The aim of conducting a competitive analysis is to gain an in-dept understanding of your competitive landscape. It helps you to reveal trends in the marketplace and determines where you stand compared to your peers.
We know that a thorough competitive analysis is not done in one day, and that it is an ongoing process to keep up with the new developments. But how do you make sure to take action on your findings, instead of spending hours on gathering data from annual reports and international websites?
In this blog we have selected three crucial moments to get the most out of your competitive landscape analysis, with details on which metrics to look at. After reading this blog you will be able to spot the best moments for a competitive analysis and where you should focus on when conducting your analysis.
What are the benefits of conducting a competitive analysis?
Competitive research is not just about comparing yourself against your peers. It comes with many more benefits:
- A better overall understanding of the market
- Identify opportunities and threats in the marketplace
- Knowledge of competitor revenues and profitability to keep your offering profitable
- Identify new and emerging trends in the market
- Inspire new ideas
- Helps you to set yourself apart from your competition
When to use a competitive analysis?
It can be particularly beneficial to carry out thorough competitive research at key stages during the year. We have selected three moments in which we see that companies benefit the most from the insights from competitive analyses.
Budget review & planning
You steadily show growing numbers year after year. That calls for a celebration, right? But what if it turns out that your key competitors show way bigger growth. Before setting a new budget, you need to know what you are up against to stay competitive. These are two metrics to pay extra attention to:
- % Net Sales Growth: you want to know how your net sales developed over a period of time. And also, how did your key competitors develop?
- %EBIT or %EBITDA: both metrics will show you if you are profitable enough. EBITDA also deducts depreciation & amortization. This is often preferred when comparing companies with a large number of fixed assets.
Knowing these numbers, you will be able to set a goal that is both ambitious and realistic.
With prices rising, a solid procurement strategy gets more and more important. Analyzing your suppliers or clients straightens your position during the negotiations. These metrics will help you to show up best prepared:
- %EBIT or %EBITDA: check the profit margins to better understand how your margins relate to that of your supplier or buyer.
- Solvency and quick ratio: these metrics help you to understand the financial position of your supplier or buyer. How solid is their financial health long-term and what is the proportion of their current liabilities?
- Investments: looking at investments helps you to understand if a supplier or buyer is innovative enough to keep up with your standards.
If this is your initial collection of this information, try looking back over the past few years to identify trends.
Spotting M&A opportunities
Stimulating growth, gaining competitive advantage or influencing the supply chain. An in-dept analysis of your competitive landscape can help you find the best fit for your company. Spot new opportunities with these metrics:
- Net Sales: helps you understand the size of a company you are potential interested in.
- %EBIT or %EBITDA (profit margins): shows you if your possible target is profitable enough.
- Investments: understanding if a target is innovative enough, can tell you if they can keep up with your standards.
Often, looking at data in different ways helps draw better conclusions and explain your findings to stakeholders with more clarity. While competitor analysis can help you during certain key moments, it is important to keep up with some level of consistent monitoring of competition on an ongoing basis. Especially in uncertain times it helps you to keep a finger on the pulse when it comes to changes and developments within your industry’s marketplace.