Evaluating Your Competition

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(calm music) These lessons will walk you through using knowledge of your competitors to identify your strengths versus theirs. From there, you'll learn how to apply analytical tools to create business strategies that accomplish greater operational profits and meets the needs of the targeted business environment. From a business perspective, competition can be defined as a variety of economic entities competing with one another to secure a greater share of the market. Understanding your competitors can help you increase customer preference for your company over your competition. This can often be achieved through organizing your company for greater efficiency and effectiveness, compared to your competitors, creating a competitive advantage. A competitive advantage is something that sets apart an organization from other companies. Giving its target customers a perception of uniqueness or specialty that competitors don't offer or can't copy. The challenge lies in understanding who your competitors are and what they're doing. The process of competitor identification is a form of research, which is the collection of information that identifies a set of activities or ideas that affect strategic development to find a competitive advantage. This means a company can find information about key competitor's actions that attract customers, keep customers, and eventually pull customers away from their competition. Using a competitor array can be one of the quickest and easiest ways to understand your competition and to properly identify companies that are key to your operations. This is a matrix style grid that compares your company's performance against your competitors. First, you can clarify a few things. The market, what are you selling? Is it a tangible product, an intangible service or both? Key competitors. Examples include the top most profitable companies in the market. And the customers. Are the customers' purchase decisions based on convenience, price, availability, et cetera? Those customer purchase decisions comprise the key industry factors for success that categorize the targeted customers' preferences. You can prioritize those customer preferences by ranking them according to what percentage of customers' focus is centered on it. For example, customer shopping for a new car might value price most so price should receive a higher percentage ranking. So out of four qualities, it received a 0.4 ranking or 40% of the customer's preference. The goal is to have all rankings sum up to one which represents a hundred percent. Next, you can assign the ranking of any factor to each competitor and your own company by comparing it to the customer preference success factor. Ultimately asking who best provides customers with their preferred qualities. Once each competitor receives their preferences rank, you can multiply those rankings by the priority to achieve the percent weightage. The final step is to add the weightages of each firm in the row at the bottom. So a clear identification can be made as to which company has greater success and customer satisfaction. In the example, firm A seems to be top performing which would make them your key competitor. Identifying competitive influences such as the competitor array model in this lesson can help a company better understand what customers think of products or services. The results can help them generate a better strategy for attracting more of the markets' customers that builds on enhancing the company's competitive advantage. With a better understanding of a competitor's actions, the company can compare those actions with their own and design a strategy that gives them a competitive advantage. With awareness of the effectiveness of your own products and services, you can generate efficient analytical methods to compare to your competitors. Once you understand yourself better, particularly in relation to your competition, you'll be closer to devising strategies to gain increased customer preference. This leads to increased positioning in the market and that's the competitive advantage all companies seek.