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How Do I Choose the Best Framework for Competitor Analysis?

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  • Written By: Jim B.
  • Edited By: M. C. Hughes
  • Last Modified Date: 02 November 2016
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Determining the proper framework for competitor analysis, which is a study of a firm's competitors within a market, should encapsulate a broad overview of all of the pertinent aspects of the competitor in question. This entails not only focusing on the available financial records of a company but also conducting thorough research of the company to acquire information not readily available. Firms should also develop a framework for competitor analysis based on how directly the competitor's actions affect the fortunes of the firm. In addition, a company should know how it competitor reacts in certain situations and the motives it might have for a specific course of action.

Many companies have a myopic view of the business world that entails simply concentrating on its own work and not worrying about what others are doing within the same industry. This may work in local situations, but in most competitive environments, it is essential to know those companies who will be battling it out for existing market share. Finding the right framework for competitor analysis is a crucial step in this process.

Companies deciding upon a framework for competitor analysis must realize the impact that their competition will have on them. If a company is only tangentially connected to a competitor, the analysis can be perfunctory and concentrate on readily available details. In certain business climates, however, one company's fortunes can be directly tied to those of a competitor. When that is the case, a thorough competitor analysis is necessary.

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It is also important for a company deciding on a framework for competitor analysis to consider its own strategies before proceeding. A company trying to gain an advantage in cost should be directly concerned with the pricing levels of its competitors and how they might react to an initiative by the analyzing company to lower its own prices. By contrast, a company trying to make its products better than its foes must be concerned about the resources those competitors have at their disposal and whether topping them in quality is even possible.

No matter what type is chosen, any solid framework for competitor analysis will have certain characteristics. It must include not only a look at the competitor's strategies, both in terms of what it says its plans are and what its hidden agenda might be, but also an in-depth study of the capabilities that company has to undertake those strategies. In addition, the analysis should focus on what the competitor is hoping to achieve, both in the short and the long term, and how that relates to the company conducting the analysis.

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