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Choosing the right framework for competitive analysis involves a thorough research of the competitor, considering their impact on the company, and aligning the analysis with the company’s strategies. A robust framework should include an in-depth study of the competitor’s strategies and capabilities.
Determining the appropriate framework for competitive analysis, which is a study of a firm’s competitors within a market, should encapsulate a broad overview of all relevant aspects of the competitor in question. This involves not only focusing on the available financial records of a company but also conducting a thorough research of the company to acquire information not readily available. Firms should also develop a competitive analysis framework based on how the competitor’s actions directly affect the company’s fortunes. Additionally, a business should know how the competition reacts in certain situations and the reasons they might have for a particular course of action.
Many companies have a short-sighted view of the business world which involves simply focusing on their work and not caring what others are doing within the same industry. This may work in local situations, but in most competitive environments, it is essential to know those companies that will be fighting for existing market share. Finding the right framework for competitor analysis is a crucial step in this process.
Companies deciding on a framework for competitive analysis need to realize the impact their competition will have on them. If a company is only tangentially related to a competitor, the analysis can be superficial and focus on readily available details. In some business climates, however, a company’s fortunes may be directly tied to those of a competitor. If so, a careful competitor analysis is required.
It is also important for a company deciding on a framework for competitor analysis to consider its strategies before proceeding. A firm seeking to gain a cost advantage should be concerned directly with the price levels of its competitors and how they might react to an initiative by the analyst firm to lower its own prices. Conversely, a company that seeks to improve its products compared to its competitors must worry about the resources available to competitors and the possibility of making them become quality.
Regardless of which type you choose, any robust competitor analysis framework will have certain characteristics. It must include not only a look at the competitor’s strategies, both in terms of what it says its plans are and what its hidden agendas might be, but also an in-depth study of the company’s capabilities to embark on those strategies. Additionally, the analysis should focus on what the competitor hopes to achieve, both in the short and long term, and how that relates to the company conducting the analysis.
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