The Competitive Analysis Matrix is a tool that allows businesses to define new growth opportunities. As the name suggests, the matrix is used to critically profile a company against its main competitors. The purpose of the Competitive Analysis Matrix is to provide a broad overview of the competitive landscape in a given industry. It helps businesses quickly identify gaps in product or service features and develop a point of differentiation as a result.
The matrix itself is simply a spreadsheet with specific features of an industry assigned to each row and the players (or competitors) of an industry assigned to each column. Then, each player is given a score based on how well they satisfy each feature. In most matrices, 1 is the lowest score and 5 is the highest.
For example, a budget airline may score a 5 for affordability but a 3 for customer service and a 2 for in-flight dining. A competitor may then use the matrix to see if it might be able to offer better customer service and food choices while remaining competitive in the budget airline industry.
Four elements of a basic Competitive Analysis Matrix
Grouped feature sets. To simplify the matrix, it’s important to group related features into a single row. Some large and complex industries may have hundreds of assessable features, which can quickly lead to overwhelm for analysts.
A holistic view. Although the matrix is touted as identifying gaps in the features of products or services, businesses should not stop there. Instead, they should look at attributes that affect the entire business to consumer process. These include delivery, installation, distribution, and after-sales support.
Accurate measurements. Remember that the Competitive Analysis Matrix is a qualitative comparison. Refrain from giving yes or no answers.
Customer focus. Resist the urge to assess product features that competitors are offering, since many of these features are superfluous to consumer needs. Indeed, the best approach is to determine what the consumer wants and then measure success against those features.
Disadvantages of the Competitive Analysis Matrix
Like many adaptable competitive matrices, there are some limitations to using the Competitive Analysis Matrix.
These include:
Subjective scores. Given that the scores for each attribute are subjectively assigned, there is likely to be some degree of inaccuracy. This is particularly prevalent when a business assigns scores to its competitors.
Incomplete information. While one business may know its distribution network inside and out, it may be difficult to obtain sufficient publicly available information on the network of a competitor.
Dependent attributes. In some cases, a strength in one attribute may result in the weakness of another within the same organization. For example, the low-fare model (strength) of a budget airline may be diluted if the airline opts to increase the poor standard of their food (weakness). In this case, the fixing of the weakness creates another competitive disadvantage if the airline cannot maintain its low prices.
When to Use Competitive Analysis
During Strategic Planning
Competitive Analysis is crucial in the strategic planning phase to position a business effectively in its market and to develop strategies that provide a competitive edge.
When Entering New Markets
It is particularly important when entering new markets or launching new products to understand the competitive landscape and how to differentiate the offering.
For Market Positioning
Competitive Analysis helps in identifying the most advantageous market position, allowing businesses to effectively target their marketing and product development efforts.
In Ongoing Market Evaluation
Regular competitive analysis is essential to stay updated on market changes, competitor movements, and emerging trends.
How to Conduct Competitive Analysis
Identifying Competitors
Start by identifying direct and indirect competitors in the market. This includes not only current competitors but also potential future competitors.
Analyzing Competitors’ Strategies
Examine competitors’ products, marketing strategies, sales processes, and customer experiences. This helps in understanding their strengths and weaknesses.
Evaluating Market Position
Assess the market position of each competitor, including their market share, customer base, and brand reputation.
Monitoring Competitor Performance
Keep track of competitors’ performance metrics, such as sales volumes, growth rates, and customer retention rates.
Leveraging SWOT Analysis
Conduct a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis for each competitor and for your own business to compare and contrast.
What to Expect from Competitive Analysis
Informed Strategic Decisions
Competitive Analysis leads to more informed strategic decisions, allowing businesses to anticipate competitors’ moves and react proactively.
Identification of Market Gaps
It helps in identifying gaps in the market that the business can exploit, leading to potential opportunities for growth and differentiation.
Enhanced Market Understanding
Regular competitive analysis enhances understanding of market dynamics, trends, and customer preferences.
Better Risk Management
Understanding the competitive landscape aids in better risk management, preparing the business for potential market shifts and competitor actions.
Continuous Improvement
Competitive Analysis encourages continuous improvement and innovation as businesses strive to maintain or achieve a competitive edge.
Key takeaways:
The Competitive Analysis Matrix allows businesses to quickly assess their market positioning and determine where their competitive strengths lie.
The Competitive Analysis Matrix should have four elements as a bare minimum: grouped feature sets, a holistic view, accurate measurements, and a focus on consumer needs.
The Competitive Analysis Matrix has several limitations, owing to subjective and sometimes dependent attributes and also a lack of publicly available information.
Key Highlights
Purpose and Overview:
The Competitive Analysis Matrix helps businesses assess their competitive position against rivals in an industry.
It provides an overview of the competitive landscape and identifies areas for differentiation.
Structure and Use:
The matrix is essentially a spreadsheet with competitors listed as columns and industry-specific features as rows.
Each competitor is scored for how well they meet each feature, often using a scale from 1 to 5.
Example Scenario:
A budget airline might score high for affordability (5), moderate for customer service (3), and low for in-flight dining (2).
This analysis reveals areas for improvement and differentiation.
Elements of the Matrix:
Grouped Feature Sets: Features are categorized for simplicity, especially in complex industries.
Holistic View: It’s essential to consider attributes affecting the entire customer process, like delivery and support.
Accurate Measurements: Scores are qualitative and not binary (yes/no).
Customer Focus: Assess features based on consumer needs, not simply replicating competitors’ offerings.
Disadvantages:
Subjective Scores: Scores are assigned subjectively, potentially leading to inaccuracies.
Incomplete Information: Lack of public data can hinder accurate competitor assessment.
Dependent Attributes: Improving one aspect may weaken another if not carefully balanced.
Related Frameworks
Definition
Focus
Application
Competitive Analysis Matrix
A structured framework used to compare and evaluate the strengths and weaknesses of a company’s products, services, or strategies against those of its competitors. The matrix typically includes factors such as pricing, product features, market share, and distribution channels.
Focuses on systematically analyzing the competitive landscape and identifying areas of competitive advantage or vulnerability to inform strategic decision-making and improve market positioning.
A strategic planning tool used to identify Strengths, Weaknesses, Opportunities, and Threats related to a business venture or project. SWOT analysis helps organizations assess internal capabilities and external factors to formulate strategies and make informed decisions.
Focuses on analyzing internal strengths and weaknesses and external opportunities and threats to develop strategies that leverage strengths, mitigate weaknesses, capitalize on opportunities, and address threats effectively.
Strategic Planning, Business Analysis, Decision-making
Porter’s Five Forces
A framework developed by Michael Porter to analyze the competitive forces within an industry. Porter identified five forces: Threat of New Entrants, Bargaining Power of Buyers, Bargaining Power of Suppliers, Threat of Substitute Products, and Intensity of Competitive Rivalry.
Focuses on assessing the competitive dynamics and attractiveness of an industry by analyzing the forces that shape competition, helping organizations understand their competitive position and formulate strategies for sustainable competitive advantage.
Industry Analysis, Competitive Strategy, Market Positioning
Value Chain Analysis
A strategic analysis framework that examines the activities and processes within a company’s value chain to identify sources of competitive advantage and opportunities for cost reduction or differentiation. Value chain analysis categorizes activities as primary or support functions.
Focuses on understanding the sequence of activities and processes involved in delivering value to customers, identifying areas for optimization, cost reduction, or value enhancement to strengthen the company’s competitive position.
Strategic Planning, Process Optimization, Cost Management
Growth-Share Matrix (BCG Matrix)
A portfolio analysis tool used to evaluate strategic business units (SBUs) or product lines based on their market growth rate and relative market share. The BCG matrix categorizes SBUs into four quadrants: Stars, Cash Cows, Question Marks, and Dogs, guiding resource allocation and strategic decision-making.
Focuses on managing a diversified portfolio of products or SBUs by categorizing them based on market growth rate and relative market share, helping organizations prioritize investments and allocate resources effectively.
A strategic analysis framework that compares a company’s value proposition against that of its competitors by mapping key value drivers across various dimensions such as price, features, and customer experience. The value curve model helps identify opportunities for differentiation and innovation.
Focuses on understanding the unique value proposition of a company and its competitors, visualizing competitive positioning, and identifying areas for value creation or differentiation to enhance market competitiveness.
A strategic planning approach that emphasizes creating uncontested market space by innovating and offering unique value propositions. Blue ocean strategy focuses on simultaneously reducing costs and increasing value for customers to create new demand and unlock new market opportunities.
Focuses on identifying and tapping into new market spaces with limited competition, allowing companies to differentiate themselves and capture uncontested market share, driving sustainable growth and profitability.
A strategic tool used to analyze and understand the external macro-environmental factors that impact an organization or market. PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental factors, providing insights into the broader context of business operations.
Focuses on identifying and evaluating external factors and trends in the business environment to anticipate opportunities, threats, and regulatory challenges, guiding strategic planning and decision-making.
Begin by identifying and listing the competitors that you want to assess and compare. These are companies operating in the same market or industry as your organization.
– Competitors in the fast-food industry: Company A, Company B, Company C. – Competitors in the software industry: Competitor X, Competitor Y, Competitor Z.
2. Define Evaluation Criteria
Determine the criteria or factors that you will use to assess and compare your organization and its competitors. These criteria can include financial performance, product quality, market share, customer satisfaction, etc.
– Evaluation criteria for fast-food chains: Revenue, market share, customer reviews, menu variety. – Evaluation criteria for software companies: Revenue growth, product features, customer support, innovation.
3. Rate Your Organization
Assess and rate your organization’s performance for each of the defined evaluation criteria. Use a predefined scale (e.g., 1 to 5) to indicate how well your organization performs in each area.
– Your organization’s revenue: 4, market share: 3, customer reviews: 4, menu variety: 5. – Your organization’s revenue growth: 4, product features: 5, customer support: 4, innovation: 4.
4. Rate Competitors
Assign ratings or scores to each competitor for each of the defined evaluation criteria. Gather data and information to assess how well each competitor performs in comparison to your organization.
Calculate the total score for each organization (including your own) by summing the scores assigned to them across all evaluation criteria. The total score reflects the overall competitive performance.
– Your organization’s total score: Sum of ratings for all criteria. – Competitor A’s total score: Sum of ratings for all criteria.
6. Analyze Competitive Position
Analyze the total scores and competitive positions of your organization and its competitors. Identify areas of strength and weakness relative to the evaluation criteria.
– Your organization’s total score: Total competitive position. – Competitor A’s total score: Competitive position relative to your organization.
7. Develop Strategies
Develop strategic recommendations based on the analysis of competitive positions. Strategies may involve leveraging strengths, addressing weaknesses, and adapting to changes in the competitive landscape.
– If your organization’s total score is higher than competitors, focus on maintaining and strengthening existing strengths. – If a competitor has a higher total score in certain areas, develop strategies to improve your organization’s performance in those areas.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
