If business is like race, competitor analysis is like a prized thoroughbred that will carry you to the finish line, outpacing your competitors as you go.
But competitor analysis is a broad practice. There are several frameworks to choose from, depending on your needs.
A framework as the term implies gives your competitive analysis structure. It makes it more effective because it allows you to be systematic and gives order to the chaos that is competitor data collection.
In this article, we’ll explore the different types of competitor analysis frameworks so you can choose the most ideal for your business and use it to improve and benchmark yourself against the competition.
What is a Competitor Analysis Framework?
A competitor analysis framework is a system of gathering useful information about your competitors, including but not limited to their marketing, products, pricing, content, and sales.
A framework is meant to simplify competitive analysis and aid you with coming up with insights and making decisions to solve your problems.
Therefore, a framework must ultimately bear actionable insights, transforming this abstract model into tangible effects.
7 Types of Competitor Analysis Frameworks
1. SWOT Analysis
SWOT analysis is a classic framework that helps businesses assess both internal and external factors that can impact their success. It breaks down into four components:
- Strengths: What your company does well (e.g. brand reputation, unique products, customer loyalty).
- Weaknesses: Areas where your company is lacking compared to competitors (e.g. limited budget, outdated technology).
- Opportunities: External factors your business can leverage (e.g. new markets, evolving consumer trends).
- Threats: External risks that could harm your business (e.g. new competitors, regulatory changes).
Benefits:
SWOT is easy to understand and use. It offers a simple, yet comprehensive view of your business's position in the marketplace, allowing you to capitalize on your strengths and address weaknesses.
It also highlights external opportunities to pursue and threats to prepare for.
Ideal for:
Businesses of all sizes, especially small to medium businesses or startups that need a straightforward tool to understand their competitive position. Marketing teams use SWOT to focus on strategic improvements quickly.
A framework is meant to simplify competitive analysis and aid you with coming up with insights and making decisions to solve your problems.
2. Porter’s Five Forces
Porter’s Five Forces framework looks at five key factors that determine the competitive intensity and attractiveness of a market:
- Threat of New Entrants: How easy it is for new competitors to enter the market.
- Bargaining Power of Suppliers: The influence suppliers have over prices and availability of materials.
- Bargaining Power of Customers: The power customers have to drive prices down or demand better quality.
- Threat of Substitutes: The risk of alternative products or services replacing yours.
- Competitive Rivalry: The intensity of competition within the industry.
Benefits:
This framework helps businesses identify the major forces shaping their competitive environment and their market’s profitability.
It offers insights into where your business can gain a competitive edge, such as negotiating with suppliers or identifying threats from substitutes.
Porter’s Five Forces is particularly useful for beginning a new marketing strategy.
Ideal for:
Larger businesses or those operating in highly competitive industries. Agencies and strategists use it to help brands understand market profitability and external pressures that affect their business strategy.
3. Strategic Group Analysis
Strategic Group Analysis divides companies within an industry into groups that have similar business models or strategies.
These "strategic groups" often share common attributes like pricing strategies, distribution channels, or marketing tactics.
You can identify your closest competitors by understanding which companies are in the same strategic group.
Benefits:
This framework is especially useful when trying to carve out a unique position within a crowded market.
By comparing companies with similar strategies, you can analyze your target market and compare profit margins with your competition.
Ideal for:
Businesses in highly competitive industries (e.g., retail, hospitality, technology) where multiple players use similar strategies. It's also valuable for companies considering a shift in strategy or positioning.
4. Growth Share Matrix (BCG Matrix)
The Growth Share Matrix, developed by the Boston Consulting Group, helps companies evaluate their product portfolio based on two factors: market growth and market share. Products are categorized into four quadrants:
- Stars: High market growth, high market share – typically requiring significant investment but offering strong returns.
- Cash Cows: Low market growth, high market share – generate steady cash flow with little investment.
- Question Marks: High market growth, low market share – products with potential but require investment to compete.
- Dogs: Low market growth, low market share – likely to be phased out as they drain resources.
Benefits:
The BCG Matrix helps businesses prioritize investments across their product portfolio.
It clearly shows which products are worth further investment and which are best phased out. This is particularly helpful for resource allocation and long-term planning.
Ideal for:
Companies with wide and diverse product lines or services, especially those looking to manage their portfolio more strategically.
It’s frequently used by large corporations, but smaller businesses with multiple offerings can also benefit from this structured approach. If you want to know which competitors you should focus on, try this framework.
5. Perceptual Mapping
Perceptual mapping is a visual tool that helps businesses understand how consumers perceive their brand relative to competitors.
The map typically compares two attributes, like price and quality, or innovation and customer service, and plots companies on a graph accordingly.
This helps businesses see where they stand in the eyes of consumers and identify potential market gaps.
Benefits:
This framework is excellent for uncovering how your brand is positioned compared to competitors. It also reveals opportunities to reposition your brand in areas where consumer demand is high, but competition is low.
Additionally, perceptual maps help with branding and communication strategies by highlighting what matters most to your target audience.
Ideal for:
Marketers and brand managers who want to refine their brand positioning or companies looking to enter a new market.
It’s especially useful in industries like retail, consumer goods, and technology, where perception plays a major role in purchasing decisions.
6. PEST Analysis
PEST stands for Political, Economic, Social, and Technological factors. It’s a framework designed to analyze macro-environmental factors that could impact your business or industry.
- Political: Government regulations, trade policies, tax laws
- Economic: Inflation rates, exchange rates, economic growth
- Social: Consumer attitudes, cultural trends, demographics
- Technological: Advancements in technology, automation, R&D activity
Benefits:
PEST analysis helps companies anticipate external risks and opportunities that could influence their industry.
It’s particularly useful for strategic planning, ensuring that businesses stay adaptable to external changes like political shifts or technological advancements.
It helps companies spot trends or challenges that might not be immediately obvious.
Ideal for:
Brands planning to enter new markets or sectors, or those facing significant changes in external conditions (e.g., regulatory shifts).
PEST is also a good framework for companies operating in industries heavily influenced by external factors, like healthcare or finance.
7. 7Ps Marketing Model
The 7Ps Marketing Model expands on the traditional 4Ps of marketing (Product, Price, Place, and Promotion) by adding three more elements: People, Process, and Physical Evidence.
- People: Refers to everyone involved in delivering your product or service, from employees to customer service.
- Process: The way your product or service is delivered, ensuring efficiency and customer satisfaction.
- Physical Evidence: The tangible aspects of your service (e.g., branding, store design) that help create an experience for customers.
Benefits:
This model provides a more comprehensive view of marketing, especially for service-based businesses.
It ensures that every aspect of your customer experience, from product development to the final purchase, is optimized and consistent.
The 7Ps also help ensure that the business’s internal processes and customer-facing elements work harmoniously.
Ideal for:
Service-based businesses, like hotels, consulting firms, or retailers who need to focus on every touchpoint of the customer journey.
It’s also beneficial for companies looking to align internal processes with their marketing strategy or develop their value proposition.
Advantages of Using a Competitor Analysis Framework
1. Make Wise Decisions
A competitor analysis framework gives you structured data to base your business decisions on, reducing guesswork.
By understanding the strengths and weaknesses of your competitors, you can confidently choose where to invest resources and which risks to avoid.
2. Be Competitive
Using a framework allows you to stay on top of market trends and competitor movements, ensuring you're never left behind. It helps you anticipate changes in the market and adapt your strategies before competitors gain the upper hand.
3. Reverse-engineer Their Strategy
Competitor analysis frameworks help you break down and analyze the successful strategies your competitors use. By understanding their tactics, you can replicate what works or find ways to improve upon them.
This can lead to stronger marketing campaigns, product offerings, or overall business strategies.
4. Refine Your USP
Studying competitors through a structured framework helps you identify gaps in their offerings, which can inform how you differentiate your product or service. This can strengthen your Unique Selling Proposition (USP) by highlighting what sets you apart.
A refined USP is crucial for attracting customers who may be torn between you and a competitor.
5. Benchmark Your Performance
Competitor analysis allows you to set benchmarks by comparing your performance with that of your rivals. It provides a clear standard against which you can measure your marketing, sales, or product success.
Frequently Asked Questions
1. How do I choose the right competitor analysis framework for my business?
Choosing the right framework depends on your business goals and industry. For a broad overview, SWOT or PEST analysis are great starting points.
If you're focused on product strategy or market positioning, frameworks like the Growth Share Matrix or Perceptual Mapping may be more helpful.
2. Can I use multiple competitor analysis frameworks at once?
Yes! In fact, combining different frameworks can give you a more comprehensive view of your competitive landscape.
For example, using both Porter’s Five Forces and SWOT can help you understand both industry dynamics and your internal strengths and weaknesses.
