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10 Questions to Ask When Writing a Business Plan Competitive Analysis

Getting to Know Your Market Every business is different, so each company's business plan is a unique document. However, most business plans do follow a fairly standard format that includes several key sections discussing the company's management, finances, industry, operations, marketing, and competition.

While each section of your business plan is important, formulating a competitive analysis is especially critical for completing the competition section, which will be integral to your marketing plan. Here are 10 questions that will help you write the competitive analysis section of your business plan.

1. Is Your Competitive Research Current and Thorough?

In most industries, the competitive landscape can change quickly and drastically, especially after the economic upheaval of the past few years. Do some research to find out the current state of your primary competitors and what they're up to, and then write or update your business plan's competitive analysis to reflect this.

Dig into your competitors' websites, collateral, press releases, and all their marketing and advertising materials to stay on top of what they're doing and, more important, how it may affect your business. Think ahead about strategic moves you can make to counter what your competitors do.

2. Have You Included Both Direct and Indirect Competitors in Your Analysis?

Direct competitors are relatively easy to identify: They're the other companies you go head-to-head with when vying for new clients, or the businesses down the street selling the same or similar products as you do and vying for the same limited pool of customers.

But indirect competitors can be harder to spot. For example, the indirect competition for a neighborhood pizza parlor would be any other restaurant in its market area that sells meals at a similar price point -- whether it's pizza, Mexican food, or burgers and fries -- because those are the other options customers have for dining out.

3. What Are Your Competitors' Primary Strengths and Weaknesses?

All companies, even industry and market leaders, have both strengths and weaknesses. Identifying the specific strengths and weaknesses of your competitors is a critical part of completing your competitive analysis.

It's wise not to try and best your competition in areas where they're strong. Instead, look for weak spots you might be able to exploit. For example, if your main competitor is known for high-quality products but lousy service, you might devise your competitive strategy around offering products of average (but adequate) quality and providing top-notch customer service. This way, customers who value service over quality will have a clear choice in the marketplace

4. What Are Your Own Company's Primary Strengths and Weaknesses?

As you analyze your competitors' strengths and weaknesses, take the time to do the same thing with respect to your own business. The best way to do this is to conduct what's known as a SWOT analysis: Strengths, Weaknesses, Opportunities and Threats.

After you've identified your strengths and weaknesses, look for opportunities for growth and market share that you can tap into with your strengths, as well as threats that weaknesses might pose for your business. Your SWOT analysis should tie directly into the analysis of your competitors' strengths and weaknesses to help you formulate your marketing strategy.

5. What Is Your Company's Unique Selling Proposition?

Every company should be able to identify at least one thing it does better, faster, smarter, cheaper, or differently from all of the other businesses it competes with. This one thing is called your Unique Selling Proposition.

Obviously, your USP will be one of the strengths identified in your SWOT analysis. Ideally, it will be something you can use to exploit your competitors' weaknesses, like providing outstanding service when a competitor's service is sub-par. All of your company's marketing and advertising initiatives should be viewed through the lens of your USP: Do they support and emphasize what your company does best?

6. How Much Market Share Can You Realistically Expect to Acquire?

Answer this question in light of your company's USP, its strengths and weaknesses, and those of its competitors. Then you should have a pretty good idea of the marketplace potential of your company's products and services.

This will help you avoid spending precious time and resources trying to grow your business in areas where your competitors are likely to make it especially hard to grab market share. If the answer is disappointing, go back and revise your strategic plan to reflect a more realistic analysis of potential market share.

7. What Are Your Competitors' Primary Target Markets?

Your competitors are probably zeroing in on key target markets with their advertising, marketing, and business development efforts. These are likely the same target markets that you should also be focusing on.

If this is the case, you'll need to differentiate your marketing messages from those being communicated by your competitors. Using the example above, if your chief competitor touts its high-quality products, counter this by stressing the outstanding customer service you provide. Look for any opportunities to set your company apart in the minds of customers.

8. What Market Segments Might Your Competitors Be Overlooking?

While looking for markets that your competitors are targeting, also try to spot niche market segments that they might have overlooked. These may represent great opportunities for you to grow and obtain market share.

Niche marketing can be especially effective for smaller businesses whose resources are more limited than their larger competitors. Rather than focusing your marketing efforts widely on a large universe of prospects, you can focus more narrowly on a tightly defined niche segment of individuals who are the best possible prospects for your company. Doing so will save you time, money and resources, and will likely be more effective in the long run.

9. How Are Your Competitors' Products and Services Priced?

Pricing is a key component of a competitive analysis, because you can't formulate your own pricing strategy unless you know and understand those of your competitors.

When it comes to strategy, companies can compete in the marketplace based on price, quality, or a combination of both. When competing on price, bear in mind that if your primary competitor has positioned itself as the low-cost provider, then trying to undercut them may shrink your margins to the point that you actually lose money on each sale. But if your competitor positions itself as the high-quality, high-cost provider, you could gain market share by providing products at slightly lower quality, but also lower cost, to appeal to more cost-conscious customers.

10. Are There Holes in Your Competitors' Product or Service Offerings?

No business can provide every product and service to every customer. Even within niche markets and industries, there are usually products and services that customers want but that competitors are not currently offering -- or are not offering at an acceptable price. These could represent growth opportunities for your business.

Even better, try to think of new products and services that customers don't even know they need yet. Apple has been masterful at designing new products that customers who've experienced them can't live without. Ten years ago, for example, who knew that one day soon they wouldn't be able to live without their iPod?

Wireless Business Solution Zee Tawasha