities in their business or marketing strategies. The groups that you choose are entirely up to you and your team and can vary based on the information you want to collect. For example, you might sort your competitors based on pricing strategies, products or services, or specific marketing strategies.

The beauty of this analysis framework is that it’s helpful for understanding what companies are doing to maintain top positions and a majority of market shares. The more patterns you find among top-performing brands, the more you can decide if adopting some of these tactics is right for your company. Use this type of analysis is when you’re:

• Reviewing sales and marketing strategies.
• Analyzing your target audience.
• Comparing profit margins to the competition.

11. SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities, and threats. Each category looks at information like:

• Strengths:  Internal factors of a company that benefit its business operations, like a highly trained team.
• Weaknesses:  Internal factors of a company that put the brand at a disadvantage, such as a small budget.
• Opportunities:  External factors that give the company opportunities for growth, such as high demand for a specific product or service.
• Threats:  External factors that create challenges for a brand, such as inflation or rising supply costs.

You can use a SWOT analysis to discover these internal and external influences on any brand, including your own. When you run this type of review on a rival, it not only shows where their strengths and weaknesses lie. The results also show where your brand performs better than the competition and where you may need to focus more of your efforts and resources to get and stay ahead of their progress.

Competitive analysis frameworks give you data and insights into how your competitors run their businesses. This is helpful when planning your own marketing strategy because you know what you’re competing against rather than making guesses. The more you know about your competitors, the better your educated predictions will be when planning marketing strategies that keep you ahead of brand rivals. Check out a few of the benefits you’ll get from following a framework for your competitive analysis:

• Avoid competitors’ mistakes.
• Find content and strategy gaps.
• Identify market shifts.
• Identify market trends and patterns.
• Make data easier to understand.
• Set achievable, measurable strategy goals.
• Target effective marketing strategies.

What to Look For When Choosing a Competitive Analysis Framework

Since there are so many analysis frameworks available, you may wonder how to choose the right one for each campaign or competitor. Here are four elements to keep in mind to find the best framework for your research:

Choosing the Right Competitors or Competitive Factors

Before you pick a framework, you need to know who to analyze. Are you looking at the strengths and weaknesses of one brand? Or are you going to analyze your entire industry? Different frameworks target different numbers and sizes of competitors, so knowing who you’re analyzing helps you make the right choice.

Picking the Right Elements to Analyze

Once you know which brands or factors you want to focus on, you then need to decide which business aspects are worth tracking. Again, these factors depend on what you want to get out of the data. For example, if you’re trying to decide if you can increase service prices and still remain competitive in your market, then pricing strategies and perceived value might be your starting points.

Discovering Where To Find the Right Data

Competitive analysis can sometimes be tricky because not all information you look for will be readily available online. You’ll need to  know the right sources  and locations to find the data you’re looking for. So check things like content analysis tools, social media, and trade publications to find information that might be less obvious in a simple Google search.

Understanding How To Apply Your Analysis

Before you even pick a framework, it’s important to know how you plan to apply the data you find at the end of the analysis. Collecting data is just busy work if you don’t have a plan for using it. Consider how the information you collect affects changes you want to make to things like your content marketing strategy or your online advertising. Then, you can select a framework that presents these insights in a clear, easy-to-understand format.

Leverage the Data To Elevate Your Content Marketing

Understanding what your competitors are doing to generate leads and customers can be extremely helpful in developing a content strategy that gets results. If you’re wondering how to gain more insights into your content performance and what to do with the info once you have it, download our free guide: “ How To Analyze Your Content and Craft a Winning Strategy .”

“CopyPress gives us the ability to work with more dealership groups. We are able to provide unique and fresh content for an ever growing customer base. We know that when we need an influx of content to keep our clients ahead of the game in the automotive landscape, CopyPress can handle these requests with ease.”

Kevin Doory

Director of SEO at Auto Revo

CopyPress writer

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12 Key Elements of a Business Plan (Top Components Explained)

Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

• The name and location of your company
• Products and services offered by your company
• Mission and vision statements
• Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

• Business location
• The legal structure of your business
• Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

• The geographical location of your target market
• Needs of your target market and how your products and services can meet those needs
• Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

• Industry description and statistics
• Demographics and profile of target customers
• Marketing data for your products and services
• Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

• Your competitors' identified advantages in the market
• How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
• The standout qualities that distinguish you from other companies
• Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

• Information about how your company plans to carry out its operations.
• The base location from which your company intends to operate.
• The number of employees to be utilized and other information about your company's operations.
• Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

• Projected income statements
• Cash flow statements
• Balance sheets
• Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

• Legal documents
• Licenses and permits
• Credit histories
• Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

• The management team and other stakeholders resume
• Marketing research
• Permits and relevant legal documents
• Financial documents

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Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.