As a startup founder, you're no stranger to challenges. Each step of your journey is about making smart choices while manoeuvring through an intricate labyrinth of decisions. One crucial process that significantly influences your strategies and decisions is competitor analysis.

Competitor analysis provides essential insight into your market, reveals potential challenges, and uncovers opportunities you might not have previously considered. It helps you understand what it takes to get an edge over your opponents and presents ways to maintain that advantage. This post will guide you through the process of performing a competitor analysis and how to document and measure the strength of your competition.

Performing Competitor Analysis

The first step in competitor analysis is identifying your competitors, either direct or indirect. Direct competitors offer a similar product or service, targeting the same audience in the same geographical area. Indirect competitors may not offer the same product or service but solve the same problem for your customers.

The next step is to collect information. This information may range from the competitor's products, market share, customer reviews, pricing, marketing strategies, search engine optimization (SEO) strategies, among others. Multiple online tools can aid in this process, such as Google Alerts, SEMRush, SpyFu, and Ahrefs.

The last step involves analyzing the gathered information to uncover strengths and weaknesses of your competitors. Look for trends and gaps in their strategies. This detailed understanding can help you develop strategies that outperform your competitors.

Documenting the Results

Prioritize and organize the collected data for easy access in the future. This can be stored in a updatable database, spreadsheets or specialised software. This catalogue should include both quantitative data (like pricing, revenue etc.) and qualitative insights (like customer reviews, marketing strategies) for each competitor.

Having a concise and accessible documentation system will help you stay updated about your competition, modify your strategies as and when required, and maintain your competitive edge.

Measuring the Strength of Your Competitors

It's not just enough to know who your competitors are, it's crucial to understand their strength. The Porter's Five Forces framework is a widely accepted tool that can help you assess the competitive strength and position of a business organization. The five forces include the threat of new entrants, bargaining power of consumers, bargaining power of suppliers, chance of substitute products and rivalry among existing competitors.

Another popular framework is the SWOT (strength, weakness, opportunity, threat) analysis. This methodology helps determine the position of a company given its internal strengths and weaknesses, as well as the external opportunities and threats faced by it. A competitor’s strength can be your weakness and hence needs to be tackled strategically.

Remember, competitor analysis isn't a one-time task, it's a continuous process. The market is dynamic, and your competitors are likely evolving their tactics, devising new strategies, or developing innovative products. Thus, regular monitoring is required to stay competitive and succeed in your business journey.

Example SWOT analysis

Here is a worked example of SWOT analysis for a single competitor, let's use a fictional example based on a hypothetical competitor in the e-commerce industry.

SWOT Analysis for "EcomHub" (a fictional e-commerce startup)

Strengths:

1. Innovative Technology: EcomHub uses cutting-edge AI algorithms to provide personalized product recommendations to its users.

2. Strong Branding: The company has successfully built a memorable brand image with a catchy slogan and consistent color themes.

3. Diverse Product Range: EcomHub offers a wide range of products from multiple categories, making it a one-stop-shop for many consumers.

4. Customer-Centric Approach: EcomHub has a responsive customer service team and a user-friendly interface, which has resulted in high customer satisfaction ratings.

Weaknesses:

1. Limited Market Presence: Being a new entrant in the e-commerce industry, EcomHub is not as well-known as some of the industry giants.

2. Dependence on Third-party Vendors: EcomHub relies heavily on third-party suppliers, leading to occasional stock-outs and delivery delays.

3. High Operational Costs: Due to investments in technology and marketing, the company is currently operating at a loss.

4. Lack of Mobile App: While the website is mobile-responsive, EcomHub does not have a dedicated mobile app, which could limit its reach to mobile-centric users.

Opportunities:

1. Expanding Market: The global e-commerce industry is projected to grow significantly, providing ample opportunities for EcomHub to expand its customer base.

2. Collaborations: EcomHub can collaborate with popular brands and influencers to increase its visibility and credibility.

3. Diversification: The company can explore new product categories or offer value-added services like product insurance or extended warranties.

4. Mobile App Development: Launching a dedicated mobile app can tap into the growing number of mobile shoppers and provide a more seamless shopping experience.

Threats:

1. Intense Competition: The e-commerce industry is highly competitive, with several established players vying for market share.

2. Regulatory Challenges: Changes in e-commerce regulations, taxes, or international trade policies can impact operations.

3. Cybersecurity Concerns: Being an online platform, EcomHub is susceptible to cyberattacks, data breaches, and phishing scams.

4. Economic Downturn: Economic recessions can lead to reduced consumer spending, impacting sales and profitability.