Entrepreneurship
Unit 2.2
Analyzing a business’s competitors
and industry
Students will Assess their Market’s
Competitors and Industry
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Students will be able to:
• Research competitors and identify their
niche
• Assess competitors’ strengths and
weaknesses
• Assess industry characteristics
The Purpose of
Competitive Analysis
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Competitive Analysis explains the
market positions of both a company’s
direct and indirect competitors.
Competitive analysis often uncovers
new business opportunities by
pinpointing where customer needs
are not yet being met.
What is a Niche?
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Niche A small, specialized segment of the
market based on customer’s needs.
• Some businesses will focus on the smaller
segment instead of competing with everyone
else for the bigger market.
• Example: In real estate, Planned Unit
Developments (PUDs) target the 55+ age
group, instead of competing with all the other
builders in an area. They don’t sell homes to
their niche—they sell “lifestyle.”
Competitive Overview
The first step in creating competitive
analysis is to research one’s top
direct and indirect competitors.
Direct competitors offer similar
products.
Indirect competitors offer close
substitutes that meet the same basic
need.
How to “Research” Competitors
(Create a table to analyze)
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Identify your top direct competitors.
Identify your top indirect competitors.
State the locations of your top competitors and
the number of years in business.
Describe the primary markets or market
segments your competitors serve.
Describe the primary products and services your
competitors sell and how much they sell, if
known, in units or sales dollars.
The Value Proposition
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The second step in the competitive
overview is to analyze your top direct
and indirect competitors in greater
detail to determine their strengths
and weaknesses. This will help you
determine the value proposition of
each of your competitors.
How to Determine the
“Value Proposition”
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Evaluate your competitors’ product or service
selection, quality, and availability.
Evaluate your competitors’ promotion strategies,
including advertising, branding, packaging, and
labeling strategies.
Evaluate your competitors’ pricing policies and
pricing structures.
Explain your competitors’ customer service and
after-sale service policies.
Example: LeFever’s River Grill
(Competitors’ Strengths and Weaknesses)
Strengths
Weaknesses
Ken Stewart’s
Great reputation for quality
and service; personalized
touch of owner; leverage
brand name to additional
catering services
High prices; additional
restaurants spread owner
too thin to maintain
personalized touch and
superior service
Moe’s Restaurant
Something new and
different; can maintain
intimate appeal
Small size; lack of brand
awareness
Lanning’s
Old-world feel; superior,
white-glove service;
perceived as a very “Special
Night Out”
May not appeal to
Generation X and Y; may
appear too outdated
River Front at the
Sheraton
Location inside hotel; can
handle large events and
catering
Relies on hotel customers;
convention market is
heavily tied to local
economy and visitors not
controlled
The Olive Garden
Well-known; consistent food
menu
Not perceived as something
special
Industry Trends
You can find opportunity in an industry
by looking at trends and patterns of
change. Consider:
• Has the rate of sales growth slowed?
• Does the government heavily regulate the
industry?
• How volatile is the industry?
• Is it becoming more difficult for new
companies to enter the industry?
Industry Forces
that Affect Your Business
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1. Barriers to Entry
Conditions or circumstances that
make it difficult or costly for outside
firms to enter a market to compete
with the established firm or firms.
Existing businesses may bar new
companies from certain distribution
channels.
Industry Forces that
Affect Your Business (Cont’d.)
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2. Threats from Substitute
Products.
• Example: Suppose you are planning to
open a restaurant serving lowcarbohydrate meals. You will be
competing with other restaurants in
your area, with grocery stores, and with
specialty food stores.
Industry Forces
that Affect Your Business (Cont’d.)
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3. Sources of Supply may affect
costs, pricing, and sales.
Consider:
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Access to affordable sources of inventory,
raw materials, and goods;
Where your suppliers located;
What trade discounts they offer;
Availability of alternative sources.
Industry Forces
that Affect Your Business (Cont’d.)
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4. Buyers’ Ability to Bargain.
In industries where large discount
buyers have bargaining power, a new
business may have difficulty gaining
a foothold. Small businesses usually
compete by offering personalized
service and customized products.
Industry Forces
that Affect Your Business (Cont’d.)
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5. Technology
Technology allows companies to
improve their business processes.
Companies that use technology to
operate effectively and efficiently are
more likely to remain competitive.
Competitive Intelligence
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Visit competitors’ outlets.
Buy your competitors’ products.
Search the Internet and your
competitors’ Websites.
Industry Characteristics
Each industry has basic characteristics
or demographics.
For example:
 Number of companies
 Annual revenues
 Average size of the companies by
number of employees
Terms to Define:
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Competitive Analysis
Direct Competitors
Indirect Competitors
Industrial Markets
Industry Trends
Industry Characteristics
Let’s Review
• Identify ways to research competitors
and identify their niche.
• How can you assess competitors’
strengths and weaknesses?
• What are 5 industry forces that may
affect your business?
• List examples of industry characteristics
Sources
Allen, Kathleen R., & Meyer, Earl
(2006). Entrepreneurship and small
business management. New York:
Glencoe.
 Green, Cynthia L. Entrepreneurship:
ideas in action. Boston: Thompson/
South-Western.
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Created by: JJ Abernathy
Snow Canyon High School
2006