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.
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.
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.
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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.
