Definition Competitor analysis

The goal of a competitor analysis is to evaluate the performance of various business enterprises in a predefined market. Based on an such analysis, one can come up with explanations for the entrepreneurial success of their competitors. A competitor analysis is one of the building blocks of a forecast on the future success of a company. On the basis of a competitor analysis one can identify the reasons for success, which allow a company to position themselves in a more advantageous market position.

The first step of a competitor analysis is to identify relevant competitors in a previously specified market segment. A market segment can be a certain product (e.g. car tires) or an industry (e.g. rubber manufacturing). In general, relevant companies are those who either have the largest market share or show the strongest growth in market shares.

After having identified relevant competitors and having described key data, one has to analyze the business strategy of each competitor. This is usually done in the form of a SWOT analysis, which highlights strengths and weaknesses of a business endeavor). Based on the current position of the competitors, as well as their behavior and strategies one can establish their immediate goals. In this context one also has to consider the corporate philosophy. It is often described in a so-called mission statement and usually allows for conclusions on the self-perception of a company.

In a competitor analysis it is crucial to confront the strengths and weaknesses of a company with their strategic goals. This allows a company to identify their own options for improving their market position as opposed to their competitors.