Market Competition Analysis — How To Outperform Your Competitors

“Whether it’s Google or Apple or free software, we’ve got some fantastic competitors and it keeps us on our toes.” — Bill Gates

WHAT?

Market Competition is a driving force for development and innovation in the current market. Having a thorough knowledge of your competition is the key to ensuring your presence and growth in the race. Be it the recent leading contestant in the telecommunication market — Jio, or be it Airtel, one of the oldest operators, putting up a tough fight by adapting to the changing demands, and improving its quality of service, competition analysis applies to all. At any stage of business, it’s worth taking time to conduct one.

Market competition analysis is a way to identify one’s competitors and understand their strengths and weaknesses in relation to yours. The company’s strengths can inform your positioning in the market and weaknesses can help you identify areas where you may want to invest time and resources.

WHY?

Competition analysis can help you achieve the following objectives:

• Understanding what other ways your target customers are solving the problem and how they rate the options available.
• A mechanism to develop effective competitive strategies to attract your target segment.
• Identifying the factor that’ll give you an upper hand over your competitors.
• Set benchmarks and strategize future growth.

And finally, if they can do it, so can we! ¯\_(ツ)_/¯

HOW?

Now that we know why we need to be aware of our competition, let’s understand how to gauge and analyze it, in order to be ahead in the race. Pinpointing the areas that need improvements can often be tricky. To have it more organized, divide the process into four broad steps:

Recognize your Competitors — Primarily, one needs to identify one’s direct and indirect competitors. For instance, food delivery ventures like Swiggy and Zomato are direct competitors, while Dunzo, which delivers grocery and other essentials in addition to food, is an indirect competitor.

Identify your competitor’s target segment: Find the target market of the competitor by understanding their vision statement, tracking the online presence and social media interactions, and analyzing their marketing strategies.

Compare the plus and minuses: Use tools like competitor matrices and trend charts to identify what is your competitor’s selling advantage, and what are its weak spots against your own. Start with making an excel sheet having potential competitors along one axis, and features along with the other.

Draw tangible conclusions: Once you know the areas with a lacuna, draw out precise, tangible solutions to improve the same, and ensure to take actions that bolster the 4 Ps of the marketing mix — price, product, place, and promotion in the best possible way.

Several frameworks are used to conduct Market Competition analysis. The most popular ones are :

• SWOT Analysis
• Porter’s 5 Forces
• Strategic Group Analysis
• Growth-Share Analysis

SWOT Analysis

SWOT analysis is one of the most widely used frameworks for competition analysis. SWOT stands for Strengths, Weaknesses, Threats, Opportunities. It helps in considering internal and external factors affecting your growth while considering the current and future potential.

SWOT analysis facilitates a data-driven, and fact-based look at the strengths and weaknesses of an organization.

Strengths — Strengths describe what separates an organization or business from others in the same segment, i.e., the POD (Point of Difference) of the organization. These can be — a strong brand value, a strong balance sheet, technology or a loyal customer base, access to primary resources or more product personalization.

Weaknesses — What are your competitors’ weaknesses in the marketplace? What mistakes have they made? By identifying these, you can leverage the same to your advantage. Some examples of weaknesses can be a weak brand, poor SEO, higher than average turnover, large debts, marketing fails, lack of capital, and a poor customer experience.

Opportunities — Opportunities that help them grow in the marketplace, change or develop products/offerings, form new partnerships and acquire new companies. Can you spot any current trends that could present an opportunity for your business?

For example, companies like Nike and Adidas started selling protective masks during the COVID-19 pandemic, and many new ventures like hand sanitizers and sprays, and disinfectants were sold for profits.

Threats — Potential harms to the organization are known as threats. Some of these can be supply chain disruptions, or new competitors entering the market. They can be both internal and external. Knowing what competitors are doing to react to these threats can make you wary of counter actions. If you can predict what your competitor can do, you can go on a path of success.

Example :

SWOT Analysis of Zara

Porter’s Five Forces

Porter’s 5 Forces is a framework developed by Michael Porter, a professor at Harvard Business School. It is a model which explains why different industries sustain different levels of profitability and is used for analyzing the industry structure of a company along with its corporate strategy.

Porter’s five forces are:

1. The intensity of competitive rivalry
2. The threat of new entrants
3. Bargaining power of new buyers
4. Bargaining power of suppliers
5. Threat of substitutes

Intensity of competitive rivalry

The ability of competitors to undercut the company and the number of competitors. The more the competitors, along with the number of similar products they offer, the lesser the power of a company.

Threat of new entrants

A company’s power is influenced by the force of new entrants into the market. An established company’s position could be significantly weakened if it takes less time and money for a competitor to enter the company’s market.

Bargaining power of suppliers

How easily suppliers can drive up the cost of inputs is another factor. It is influenced by the count of suppliers of inputs of goods or services, how unique these inputs are, and how much it would cost a company to switch to another supplier. The fewer the suppliers to the industry, the more a company would depend on a supplier.

Bargaining power of new buyers

The ability customers have to decrease prices or their level of power is another force. It is affected by how many customers a company has, how important each customer is, and how much it does cost a company to find new customers.

Threat of Substitutes

Substitute goods or services that can be used in place of a company’s products or services pose a threat. Companies can lock in favorable terms and increase prices if there are no close substitutes for the goods or services they provide.

Strategic Group Analysis

Strategic Group Analysis, as the name suggests, is a technique of grouping rival companies with similar strategies, to find their relative position in the market. It is used to identify close and distant competitors. Clusters are made based on multiple factors, like brand recognition, product quality, promotion tactics, price policy, etc. For example, Zara can conduct a strategic group analysis on the grounds of sustainability vs pricing of its competitors.

Strategic Group Analysis can help you focus on rivals within your radar, and build long term strategies with scope for innovation and change.

Growth-Share Matrix

Another interesting technique is the Growth-Share Matrix which is used by large business corporations with massive portfolios to critically evaluate their use of resources and funds in product offerings with respect to those of their competitors. It helps you identify the places to prioritize and the ones to ignore.

The matrix has four quadrants, each having a certain significance in profitability, represented by unique symbols or ideas, namely — Question Marks, Stars, Cash Cows, and Pets (generally dogs).

For example, in the case of soft drinks, Thums Up, Maaza, and Bisleri are stars, while Limca and Coca-cola are cash cows, as their market share is high, but growth is low. Fanta and Sprite can be question marks but Minute Maid Pulpy Orange and Diet Coke are pets with low share and low growth in the market.

Some other popular frameworks include Perceptual Mapping, Business Model Canvas, and Customer Journey Maps. All of these use different methods to assess one’s own standing versus its competitors in the market and help in strategizing accordingly to satisfy customers, increase the market share, and focus on potential opportunities.

Having understood some of the frameworks for performing market competition analysis, let’s understand this with a case study — Sony PlayStation 5 vs. Nintendo Switch Lite

Sony Group Corporation, a Japanese multinational conglomerate, is the creator of many gaming system products like PlayStation 5. The Sony PlayStation 5 which was released in November 2020, had big-time supply shortages after its release.

Nintendo Co. Ltd., another Japanese multinational video game company, develops gaming software and video game consoles. Nintendo’s Switch console has been a consistently high seller for several years.

Both these competitive products have their specific agendas — Sony aims to create new gaming products to beat the established competitors in the market, whereas Nintendo focuses on improving and advancing the current product to achieve reliable sales over time.

We perform a market competition analysis of these two products :

Brainstorming other potential competitors — While we work on the analysis of the Playstation 5 and the Nintendo Switch Lite, we also take into consideration other market offerings. The Microsoft X Box, Stadia by Google, Doofy by NVIDIA, and Playdate occupy the attention of customers in the same market vertical. For an effective and realistic market analysis, we can brainstorm the features, pros, and cons of buying these products.

Listing down the product offerings — Playstation offers two PS5 versions, digital and standard, differently priced, while Nintendo offers three versions of its console. Peripherals sold by these companies include virtual reality (VR) add-ons by Sony while Nintendo sells gaming peripherals such as steering wheels, tennis rackets, and different controller configurations.

Analyzing the sales strategies of the products — Due to the semiconductor shortage, the Sony Nintendo Playstation had very low volumes of PS5 for sales. The scarcity principle states that if a product has low supply and high demand, the price and value rise to meet the demand. Hence the PS5 saw more demand. Nintendo, on the other hand, lowered the prices of its product and made it compact, primarily targeting children and a family customer base for its Switch Lite product.

The results!

Sony sold 7.8 million while Nintendo sold a whopping 14.3 million consoles, through September 2021.

Analyzing the product prices — The standard Sony PS5 sells for $499, while Nintendo’s most expensive offering comes in at $349. Hence, over here, Sony is said to have high-priced offerings which is also a factor making customers reluctant from buying it, especially when they get another competitive offering, at a cheaper price, with not a huge disparity in the product features.

Analyzing marketing strategies and social media engagement of the audience — Sony’s ads feature realistic in-game footage and speak to the audience with their exclusive game titles. Nintendo, meanwhile, uses brightly-lit ads showing happy families playing together or children using their smaller Switches while traveling to trigger the emotional quotient of families. Sony enjoys a significant lead over Nintendo for social media engagement. The official Playstation Facebook page has 38 million followers whereas Nintendo has just 7.7 million followers as of 2022.

Conclusion

The purpose of a market competition analysis is to understand the competitors’ strengths and weaknesses in comparison to your own and to find a gap in the market requirements and availability. It helps ideate, innovate and build strategies to enhance the current business strategy in order to ensure customer retention, market growth, and high market share, giving you an edge over your competition.

Authors — Rashi Bhansali, GAURI BHARAT, Vedant Mahajan, Anushka Bhave