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.
Understanding the Competitive Analysis Matrix
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.
- 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.
- 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.
- 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.
- 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.
|1. Identify Competitors||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.||– Competitor A’s revenue: 5, market share: 4, customer reviews: 3, menu variety: 4. – Competitor X’s revenue growth: 5, product features: 4, customer support: 3, innovation: 5.|
|5. Calculate Total Scores||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.|
Connected Analysis Frameworks
Related Strategy Concepts: Go-To-Market Strategy, Marketing Strategy, Business Models, Tech Business Models, Jobs-To-Be Done, Design Thinking, Lean Startup Canvas, Value Chain, Value Proposition Canvas, Balanced Scorecard, Business Model Canvas, SWOT Analysis, Growth Hacking, Bundling, Unbundling, Bootstrapping, Venture Capital, Porter’s Five Forces, Porter’s Generic Strategies, Porter’s Five Forces, PESTEL Analysis, SWOT, Porter’s Diamond Model, Ansoff, Technology Adoption Curve, TOWS, SOAR, Balanced Scorecard, OKR, Agile Methodology, Value Proposition, VTDF Framework, BCG Matrix, GE McKinsey Matrix, Kotter’s 8-Step Change Model.