In this article, you will learn what competitive environment analysis is, why it is necessary, and how to conduct one.
A cycling race is one of the most prestigious competitions in the world. Athletes launch from the track to break records or win high rankings. They race shoulder to shoulder, climb mountains, then charge wildly downhill. Over time the field becomes more challenging: the longer the race goes on, the thinner the pack. The strongest cyclist stands at the front, a mediocre one fights at the back, and a weak one gives up.
Why am I telling you this? Because the economics of competition are very similar. It can be a fierce race, so you have to persist. Your company must stay competitive by offering more than direct competitors — more products, more innovation, and exceeding customer expectations. Focusing on both the internal and external environment to leverage opportunities and stay alert to threats is essential, because the main purpose of competitive environment analysis is to find out exactly what your competitors are doing.
Any competitive environment consists of companies competing for greater market share. But in these business environments, small businesses or like-minded companies selling similar products can find it challenging. They want to saturate the market, which means every company earns only thin margins. That is why retailers must leverage their strengths, pricing plans, partnerships and marketing strategies to win buyers' attention — and, most importantly, their dollars.
But the market is open to everyone, and with the broad digital marketing environment, new entrants appear and become direct competitors of other companies. Therefore, it becomes more important for an individual business than for any other to name and target a specific market segment. That is what competitive environment analysis means today: analyzing the competition to assess the strengths and weaknesses of current or potential competitors — evaluated from the customer's point of view.
