You’re putting together your business plan.  A critical part of that plan is the competitive analysis portion.  You know, the part where you compare your products and services to those of your competition.  So you list their product’s strengths and weaknesses, and compare them to your product’s strengths and weaknesses.  Easy, right?  It is if you stop there.  But are you seeing a true competitive picture?

Many people make the mistake of doing a benchmark comparison and calling it a competitive analysis.  While benchmarking is important and useful, you need a more complete view of the competition as it relates to your business plan.  A more inclusive approach will give you a more accurate picture of how you stack up against the competition.  When it comes time to pitch your business plan, you will also appear more strategic and thorough in your analysis.

The market analysis section is a piece of your business plan that can help you do a more in-depth assessment of what you are up against.  You should complete the market analysis before tackling the competitive analysis section, as your market analysis may lead you to a different conclusion about the competition.

To analyze the market you must consider the various environments that exist in your industry.  Four environments that could potentially have a major impact on your industry are:

Political Environment Are there current or future government policies or regulations that create an advantage or disadvantage to you or your competition?  What direction are the political winds blowing for your industry?  Are there special interest groups that are in play?  Who wins most if the political climate changes?

Technical Environment What role does technology play?  Are there development efforts underway that could cause a paradigm shift?  If so, will you or your competition have access to that new technology?  Will that technology create new products that will be game-changing in your industry?

Financial Environment How is investment money flowing?  Who is getting it?  How are they using it?  How much is being spent on items like advertising and R&D?

Customer Environment What are the customer product and service preferences?  What are the customer demographics?  What are the most effective channels to reach those customers, and who is best positioned to do so?  How sensitive are the customers to price, quality, and delivery in your market?

To do a thorough job on the market analysis you need good, solid data.  Tap into the trade and industry associations, commerce departments, and other independent sources.  Doing a good job here will pay dividends.

Once you have done your homework and completed the market analysis, as you begin to assess the competition as well as your own company, do so with the above “environments” in mind.  Ask yourself, “Who has the advantage in this particular environment?”  This will give you a much better assessment of the competitive landscape, and become a solid foundation for your strategic plan to address the market and beat the competition.