How to Write Competitive Analysis in a Business Plan (w/ Examples)

Every business wants to outperform its competitors, but do you know the right approach to gather information and analyze your competitors?

That’s where competitive analysis steps in. It’s the tool that helps you know your competition’s pricing strategies, strengths, product details, marketing strategies, target audience, and more.

If you want to know more about competitor analysis, this guide is all you need. It spills all the details on how to conduct and write a competitor analysis in a business plan, with examples.

Let’s get started and first understand the meaning of competitive analysis.

After having a brief knowledge of what a competitive analysis is, let’s understand how to conduct it:

1. Identify Your Direct and Indirect Competitors

First things first — identify all your business competitors and list them. You can make the final list later, but right now jot down all the competitors including new competitors.

Explore your competitors using Google, social media platforms, or local markets. Then differentiate them into direct or indirect competitors. And then distinguish them into direct or indirect competitors.

Direct competitors

Businesses offering the same products or services, targeting a similar target market, are your direct competitors.

These competitors operate in the same industry and are often competing for the same market share.

Indirect competitors

On the other hand, indirect competitors are businesses that offer different products or services but cater to the same target customers.

While they may not offer identical solutions, they compete for the same customer budget or attention. Indirect competitors can pose a threat by providing alternatives that customers might consider instead of your offerings.

2. Study the Overall Market

Now that you know your business competitors, deep dive into the market research. The research should be a combination of both primary and secondary research methods.

Primary research

It means being involved in getting the information directly from customers or by buying the product itself. Some examples of primary market research methods include:

• Purchasing competitors’ products or services
• Conducting interviews with customers
• Administering online surveys to gather customer insights

Secondary research

The secondary research involves utilizing pre-existing gathered information from some relevant sources. Some of its examples include:

• Scrutinizing competitors’ websites
• Assessing the current economic landscape
• Identifying technological advancements

Have a good understanding of the market at this point before you proceed with the next step.

3. Prepare a Competitive Framework

Creating a competitive framework is like charting a strategic roadmap for your business in the competitive landscape. It includes defining your USPs, market positioning, and various strategies.

Establishing your competitive positioning clarifies where your business stands among competitors.

Plan how to make your product or service stand out by figuring out ways to make it different to stand out, whether it’s through new features, better quality, or excellent customer service.

Craft unique value propositions that resonate with your target audience, communicating the benefits of choosing your offerings. This framework serves as a compass for crucial business decisions, ensuring alignment with your strategic positioning.

By consistently referencing this framework, your business can effectively meet customer needs, fostering satisfaction and loyalty through tailored products, services, and interactions.

4. Take Note of Your Competition’s Strategies

By stepping into your competitors’ research, you will learn what strategies they use to market their products or services and how they engage with their customers.

This will motivate you to do something more for customers and give you an idea of what your consumers like.

Start by analyzing their marketing strategies, such as sales and marketing channels, promotional activities, and branding strategies. Understand how they position themselves in the market and what USPs they emphasize.

Evaluate their pricing strategies and offerings, and keep an eye on their distribution channel to better understand your competitors. For example, here are the pricing strategies of a barber shop and its competitors:

This information allows you to make informed decisions about your strategies, helping you identify opportunities for differentiation and improvement.

5. Perform a SWOT Analysis of Your Competitors

You would love to know the opportunities and threats of your business, right? To be prepared for it when the time comes.

Well, conducting a SWOT analysis is like the same, it is more about getting to know about your strengths, weaknesses, opportunities, and threats. It also helps you understand your competitive edge in the market.

Whereas strengths and weaknesses focus on internal aspects of your company — opportunities and threats examine the external factors related to the industry and market.

Things to include in your SWOT analysis are:

Strengths

It includes the positive features of your internal business operations. For example, it might include a strong brand, skilled workforce, innovative products/services, loyal customer base, etc.

Weaknesses

It includes all the hindrances of your internal business operations. For example, it might include limited resources, outdated technology, weak brand recognition, inefficient processes, etc.

Opportunities

As the name says, it is all about the opportunities that will come your way in the near or far future. It is mainly about the external factors related to the market or industry trends.

For example, it might include emerging markets, technological advancements, changing consumer trends, profitable partnerships in the future, etc.

Threats

You should include any external factor that poses a challenge or any risk for your business in this section. For example, it might include intense competition, economic downturns, regulatory changes, or any advanced technology disruption.

These were the elements to help you conduct the competitive market analysis. Let us now go through how to write it in a business plan.

How to Write Competitive Analysis in a Business Plan

1. Determine who your readers are

Know your audience first, because that will change the whole context of your competitor analysis business plan.

The competitive analysis section will vary depending on the intended audience is the team or investors.

Consider the following things about your audience before you start writing this section:

Internal competitor plan (employees or partners)

Objective: The internal competitor plan is to provide your team with an understanding of the competitive landscape.

Focus: The focus should be on the comparison of the strengths and weaknesses of competitors to boost strategic discussions within your team.

Use: It is to leverage the above information to develop strategies that highlight your strengths and address your weaknesses.

Competitor plan for funding (bank or investors)

Objective: Here, the objective is to reassure the potential and viability of your business to investors or lenders.

Focus: This section should focus on awareness and deep understanding of the competitive landscape to persuade the readers about the future of your business.

Use: It is to showcase your market position and the opportunities that are on the way to your business.

This differentiation is solely to ensure that the competitive analysis serves its purpose effectively based on the specific needs and expectations of the respective audience.

2. Describe Competitive Advantage

One of the most important things in the competitive analysis is to know your competitive advantage and gain insight into how you are a better option than competitors.

Your competitive analysis should pinpoint the competitive advantage based on the competitors’ product line or service and market segment, pricing, and other such situations. Some of the points you might include in this section are:

• Product/service differentiation in terms of quality or innovation
• Cost leadership or competitive pricing
• Brand reputation
• Customer service excellence
• Innovation
• Diverse and effective marketing strategy

3. Explain your strategies

Your competitor analysis section should not only highlight what opportunities or threats your business has. It should also mention that what will be the strategies to overcome those threats or capitalize on the opportunities.

It could be for taking a top-notch quality for your products or services, exploring the unexplored market segment, or having creative marketing strategies.

4. Know the pricing strategy

To understand the pricing strategy of your competitors, there are various aspects you need to have information about. It involves knowing their pricing model, evaluating their price points, and considering the additional costs, if any.

One way to understand this in a better way is to compare features and value offered at different price points and identify the gaps in competitors’ offerings.

Once you know the pricing structure of your competitors, compare it with yours and get to know the competitive advantage of your business from a pricing point of view.

Competitive analysis example

Need help writing the competitive analysis section of your business plan? Here’s the barbershop competitive analysis example to help you get started.

Advantages of a Competitive Environment

Somewhere we all think, “What if we had no competition?” “What if we were the monopoly?” It would be great, right? Well, this is not the reality, and have to accept the competition sooner or later.

However, competition is healthy for businesses to thrive and survive, let’s see how:

1. It pushes you to innovation and improvement

In the competitive environment, a businessperson might get a new idea to bring innovation to the market to keep their products and services trending. This way innovation is promoted.

2. Competition validates your idea

Having a good idea becomes valid when others are developing similar products or services. A competitive market confirms that there is a market for your product and service. It also implies that the expenses of marketing and educating your target customers might likely decrease.

3. Efficiency and cost control

Businesses competing with each other get the motivation to operate efficiently to reduce costs and offer competitive prices. This thing for more sales benefits both businesses and customers.

4. Market responsiveness

A competitive environment forces businesses to be quick to adapt to market changes and customer demands. Companies need to adapt quickly to stay relevant and meet consumer preferences.

Competitive Analysis is critical, but don’t go overboard

Whether you are starting a new business or have an experience in the same field, gaining insight from your competitors will always be beneficial for your business.

Remember: Competitive analysis is essential for your business, but you can not assume all things positive on your side. Be realistic and practical while both conducting and writing this section.

Not only competitive analysis, but the whole business plan is necessary for any business to stay on the path. It will be your guide whenever your business is in any problem.

For assistance, you can visit our business plan writing guide. Additionally, we wish you all the luck in your competitive analysis journey.

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