competitive edge in business plan example

How to Write a Competitive Analysis for Your Business Plan

11 min. read

Updated January 3, 2024

Do you know who your competitors are? If you do, have you taken the time to conduct a thorough competitor analysis?

Knowing your competitors, how they operate, and the necessary benchmarks you need to hit are crucial to positioning your business for success. Investors will also want to see an analysis of the competition in your business plan.

In this guide, we’ll explore the significance of competitive analysis and guide you through the essential steps to conduct and write your own. 

You’ll learn how to identify and evaluate competitors to better understand the opportunities and threats to your business. And you’ll be given a four-step process to describe and visualize how your business fits within the competitive landscape.

• What is a competitive analysis?

A competitive analysis is the process of gathering information about your competitors and using it to identify their strengths and weaknesses. This information can then be used to develop strategies to improve your own business and gain a competitive advantage.

• How to conduct a competitive analysis

Before you start writing about the competition, you need to conduct your analysis. Here are the steps you need to take:

1. Identify your competitors

The first step in conducting a comprehensive competitive analysis is to identify your competitors. 

Start by creating a list of both direct and indirect competitors within your industry or market segment. Direct competitors offer similar products or services, while indirect competitors solve the same problems your company does, but with different products or services.

Keep in mind that this list may change over time. It’s crucial to revisit it regularly to keep track of any new entrants or changes to your current competitors. For instance, a new competitor may enter the market, or an existing competitor may change their product offerings.

2. Analyze the market

Once you’ve identified your competitors, you need to study the overall market. 

This includes the market size , growth rate, trends, and customer preferences. Be sure that you understand the key drivers of demand, demographic and psychographic profiles of your target audience , and any potential market gaps or opportunities.

Conducting a market analysis can require a significant amount of research and data collection. Luckily, if you’re writing a business plan you’ll follow this process to complete the market analysis section . So, doing this research has value for multiple parts of your plan.

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3. Create a competitive framework

You’ll need to establish criteria for comparing your business with competitors. You want the metrics and information you choose to provide answers to specific questions. (“Do we have the same customers?” “What features are offered?” “How many customers are being served?”)

Here are some common factors to consider including: 

• Market share
• Product/service offerings or features
• Distribution channels
• Target markets
• Marketing strategies
• Customer service

4. Research your competitors

You can now begin gathering information about your competitors. Because you spent the time to explore the market and set up a comparison framework—your research will be far more focused and easier to complete.

There’s no perfect research process, so start by exploring sources such as competitor websites, social media, customer reviews, industry reports, press releases, and public financial statements. You may also want to conduct primary research by interviewing customers, suppliers, or industry experts.

You can check out our full guide on conducting market research for more specific steps.

5. Assess their strengths and weaknesses

Evaluate each competitor based on the criteria you’ve established in the competitive framework. Identify their key strengths (competitive advantages) and weaknesses (areas where they underperform).

6. Identify opportunities and threats

Based on the strengths and weaknesses of your competitors, identify opportunities (areas where you can outperform them) and threats (areas where they may outperform you) for your business. 

You can check out our full guide to conducting a SWOT analysis for more specific questions that you should ask as part of each step. 

• How to write your competitive analysis

Once you’ve done your research, it’s time to present your findings in your business plan. Here are the steps you need to take:

1. Determine who your audience is

Who you are writing a business plan for (investors, partners, employees, etc.) may require you to format your competitive analysis differently. 

For an internal business plan you’ll use with your team, the competition section should help them better understand the competition. You and your team will use it to look at comparative strengths and weaknesses to help you develop strategies to gain a competitive advantage.

For fundraising, your plan will be shared with potential investors or as part of a bank loan. In this case, you’re describing the competition to reassure your target reader. You are showing awareness and a firm understanding of the competition, and are positioned to take advantage of opportunities while avoiding the pitfalls.

2. Describe your competitive position

You need to know how your business stacks up, based on the values it offers to your chosen target market. To run this comparison, you’ll be using the same criteria from the competitive framework you completed earlier. You need to identify your competitive advantages and weaknesses, and any areas where you can improve.

The goal is positioning (setting your business up against the background of other offerings), and making that position clear to the target market. Here are a few questions to ask yourself in order to define your competitive position:

• How are you going to take advantage of your distinctive differences, in your customers’ eyes? 
• What are you doing better? 
• How do you work toward strengths and away from weaknesses?
• What do you want the world to think and say about you and how you compare to others?

3. Visualize your competitive position

There are a few different ways to present your competitive framework in your business plan. The first is a “positioning map” and the second is a “competitive matrix”. Depending on your needs, you can use one or both of these to communicate the information that you gathered during your competitive analysis:

Positioning map

The positioning map plots two product or business benefits across a horizontal and vertical axis. The furthest points of each represent opposite extremes (Hot and cold for example) that intersect in the middle. With this simple chart, you can drop your own business and the competition into the zone that best represents the combination of both factors.

I often refer to marketing expert Philip Kohler’s simple strategic positioning map of breakfast, shown here. You can easily draw your own map with any two factors of competition to see how a market stacks up.

It’s quite common to see the price on one axis and some important qualitative factor on the other, with the assumption that there should be a rough relationship between price and quality.

Competitive matrix

It’s pretty common for most business plans to also include a competitive matrix. It shows how different competitors stack up according to the factors identified in your competitive framework. 

How do you stack up against the others? Here’s what a typical competitive matrix looks like:

For the record, I’ve seen dozens of competitive matrices in plans and pitches. I’ve never seen a single one that didn’t show that this company does more of what the market wants than all others. So maybe that tells you something about credibility and how to increase it. Still, the ones I see are all in the context of seeking investment, so maybe that’s the nature of the game.

4. Explain your strategies for gaining a competitive edge

Your business plan should also explain the strategies your business will use to capitalize on the opportunities you’ve identified while mitigating any threats from competition. This may involve improving your product/service offerings, targeting underserved market segments, offering more attractive price points, focusing on better customer service, or developing innovative marketing strategies.

While you should cover these strategies in the competition section, this information should be expanded on further in other areas of your business plan. 

For example, based on your competitive analysis you show that most competitors have the same feature set. As part of your strategy, you see a few obvious ways to better serve your target market with additional product features. This information should be referenced within your products and services section to back up your problem and solution statement. 

• Why competition is a good thing

Business owners often wish that they had no competition. They think that with no competition, the entire market for their product or service will be theirs. That is simply not the case—especially for new startups that have truly innovative products and services. Here’s why:

Competition validates your idea

You know you have a good idea when other people are coming up with similar products or services. Competition validates the market and the fact that there are most likely customers for your new product. This also means that the costs of marketing and educating your market go down (see my next point).

Competition helps educate your target market

Being first-to-market can be a huge advantage. It also means that you will have to spend way more than the next player to educate customers about your new widget, your new solution to a problem, and your new approach to services. 

This is especially true for businesses that are extremely innovative. These first-to-market businesses will be facing customers that didn’t know that there was a solution to their problem . These potential customers might not even know that they have a problem that can be solved in a better way. 

If you’re a first-to-market company, you will have an uphill battle to educate consumers—an often expensive and time-consuming process. The 2nd-to-market will enjoy all the benefits of an educated marketplace without the large marketing expense.

Competition pushes you

Businesses that have little or no competition become stagnant. Customers have few alternatives to choose from, so there is no incentive to innovate. Constant competition ensures that your marketplace continues to evolve and that your product offering continues to evolve with it.

Competition forces focus & differentiation

Without competition, it’s easy to lose focus on your core business and your core customers and start expanding into areas that don’t serve your best customers. Competition forces you and your business to figure out how to be different than your competition while focusing on your customers. In the long term, competition will help you build a better business.

• What if there is no competition?

One mistake many new businesses make is thinking that just because nobody else is doing exactly what they’re doing, their business is a sure thing. If you’re struggling to find competitors, ask yourself these questions.

Is there a good reason why no one else is doing it?

The smart thing to do is ask yourself,  “Why isn’t anyone else doing it?”

It’s possible that nobody’s selling cod-liver frozen yogurt in your area because there’s simply no market for it. Ask around, talk to people, and do your market research. If you determine that you’ve got customers out there, you’re in good shape.

But that still doesn’t mean there’s no competition.

How are customers getting their needs met?

There may not be another cod-liver frozen yogurt shop within 500 miles. But maybe an online distributor sells cod-liver oil to do-it-yourselfers who make their own fro-yo at home. Or maybe your potential customers are eating frozen salmon pops right now. 

Are there any businesses that are indirect competitors?

Don’t think of competition as only other businesses that do exactly what you do. Think about what currently exists on the market that your product would displace.

It’s the difference between direct competition and indirect competition. When Henry Ford started successfully mass-producing automobiles in the U.S., he didn’t have other automakers to compete with. His competition was horse-and-buggy makers, bicycles, and railroads.

Do a competitive analysis, but don’t let it derail your planning

While it’s important that you know the competition, don’t get too caught up in the research. 

If all you do is track your competition and do endless competitive analyses, you won’t be able to come up with original ideas. You will end up looking and acting just like your competition. Instead, make a habit of NOT visiting your competition’s website, NOT going into their store, and NOT calling their sales office. 

Focus instead on how you can provide the best service possible and spend your time talking to your customers. Figure out how you can better serve the next person that walks in the door so that they become a lifetime customer, a reference, or a referral source.

If you focus too much on the competition, you will become a copycat. When that happens, it won’t matter to a customer if they walk into your store or the competition’s because you will both be the same.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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• How to create a competitive analysis (w ...

How to create a competitive analysis (with examples)

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. In this guide, we’ll outline how to do a competitive analysis and explain how you can use this marketing strategy to improve your business.

Whether you’re running a business or playing in a football game, understanding your competition is crucial for success. While you may not be scoring touchdowns in the office, your goal is to score business deals with clients or win customers with your products. The method of preparation for athletes and business owners is similar—once you understand your strengths and weaknesses versus your competitors’, you can level up. 

What is a competitive analysis?

Competitive analysis involves identifying your direct and indirect competitors using research to reveal their strengths and weaknesses in relation to your own. 

Direct competitors market the same product to the same audience as you, while indirect competitors market the same product to a different audience. After identifying your competitors, you can use the information you gather to see where you stand in the market landscape. 

What to include in a competitive analysis

The purpose of this type of analysis is to get a competitive advantage in the market and improve your business strategy. Without a competitive analysis, it’s difficult to know what others are doing to win clients or customers in your target market. A competitive analysis report may include:

A description of your company’s target market

Details about your product or service versus the competitors’

Current and projected market share, sales, and revenues

Pricing comparison

Marketing and social media strategy analysis

Differences in customer ratings

You’ll compare each detail of your product or service versus the competition to assess strategy efficacy. By comparing success metrics across companies, you can make data-driven decisions.

How to do a competitive analysis

Follow these five steps to create your competitive analysis report and get a broad view of where you fit in the market. This process can help you analyze a handful of competitors at one time and better approach your target customers.

1. Create a competitor overview

In step one, select between five and 10 competitors to compare against your company. The competitors you choose should have similar product or service offerings and a similar business model to you. You should also choose a mix of both direct and indirect competitors so you can see how new markets might affect your company. Choosing both startup and seasoned competitors will further diversify your analysis.

Tip: To find competitors in your industry, use Google or Amazon to search for your product or service. The top results that emerge are likely your competitors. If you’re a startup or you serve a niche market, you may need to dive deeper into the rankings to find your direct competitors.

2. Conduct market research

Once you know the competitors you want to analyze, you’ll begin in-depth market research. This will be a mixture of primary and secondary research. Primary research comes directly from customers or the product itself, while secondary research is information that’s already compiled. Then, keep track of the data you collect in a user research template .

Primary market research may include: 

Purchasing competitors’ products or services

Interviewing customers

Conducting online surveys of customers 

Holding in-person focus groups

Secondary market research may include:

Examining competitors’ websites

Assessing the current economic situation

Identifying technological developments 

Reading company records

Tip: Search engine analysis tools like Ahrefs and SEMrush can help you examine competitors’ websites and obtain crucial SEO information such as the keywords they’re targeting, the number of backlinks they have, and the overall health of their website. 

3. Compare product features

The next step in your analysis involves a comparison of your product to your competitors’ products. This comparison should break down the products feature by feature. While every product has its own unique features, most products will likely include:

Service offered

Age of audience served

Number of features

Style and design

Ease of use

Type and number of warranties

Customer support offered

Product quality

Tip: If your features table gets too long, abbreviate this step by listing the features you believe are of most importance to your analysis. Important features may include cost, product benefits, and ease of use.

4. Compare product marketing

The next step in your analysis will look similar to the one before, except you’ll compare the marketing efforts of your competitors instead of the product features. Unlike the product features matrix you created, you’ll need to go deeper to unveil each company’s marketing plan . 

Areas you’ll want to analyze include:

Social media

Website copy

Press releases

Product copy

As you analyze the above, ask questions to dig deeper into each company’s marketing strategies. The questions you should ask will vary by industry, but may include:

What story are they trying to tell?

What value do they bring to their customers?

What’s their company mission?

What’s their brand voice?

Tip: You can identify your competitors’ target demographic in this step by referencing their customer base, either from their website or from testimonials. This information can help you build customer personas. When you can picture who your competitor actively targets, you can better understand their marketing tactics. 

5. Use a SWOT analysis

Competitive intelligence will make up a significant part of your competitor analysis framework, but once you’ve gathered your information, you can turn the focus back to your company. A SWOT analysis helps you identify your company’s strengths and weaknesses. It also helps turn weaknesses into opportunities and assess threats you face based on your competition.

During a SWOT analysis, ask yourself:

What do we do well?

What could we improve?

Are there market gaps in our services?

What new market trends are on the horizon?

Tip: Your research from the previous steps in the competitive analysis will help you answer these questions and fill in your SWOT analysis. You can visually present your findings in a SWOT matrix, which is a four-box chart divided by category.

6. Identify your place in the market landscape

The last step in your competitive analysis is to understand where you stand in the market landscape. To do this, you’ll create a graph with an X and Y axis. The two axes should represent the most important factors for being competitive in your market. 

For example, the X-axis may represent customer satisfaction, while the Y-axis may represent presence in the market. You’ll then plot each competitor on the graph according to their (x,y) coordinates. You’ll also plot your company on this chart, which will give you an idea of where you stand in relation to your competitors. 

This graph is included for informational purposes and does not represent Asana’s market landscape or any specific industry’s market landscape. 

Tip: In this example, you’ll see three companies that have a greater market presence and greater customer satisfaction than yours, while two companies have a similar market presence but higher customer satisfaction. This data should jumpstart the problem-solving process because you now know which competitors are the biggest threats and you can see where you fall short. 

Competitive analysis example

Imagine you work at a marketing startup that provides SEO for dentists, which is a niche industry and only has a few competitors. You decide to conduct a market analysis for your business. To do so, you would:

Step 1: Use Google to compile a list of your competitors. 

Steps 2, 3, and 4: Use your competitors’ websites, as well as SEO analysis tools like Ahrefs, to deep-dive into the service offerings and marketing strategies of each company. 

Step 5: Focusing back on your own company, you conduct a SWOT analysis to assess your own strategic goals and get a visual of your strengths and weaknesses. 

Step 6: Finally, you create a graph of the market landscape and conclude that there are two companies beating your company in customer satisfaction and market presence. 

After compiling this information into a table like the one below, you consider a unique strategy. To beat out your competitors, you can use localization. Instead of marketing to dentists nationwide like your competitors are doing, you decide to focus your marketing strategy on one region, state, or city. Once you’ve become the known SEO company for dentists in that city, you’ll branch out. 

You won’t know what conclusions you can draw from your competitive analysis until you do the work and see the results. Whether you decide on a new pricing strategy, a way to level up your marketing, or a revamp of your product, understanding your competition can provide significant insight.

Drawbacks of competitive analysis

There are some drawbacks to competitive analysis you should consider before moving forward with your report. While these drawbacks are minor, understanding them can make you an even better manager or business owner. 

Don’t forget to take action

You don’t just want to gather the information from your competitive analysis—you also want to take action on that information. The data itself will only show you where you fit into the market landscape. The key to competitive analysis is using it to problem solve and improve your company’s strategic plan .

Be wary of confirmation bias

Confirmation bias means interpreting information based on the beliefs you already hold. This is bad because it can cause you to hold on to false beliefs. To avoid bias, you should rely on all the data available to back up your decisions. In the example above, the business owner may believe they’re the best in the SEO dental market at social media. Because of this belief, when they do market research for social media, they may only collect enough information to confirm their own bias—even if their competitors are statistically better at social media. However, if they were to rely on all the data available, they could eliminate this bias.

Update your analysis regularly

A competitive analysis report represents a snapshot of the market landscape as it currently stands. This report can help you gain enough information to make changes to your company, but you shouldn’t refer to the document again unless you update the information regularly. Market trends are always changing, and although it’s tedious to update your report, doing so will ensure you get accurate insight into your competitors at all times. 

Boost your marketing strategy with competitive analysis

Learning your competitors’ strengths and weaknesses will make you a better marketer. If you don’t know the competition you’re up against, you can’t beat them. Using competitive analysis can boost your marketing strategy and allow you to capture your target audience faster.

Competitive analysis must lead to action, which means following up on your findings with clear business goals and a strong business plan. Once you do your competitive analysis, you can use the templates below to put your plan into action.

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What is competitive advantage? Strategy with examples

Creating a competitive advantage is a long process, starting from the very beginning of forming the company’s culture, mission, and vision. You can likely see the advantages you can create while you are creating the company’s mission, aka the summary of why your company/product exists, which customer problem you aim to solve, and your overall goal.

At the end of the day everything is defined for creating customer value, which generates profit for the business 🤑

The role of a competitive advantage is then to make sure that you are creating and delivering the customer value as you planned.

In this article, we will learn the story of competitive advantage. We will understand the process to analyze our product and market, how we can state our strategy inside the market, and how we can test our options. By the end, we will learn how to sustain a competitive advantage with best practices and real-life examples.

What do we mean by competitive advantage?

Competitive advantage is the capability you have over competitors to create value for customers. The advantage creation process starts from the mission, which usually coincides with the inception of the company in the first place:

The strategy of your company may be different, but each decision you make and feature you define aims to achieve a competitive advantage. If I still can’t emphasize how important competitive advantage is, think about it like this: every goal we want to achieve in our daily lives as product manager serves to create a competitive advantage.

You can say you achieved a competitive advantage if:

• You are offering something different than your competitors
• Your company’s strategy is different than other companies
• You can create more economic value with your product than your competitors

As product managers, our role requires us to carry the company’s mission and objectives into our product. To do this, we have to analyze the market, external competitors, our product, and internal company capabilities. According to our analysis, we create options and select our strategy.

The type of choices we make shapes our goals and how we want to compete with our rivals. The decision we make puts our product into one of two categories and helps shape our competitive advantage:

• Niche product
• Cost advantage product

1. Niche product

When you have a niche product, users prefer your product because it creates a unique output — something they can’t get elsewhere. Users will often pay extra for this.

I love to provide Apple examples in these cases. Apple products offer you premium features and users don’t mind paying the required amount. Think of new iPhones or Mac laptops — the experience they provide isn’t easily replicated by competitors. With a niche product, however, don’t forget there is always a risk of being copied. The challenge for this method is protecting your uniqueness.

To continue with modern examples, think of how Instagram creates a unique platform for sharing photos, the same way that Twitter does with small posts and that Facebook does for longer posts and videos.

When we think of a niche product, I can’t skip the classic example of Coca-Cola. With its unique recipe, no one has been able to replicate or get close to it.

2. Cost advantage product

While making the product, your company should have a production or distribution advantage over rivals. With a cost advantage, you can sell your products at competitive prices.

We can think of big brands for this — because of their high production amounts, they catch a cost advantage opportunity. Walmart can be one of the best examples of this strategy. They offer very low prices and for that reason, people choose to shop there over other stores.

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How to identify and analyze your product’s competitive advantage

Competitive advantage can only be created after a strategic management process. As product managers, we identify the differentiator points and amplify them to create a competitive advantage:

The decision we will make will be between the type of advantage we seek and the target market. I recommend you start with your target market.

If you still haven’t read Start with Why: How Great Leaders Inspire Everyone to Take Action by Simon Sinek, I recommend that you start asking why 🧐 For example, why will users pay for your product and why you are producing this product in the first place?

The second big decision is what kind of an advantage you seek. This is the time to bring your analysis and every input you have to the table. Lower cost or differentiation has its levels like in the picture above. You don’t have to focus on a pure version of these, though, you can mix the customer need and market situation and create an in-between.

As we discussed earlier, to be able to create a competitive advantage, you should select one of the strategies from your analysis. How can you decide which strategy is the best? Your winner which will become your advantage should pass at least three tests:

• The fit test
• The competitive advantage test
• The performance test

1. The fit test

For the first test, we go over the company’s vision, mission, objectives, and company structure. We may know the problem, but our approach to solving it should fit our company culture and internal dynamics. We search for the best fit according to our internal and external analysis.

2. The competitive advantage test

You may find a good competitive advantage, but it is not enough if you can’t sustain it . We mentioned finding an advantage, but now we will test if it is likely to sustain our strategy (like Coca-Cola).

The competitive advantage can be easy to imitate and we may only have a first-mover advantage . This option has a risk if you are investing more and competitors will be able to access the technology behind your product easily. They may even beat you with lower-cost strategies. For these reasons, you should have a good plan to sustain the advantage you created.

3. The performance test

Performance is the profit you will generate with this advantage. At the end of the day, we are seeking profit and the higher value advantage will most likely be our winner. You need to create a value proposition model for each option.

Additionally, you should check the product’s performance, strengths, and the market around it. Use product metrics to see how it’s doing. The performance of the product can be determined with all of those components.

What does it mean to have a sustainable competitive advantage?

In the competitive advantage test, we are checking if the strategy is sustainable or not. Do not worry if you think your advantage will be imitated by your rivals. Most competitive advantages are brilliant ideas and most of them will be copied in a way. Your rivals will find a way to offer a better solution by using your idea.

Sustainable competitive advantage means you earn high profits with this strategy and the money keeps coming in the long term. However, as you can imagine, the more profit you get, the more competition you will create. And that’s not all, this competition will decrease your sustainability in most cases.

If you succeed in creating an advantage that’s hard to imitate and competitors are unable to find your source, you can say that you have a sustainable advantage. In some product markets, competitors may not imitate your product directly — they may offer a better solution and attract your customers. This example can be seen mostly in the service industry.

Coca-Cola has a sustained product strategy as they kept their formula impossible to imitate. They’ve updated their recipe but still have never had a competitor that copied their recipe or flavor exactly. There are other components supporting this success, such as marketing and sales teams.

When you create a good strategy and opportunity, sustaining the success can be done through all sources of the company. However, do not forget that even sustainable competitive advantages may expire in time.

How to strengthen your product’s competitive advantage over time

As a product manager, finding our own (as well as our competitors’) product strengths and weaknesses is our main duty. However, creating a competitive advantage requires a good strategy. You need a strategy to succeed.

What makes a good product manager is the agile modifications in your strategy over time. If you are persistent to continue in the same strategy, know that your advantage is going to go away.

The below list is variables that you need to be aware of to avoid being beaten by your rivals:

• Following the needs shift in the market conditions
• Using the latest technology
• Following the trends and market opportunities
• Knowing every move your competitors take
• Knowing customer needs and changing tastes
• Creating continuous ideas for the product and the strategy improvement

Time is crucial for even the best things. When the time comes, you should be able to point out the elements or strategies that should be abandoned. A product’s strategy includes everything from abandoned features, new planned initiatives, ongoing strategy, and new elements to adapt to changing circumstances.

The company’s strategy acts as a roadmap to our competitive advantage, along with the long-term plan to beat competitors in the market. And to be able to call yourself a good product manager, you should have a good strategy and good execution capability.

As the product manager, you should be able to address the solutions to possible obstacles the company may face. You should have the answers below for long-term success:

• How can we beat our new rivals?
• How can we sustain product growth if our user count decreases?
• How can we adapt if our customer base changes?
• Should we reduce costs and compete using discounting?
• Should we partner with a rival that has a capability we don’t have?
• Should we expand our business into different countries/demographics?
• Should we find new product lines or substitute products?

This continuous questioning process will help you to maintain and strengthen your product’s competitive advantage.

Best practices for leveraging competitive advantage in product development

There are a few practices and tools to help you land your competitive advantage through research and market analysis, including value chain analysis, SWOT analysis, and weighted competitive strength assessment.

Value chain analysis

Product value chain analysis is an effective method to convert your company’s activities into a competitive advantage. This method helps companies understand their own processes better and, with the help of that knowledge, create an awareness of the company’s strengths.

Analysis starts with dividing a company’s process into primary and secondary activities. Primary activities show us what to focus more on the processes that create higher costs and analyze more to decrease them. Primary activities are most likely competitive advantages that we have over our rivals. Secondary activities show us the unnecessary processes so that we can eliminate them to create a cost advantage.

SWOT analysis

Strength, weaknesses, opportunities, and threats are the key elements of this analysis. You can use SWOT analysis to find your company’s competitive advantage options:

• Strengths — Internal strengths are the basis for our strategies
• Weaknesses — Internal weaknesses are our deficient capabilities
• Opportunities — Market opportunities are our objectives that will become the strategy
• Threats — External threats help us create defensive points in our strategies

SWOT helps you to find a new strategy or recommend a new strategic action. You will have the opportunity to use your strengths while you are seizing opportunities and preventing external threats. The created strategic actions will strengthen your competitive advantage or create a shiny new one.

Weighted competitive strength assessment

Weighted competitive strength assessment is different from the other methods and helps decide which strategy to use, rather than helping find options. Each possible competitive advantage gets scored and the one with the most points dictates which creates the most value and helps us beat rivals.

To do this, follow the steps below:

• Prepare a SWOT analysis or make a list of the competitive strengths and weaknesses
• Prepare the market’s key success factors and assign importance and weight to each strength
• Add your competitors to the list and add scores on each competitive strength for all of them
• Multiply the scores with importance weight and sum the weighted strength for each competitor. The overall measure will be the competitive strength of each competitor
• Analyze the result ratings and create a concussion document
• List the competitive advantages and disadvantages of the company
• Create a strengths and weaknesses list for future strategy processes

The company with a higher weighted score will have an overall advantage within the market. The scores will help you to decide what strategy will be better for you and which will not.

Examples of products with strong competitive advantages and how they achieved them

We earlier talked about Coca-Cola and its competitive advantage. The formula of their drink is not their only competitive strength, however. They also have big, successful marketing strategies that help them to achieve being a market leader.

The Coca-Cola happiness machine and Christmas balloons can be some examples. These kinds of marketing campaigns are called guerilla marketing. The purpose is to increase market share with hit-and-run techniques. It may be a big risk for such a big company but reaps a big reward for its strategy. Coca-Cola takes these kinds of risks and collects the rewards.

Another example is WeChat in China, which created a blue ocean strategy with a next-generation product. Their mobile payment application was using QR codes on smartphones. This strategy is called first-to-market or leapfrogging. They found an opportunity and turned it into a competitive advantage. First movers always have the biggest share in the market so they have a strong competitive advantage.

Another strategy to keep your competitive advantage is an investment in R&D. Technology companies are in a red ocean, and to be able to keep their market share, they should be constantly on alert. Apple’s strongest advantage is its continuous product innovation. They are beating their less-innovative rivals with this advantage and increasing their sales and market share.

Google invested $6.8 billion in 2012 to keep its market share and acquisitions. When other companies gain an advantage, they acquire a competitor company into their organization. They have been acquiring new companies since 2010, such as YouTube, DoubleClick, and Waze. There are hundreds of companies they have done this with and the number continues to increase.

Timing is important for strategic moves and competitive strategies. Sometimes, when to make a move can be more challenging than creating new competitive advantages.

I know I said that being a first-mover has a great effect on creating a strong competitive advantage, but there is no guarantee of success in any market. There are always risks when implementing something new.

Let’s do our best to check the data, and know the product and market. Additionally, we should be careful to only implement strategies that are compatible with our company culture. No need to force our team members to do something different than they believe in. After you implement everything I recommended, I can only send my best wishes to you while waiting for your product to become successful 🫶

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7 Competitive Advantage Examples for Business Success

Julia McCoy

Imagine stepping into a ring where everyone’s fighting to be number one. That’s the business world for you, and having a competitive advantage is like knowing a secret move that puts you ahead of the others. But what are your competitive advantages?

We’re about to explore the different types of competitive advantage in business and how companies shine by reducing expenses smartly and offering distinctive value that makes them the preferable choice of consumers.

We’re talking real-world competitive advantage examples where companies have turned the tables in their favor using these strategies.

Additionally, we’ll delve into the significance of embracing innovation and adjusting to worldwide shifts, vital for maintaining a competitive advantage.

So buckle up; it’s time to learn how to stay ahead in the game.

Table Of Contents:

What is a competitive advantage, cost leadership, product differentiation, strong brand, technological superiority, access to capital, what is competitive advantage and example, what is an example of a company with a competitive advantage, what is chick-fil-a’s competitive advantage.

Competitive advantage refers to unique attributes or capabilities that allow a business to outshine its competitors, attract more customers, and achieve higher profitability. These advantages are essential for businesses aiming to establish themselves as leaders in their respective markets.

A company’s competitive edge might stem from various sources such as innovative technology, exceptional customer service, or even a strategic geographic location.

Competitive advantage definition from  Investopedia

Types of Competitive Advantage

Michael Porter , a world-renowned authority on business competitiveness, identified three fundamental strategies that companies can adopt to secure enduring advantages. These strategies are cost leadership , differentiation , and focus .

Cost leadership is all about making and selling stuff that’s cheaper than the other guys.

Differentiation is about creating products that truly stand out from the crowd.

Focus is where you hone in on specific market segments and offer them something unique and tailored to their needs.

Let’s break down these three competitive advantage examples.

In cost leadership, it’s all about becoming the lowest-cost producer in your industry. Think Walmart or IKEA. These industry giants excel in trimming expenses from every angle, while still maintaining a decent level of quality. They buy in bulk, optimize operations, and pass these savings to their customers.

Even smaller enterprises can engage in this approach by focusing on efficiency and expanding their operations as opportunities arise. The key? Streamlining processes and negotiating better deals with suppliers to lower production costs.

Differentiation is when you make your product or service stand out because it has something unique. Apple, with its pioneering gadgets and a brand that epitomizes sophistication and cutting-edge technology, truly excels in carving out a distinctive niche.

There are three types of product differentiation: vertical, horizontal, and mixed.

Vertical differentiation is all about clear-cut advantages like price or quality that set a product apart.

Horizontal differentiation, on the other hand, zooms in on consumer tastes like packaging, flavor, or color.

Mixed differentiation blends both approaches — highlighting a mix of objective and subjective product characteristics.

To nail differentiation, think deeply about what makes your offering special — be it design, features, customer service, or technology — and then shout it from the rooftops (or market it wisely online).

Remember: Different doesn’t always mean better for everyone but it means better for your target audience.

A focus strategy involves targeting a specific niche market rather than trying to appeal to the masses. This could mean specializing in gluten-free baked goods if you’re a bakery or eco-friendly apparel if you’re into fashion retailing.

The beauty of focus strategies lies in understanding and serving your chosen segment so well that competitors simply can’t keep up because they’re spread too thin catering to broader markets.

Warby Parker, by really honing in on the specific desires and necessities of its target audience, has managed to secure a substantial niche despite aggressive rivalry from bigger eyewear corporations.

Gaining an edge over competitors requires not just following one path but often blending these strategies smartly based on changing market dynamics.

Source:  The Balance

Cost leadership, product differentiation, and focus are generic competitive advantages. Porter has also identified three specific types of competitive advantage: strong brand , technological superiority , and access to capital .

For any company, establishing a robust brand is essential. It not only boosts the effectiveness of advertising but also fosters a deeper emotional bond with consumers.

A powerful brand transcends mere logos and names; it’s a community built on ideas, values, and beliefs, evoking inspiration and uniqueness. It’s the go-to choice for consumers, meeting their expectations effortlessly and staying attuned to evolving social and consumer trends.

To build a strong brand, you first need a clear purpose beyond profit-making. This purpose defines why your business exists. Then, you analyze competitors, identify your target audience, and formulate a strategy.

Crafting a compelling brand story follows — communicate your values, vision, and mission.

Next, shape or refine your brand identity with a strong name, recognizable logo, and unique tone of voice.

Consistency is key here — your messaging, storytelling, and promotional efforts should consistently align with your brand’s purpose.

New technology is a fantastic opportunity to revamp business models and streamline operations for better efficiency.

When technological prowess delivers specific perks like automation or data-driven innovations, it becomes a powerful competitive advantage.

Investing in research and development to unveil new products can also capture consumers’ attention and propel a company to the forefront of the digital landscape, setting it apart from rivals.

There’s a myriad of ways to leverage technology for that competitive edge. For instance, using data to understand both customers and employees better can inform strategic decisions. Cloud services enable the storage of vast amounts of data, while artificial intelligence helps with thorough analysis, leading to enhanced efficiency, cost savings, and superior customer experiences.

Apps serve as vital conduits for seamless interactions between a company and its clientele across various platforms.

Cognitive technologies like machine learning and speech recognition streamline processes that once relied on human input.

Furthermore, cybersecurity is crucial in today’s tech-driven world, safeguarding against cyber threats and ensuring the protection of sensitive customer data.

Large companies across various industries, including manufacturing, space exploration, and healthcare, frequently leverage this form of competitive advantage.

Access to capital denotes the availability of funds, equipment, and materials necessary for the production and distribution of goods. It encompasses resources for storage, refunds for defective products, and funding for marketing endeavors.

Small businesses often grapple with challenges in securing capital to launch products or expand sales. Conversely, large enterprises benefit from ample financial resources for advertising, research and development, and infrastructure — positioning them to outpace competitors.

With access to capital, market leaders can effortlessly raise funds and reinvest additional resources to scale production or venture into new markets.

Now, let’s look at real-world competitive advantage examples and explore how renowned companies have pushed their brands to the forefront of their respective industries.

Real-World Competitive Advantage Examples

Discover how industry giants like Amazon, Apple, Walmart, Tesla, Starbucks, Nike, and Netflix have used their competitive advantage to leave market competitors in the dust.

Walmart has become synonymous with savings, but it’s not just about low prices for customers. They achieve this through a relentless focus on efficiency — from logistics to negotiations with suppliers. By prioritizing efficiency, they manage to offer lower prices than their rivals while still keeping their profit margins healthy.

Another factor that turned into Walmart’s competitive edge is its strategic placement of stores in remote areas. By catering to small towns with limited retail options, Walmart effectively monopolized these markets, making it challenging for competitors to establish a foothold. This presence in hard-to-reach locations, coupled with competitive pricing and quality service, solidified Walmart’s dominance in numerous underserved communities.

Walmart’s use of technology for inventory management is especially noteworthy — it uses automation to gain a competitive advantage in the retail space. Automation plays a crucial role in streamlining operations throughout the company’s distribution centers and stores. From product transportation and sorting to packaging and checkout processes, Walmart employs automation technologies to enhance efficiency and customer satisfaction.

Scan-and-go kiosks in stores reduce wait times, while automation in distribution centers, powered by robotics and artificial intelligence, optimizes supply chain processes, ensuring accuracy and speed. Thanks to AI, Walmart shelves are stocked efficiently while avoiding overordering — saving millions annually.

In essence, Walmart’s strategy turns cost-saving into its most potent weapon against competition.

If there’s one company that knows how to stand out, it’s Apple. Their approach? Deliver products so unique that they set the standard for what consumers expect in quality and design.

This isn’t just about having sleek gadgets; Apple backs up its designs with robust ecosystems like iOS and exclusive services such as iTunes and the App Store which lock users into their world seamlessly.

No doubt, Apple’s biggest competitive edge is its strong brand reputation — built over many years of delivering high-quality products with clean, intuitive designs. This brand equity not only distinguishes Apple in the global market but also fosters strong customer loyalty. With consistent brand recognition and a seamless ecosystem of interconnected devices and services, customers often opt for additional Apple products, reinforcing the company’s market dominance.

Technological innovation is the core of Apple’s success, as the company continually pushes boundaries with groundbreaking products like the iPod, MacBook, and iPhone. Through substantial investments in research and development, Apple maintains its position at the forefront of technological advancement, consistently introducing cutting-edge features and functionalities to captivate consumers. In 2022 alone, Apple allocated over $25 billion to R&D, showcasing its unwavering commitment to innovation.

Apple continually reshapes the market landscape, not merely by keeping pace but by establishing new benchmarks in innovation and user experience.

Amazon’s success stems from a multifaceted approach to competitive advantage.

First, the company prioritizes cost leadership — focusing on customer satisfaction over immediate profits.

Recognizing the significance of delivery costs, Amazon pioneered free shipping for purchases exceeding $25, a move that significantly enhanced customer appeal and boosted sales. This strategy was further amplified with the introduction of Amazon Prime, providing expedited two-day delivery for time-sensitive customers.

Amazon also employs product differentiation to stand out in the market. Offering an unparalleled selection of goods, the company serves both buyers and sellers through its expansive marketplace. This broad product assortment caters to diverse consumer needs, ranging from everyday essentials to specialized items, aligning with Amazon’s customer-centric ethos and enhancing service convenience.

Amazon maintains a focus on technological superiority to elevate customer service standards. The platform’s user-friendly interface, coupled with features like enhanced search functionality, personalized suggestions, and one-click ordering, prioritizes ease of use for customers.

Lastly, Amazon extends its technological prowess through its subsidiary AWS, offering cloud computing services to individuals, businesses, and governments to diversify its revenue streams and cement its position as a leader in the tech industry.

Nike’s success in the sports apparel and footwear industry is attributed to its product differentiation and efficient brand management.

Nike boasts unparalleled brand awareness, driven by its iconic swish logo and slogan “Just Do It” which has solidified its status as a household name. Endorsements from high-profile athletes like Michael Jordan and Tiger Woods further amplify Nike’s visibility and resonance with consumers.

Central to Nike’s strategy is a relentless pursuit of innovation, exemplified by its dedicated research division called The Nike Sports Research Lab. Through innovation, Nike continuously expands its product range to cater to diverse demographics, including women, teenagers, and children, ensuring its offerings align with evolving market trends and customer preferences.

Notable innovations like the Nike Fuel Band, which tracks daily activities, and Nike By You, a customization service for footwear and sportswear, enhance customer engagement and foster brand loyalty by offering personalized experiences unmatched by competitors.

Starbucks has become a household name by focusing on product differentiation, emphasizing the quality of its offerings to attract a clientele of middle to upper-class individuals. The strategic placement of Starbucks stores in bustling urban centers, suburban retail districts, and university campuses enhances accessibility and reinforces its brand image as a place where customers can relax and socialize outside of home and work.

By curating inviting store environments, offering complimentary WiFi, and providing exceptional service alongside a diverse product range, Starbucks creates a distinct customer experience that sets it apart from competitors.

With a massive global presence spanning over 80 countries and a uniform visual identity maintained across its stores worldwide, Starbucks has built a strong brand identity symbolized by the iconic Siren logo. This concerted effort to maintain consistency across locations reinforces the brand’s reputation and ensures a seamless customer experience regardless of geographical location.

Lastly, Starbucks has turned corporate social responsibility (CSR) into a competitive advantage — demonstrating a commitment to environmental sustainability that further enhances its positive brand image and fosters long-term customer loyalty.

Netflix maintains a sustainable competitive advantage through a cost leadership strategy, prioritizing low operational costs and affordable pricing to attract a broad customer base.

With over two decades of experience in the streaming industry, Netflix has developed a robust infrastructure on a large scale, positioning itself ahead of newer competitors entering the market. Rather than focusing on niche segments, Netflix adopts a global approach, aiming to expand its customer reach worldwide and solidify its market presence.

Investment in research and development plays a pivotal role in Netflix’s strategy, driving innovation and addressing customer needs effectively. Through initiatives like the Dynamic Optimizer and the introduction of offline viewing capabilities, Netflix optimizes content delivery and enhances user experience.

Continuous refinement of its recommendation algorithm also enables Netflix to personalize content suggestions according to viewing habits, further enhancing customer engagement and retention.

Unlike its rivals that offer mostly in-house titles, Netflix implements a differentiation strategy by offering original content alongside licensed third-party videos. By working directly with producers and leveraging subscriber data to inform content creation and pricing decisions, Netflix delivers value to its audience while maintaining cost efficiency.

This approach has enabled Netflix to produce compelling content targeted at specific viewer interests, fostering customer loyalty and cementing a sustainable competitive advantage in the streaming industry.

Tesla took electric cars from a niche novelty to a must-have status among environmentally conscious consumers.

Rather than targeting all car buyers, Tesla focused on affluent individuals looking for luxury without compromising on eco-friendliness.

Tesla’s biggest competitive advantage is its technological prowess, continuously integrating cutting-edge innovations into its vehicles. With a focus on software-driven functionality, Tesla can collect and analyze data from its vehicles, allowing for continuous improvement and refinement of features such as autopilot.

The use of artificial intelligence further reinforces Tesla’s position at the forefront of autonomous driving technology, with neural networks trained using real-world data captured by Tesla owners.

Like Apple’s approach to product excellence, Tesla has built a reputation for delivering high-quality, stylish automobiles that defy traditional expectations of electric cars. The introduction of the Tesla Roadster shattered stereotypes, showcasing that electric vehicles can be both fast and visually appealing.

Tesla’s vertical integration strategy, particularly in battery production, also provides a significant competitive advantage. The establishment of the Gigafactory drastically reduced battery manufacturing costs through economies of scale, waste reduction, and process optimization.

This strategic move not only enables Tesla to produce more batteries than all other car manufacturers combined but also facilitates continuous improvements in battery quality and chemical composition, further solidifying its dominance in the electric vehicle market.

FAQs – Competitive Advantage Examples

A competitive advantage makes a firm’s goods or services better than its rivals. Apple stands out with its unique ecosystem.

Amazon dominates its industry by delivering a vast selection, quick shipping, and stellar customer service.

This fast-food giant shines through top-notch customer service and quality eats. Their secret sauce? Treating patrons like gold.

Stepping into the business ring, knowing your secret move matters. That’s where competitive advantage examples shine.

Key takeaways? Cost leadership and differentiation are not just buzzwords; they’re game changers. Innovation keeps you ahead, while globalization opens doors but demands agility.

Sustaining your edge means adapting, evolving, and never settling for yesterday’s win.

To sum up: stay sharp, be unique, and always look forward. The right strategy isn’t just about leading today; it’s about staying ahead tomorrow.

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What Is a Competitive Advantage?

• How It Works
• How To Build It
• Competitive vs. Comparative Advantage

The Bottom Line

• Business Essentials

Competitive Advantage Definition With Types and Examples

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals. Competitive advantages are attributed to a variety of factors including cost structure, branding , the quality of product offerings, the  distribution network , intellectual property, and customer service.

Key Takeaways

• Competitive advantage is what makes an entity's products or services more desirable to customers than that of any other rival.
• Competitive advantages can be broken down into comparative advantages and differential advantages.
• Comparative advantage is a company's ability to produce something more efficiently than a rival, which leads to greater profit margins.
• A differential advantage is when a company's products are seen as both unique and of higher quality, relative to those of a competitor.

Investopedia / Michela Buttignol

Understanding Competitive Advantage

Competitive advantages generate greater value for a firm and its shareholders because of certain strengths or conditions. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage. The two main types of competitive advantages are comparative advantage and differential advantage.

A comparative advantage is when a firm can produce products more efficiently and at a lower cost than its competitors.

A differential advantage is when a firm's products or services differ from its competitors' offerings and are seen as superior. Advanced technology, patent-protected products or processes, superior personnel, and strong brand identity are all drivers of differential advantage. These factors support wide margins and large market shares.

For example, Apple is famous for creating innovative products, such as the iPhone, and supporting its market leadership with savvy marketing campaigns to build an elite brand. Another example is major drug companies. They can market branded drugs at high price points because they are protected by patents.

The term "competitive advantage" traditionally refers to the business world, but can also be applied to a country, organization, or even a person who is competing for something.

How To Build a Competitive Advantage

To build a competitive advantage, a company can use one of three main methods:

• Cost: Provide offerings at the lowest price
• Differentiation: Provide offerings that are superior in quality, service, or features
• Specialization: Provide offerings narrowly tailored to a focused market

Competing on price can be effective, but if you slash prices too much you risk decreasing profit margins to an untenable level. Many firms opt instead to differentiate themselves in other ways, which helps preserve or expand their profit margin.

Benefits of a Competitive Advantage

When a company creates a durable competitive advantage, it sets itself apart from the competition and provides value to customers as well as stakeholders. By producing a desirable product or service that is better or more cost-effective than its competitors,' the company can make more sales, generate more revenue, and enjoy greater profits.

Strategies to Build a Competitive Advantage

To build a competitive advantage, a company must know what sets it apart from its competitors and then focus its message, service, and products with that difference in mind. Here are several strategies companies use to build a competitive advantage:

• Research the market : Market research helps a company identify and define its target market, which can guide it in developing the most effective advantage.
• Identify strengths : A company can find its unique strengths, especially relative to competitors, by reviewing products, services, features, positioning, and branding.
• Evaluate finances : Companies can take a close look at their financial performance to spot profit centers and areas of stability, using financial statements and ratios.
• Review operations : How efficient is a company's operations? Where is it effective, and where is there room for improvement? Consider customer service as well as production and supply chain management.
• Consider human resources : The talent a company can attract as employees and leadership can make an important difference in the success of the business. Evaluating company culture, hiring, and staffing practices can help.

Competitive Advantage vs. Comparative Advantage

A firm's ability to produce a good or service more efficiently than its competitors, which leads to greater profit margins, creates a comparative advantage. Rational consumers will choose the cheaper of any two perfect substitutes offered. For example, a car owner will buy gasoline from a gas station that is 5 cents cheaper than other stations in the area. For imperfect substitutes, like Pepsi versus Coke, higher margins for the lowest-cost producers can eventually bring superior returns.

Economies of scale , efficient internal systems, and geographic location can also create a comparative advantage.

Comparative advantage does not imply a better product or service. It only shows the firm can offer a product or service of the same value at a lower price.

For example, a firm that manufactures a product in China may have lower labor costs than a company that manufactures in the U.S., so it can offer an equal product at a lower price. In the context of international trade economics, opportunity cost determines comparative advantages. 

Amazon ( AMZN ) is an example of a company focused on building and maintaining a comparative advantage. The e-commerce platform has a level of scale and efficiency that is difficult for retail competitors to replicate, allowing it to rise to prominence largely through price competition.

How Do I Know If a Company Has a Competitive Advantage?

If a business can increase its market share through increased efficiency or productivity, it would have a competitive advantage over its competitors.

How Can a Company Increase Its Competitive Advantage?

Lasting competitive advantages tend to be things competitors cannot easily replicate or imitate. Warren Buffet calls sustainable competitive advantages economic moats , which businesses can figuratively dig around themselves to entrench competitive advantages. This can include strengthening one's brand, raising barriers to new entrants (such as through regulations), and the defense of intellectual property.

Why Do Larger Companies Often Have Competitive Advantages?

Competitive advantages that accrue from economies of scale typically refer to supply-side advantages, such as the purchasing power of a large restaurant or retail chain. But advantages of scale also exist on the demand side—they are commonly referred to as  network effects . This happens when a service becomes more valuable to all of its users as the service adds more users. The result can often be a winner-take-all dynamic in the industry.

How Is Competitive Advantage Different From Comparative Advantage?

Comparative advantage mostly refers to international trade. It posits that a country should focus on what it can produce and export relatively the cheapest—thus if one country has a competitive advantage in producing both products A & B, it should only produce product A if it can do it better than B and import B from some other country.

A company's competitive advantage is the way it excels compared to its rivals. This advantage may be through cost leadership, differentiation, or focus. Identifying a company's competitive advantage helps show how it is positioned to be more successful than its competitors, creating more revenue and generating greater profits.

Young African Leaders Initiative. " Action Your Business Growth: The Importance of Knowing Your Competitive Advantage ."

U.S. Small Business Administration. " Market Research and Competitive Analysis ."

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5 Sources of Competitive Advantage to Drive Growth

• 10 Nov 2020

From chariot races and jousting tournaments to playground games and professional sports, competition is an age-old force that drives humans to evolve and outpace their competitors.

Competition in business is no exception, and it can make or break your organization. While it's often uncomfortable and scary to witness another business profit from your company's weaknesses, competition can also push your business to evolve into a better version of itself.

How do you gain an edge to drive growth for your organization? Here are five sources of competitive advantage to leverage for your business strategy.

Access your free e-book today.

Sources of Competitive Advantage

1. product attribute differentiation.

One way to gain an advantage over competitors is by differentiating your product from theirs. Ask yourself: What makes my offering unique? Why would consumers want to purchase my product instead of my competitors’?

Countless attributes can set your product apart. Here are some to consider:

• Better customer service
• More variety
• Faster or cheaper shipping
• Color and aesthetics
• Brand identity
• Atmosphere of brick-and-mortar locations
• Source of goods

Whole Foods Market is one example of a company that differentiates its products using brand identity, atmosphere, and sourcing. Whole Foods’ competitors are other natural food chains, such as Trader Joe’s and Sprouts Farmers Market, along with big names in the grocery space, including Stop & Shop and Wegman’s.

Whole Foods stands out in the crowded natural foods market as the first and only certified organic national grocery store in the United States. Its brand identity centers on the integrity of its natural and organically sourced foods. It also cultivates an in-store atmosphere that makes grocery shopping feel purposeful and is a step up from some of its competitors' traditional grab-and-go shopping experience.

Like Whole Foods, find the attributes that differentiate your product from others and make them central to your brand’s identity.

2. Customers’ Willingness to Pay

The way you price your products or services can set you apart from your competitors. When doing so, it’s vital to understand your customers’ willingness to pay .

Willingness to pay (WTP) is the maximum price a customer is willing to pay for a product or service. It can be a specific dollar amount or a price range.

By determining your customers’ WTP, you can ensure you’re maximizing profit without turning away customers.

In the context of competition, it’s important to view willingness to pay as a strategic tool. If your customers are willing to pay the same amount for your and your competitors’ products, consider what can be shifted to increase their willingness to pay for yours.

For example, business support system company CSG reports that 47 percent of consumers are willing to pay more for products that are sustainably sourced. Among those consumers, five percent are willing to pay double the price for a sustainable product over a non-sustainable one.

With the knowledge that certain factors could cause your customers’ willingness to pay to increase, you can strategically implement changes that give your business a competitive edge.

Alternatively, if your competitor provides a product at the very top of customers’ willingness to pay, you can gain a competitive advantage by offering a lower price. Tread cautiously, because doing so could start a price war in which you both continue to drop prices to win customers.

3. Price Discrimination

With an understanding of your customers’ willingness to pay, you may find that different types of customers are willing to pay different amounts for your products. In such cases, it can be useful to employ price discrimination, which can be a valuable tool for expanding your company’s reach when competing with others.

“Price discrimination is one of the most common and powerful price strategies for companies,” says Harvard Business School Professor Bharat Anand in the online course Economics for Managers .

In the course, Anand presents several examples of price discrimination, including reduced prices for students, seniors, and veterans. These “special case” prices present an opportunity for your company to earn customers whose willingness to pay may be lower than that of its typical customers.

It’s worth noting that a lower price doesn’t always win consumers over—selecting a strategic price is crucial, but it’s just one factor they consider when determining which product to buy.

4. Bundled Pricing

Another pricing strategy that can prove to be advantageous is bundled pricing.

Bundled pricing is the practice of selling two or more products together in a “bundle,” for which the cost is different than that of purchasing all of the items separately.

Cable companies often leverage bundling. Purchasing voice, video, and data services together often grants the customer a lower price than if they were to purchase the services individually.

“How you think about the logic of pricing should depend on willingness to pay,” Anand says in Economics for Managers . He presents the example of bundling childcare and theater tickets.

“Put two products together that, when consumed jointly, increase consumers’ willingness to pay,” he says. “You might be able to increase the price for both just because it has so much more value for consumers.”

The way you price your products should be strategic, purposeful, and give your business a leg up over its competitors.

5. Human Capital

A company is only as strong as its people. As such, hiring, training, and retaining a team of skilled employees is a competitive advantage for any business.

Putting in the time and care to select outstanding candidates for open positions, train current employees, offer professional development opportunities, and create a culture wherein people feel supported and challenged can pay off.

Gallup reports that business units with highly engaged employees see a 21 percent increase in profit over their less-engaged counterparts.

Employee engagement has been especially important during the coronavirus (COVID-19) pandemic , as many businesses have closed physical offices and transitioned to remote work. By finding ways to effectively engage your team in a virtual setting , you can make them feel supported and empowered from afar.

Positioning Your Business for Success

Differentiating your product, creating a pricing strategy, and investing in your employees can be the difference between rising to the top of your market and being driven out by a competitor.

By taking a strategy course , such as Economics for Managers , you can bolster your skills in these areas and see competition not as a looming threat, but as a catalyst for growth.

Do you want to learn more about positioning your business for success in a competitive market? Explore our eight-week Economics for Managers course and other online strategy courses to hone your skills.

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Business plan tips: how to identify your competitive advantage

Morgan Beall October 23, 2017

                        Morgan Beall October 23, 2017

At Vancity, we see hundreds of business plans each year from new and aspiring entrepreneurs. And from that experience, we know there are five areas in the business plan that entrepreneurs may not spend enough time on: business objective , SWOT analysis , cash flow projection , competitive advantage and market potential .

In this series, I’m going to share some tips on each of these five areas to get your business plan in top shape. In this post, I’ll cover ways to identify your competitive advantage.

Competitive advantage

What makes your business special? What are you doing differently than your competitors? Why should customers choose your product or service? These are the questions you should ask yourself when determining your competitive advantage. It’s something that often gets overlooked in many business plan s , but understanding your competitive advantage is a huge factor in starting and running a successful business.

https://youtube.com/watch?v=Nid9Frjiz3w

These three steps will help you realize what sets you apart from the rest:

1. Identify your competitors

Start by making a list of your direct and indirect competitors. Not sure who they are? Direct competitors are businesses that satisfy a similar need that you fulfill. Try Google searches and check online business listings in your area. If you are planning on setting up a physical location, walk the community around where your business will be. Even if there don’t appear to be other businesses directly competing with you, there are always other businesses competing for your customer’s time and money. Ask yourself who they are and what products or services are they selling?

2. Find their strengths and weaknesses

Identify what your competitors are doing right. Do a little research to determine what hooks people on their product or service. Next, identify what they’re doing wrong. What’s keeping people from shopping with them? What turns customers off? Make time in your calendar to observe and take notes, or go online and check out website, product and service reviews and see what past customers have had to say.

3. Figure out your “special ingredient”

Lastly, use the information you learned about your competitors to determine your own “special ingredient.” What makes your business stand out? Think about how your values align with your audience, your branding, story, and who you are as a business owner. Consider your customer service, the quality of your products, and where you source your materials from. You may have one very obvious special ingredient, or you may find you have a few special ingredients.

In essence, your competitive advantage is a compelling argument for why a customer should buy your product or service over someone else’s. It’s a vital part of your business plan that helps a financial institution, and your future customers, decide to invest in YOU.

Looking for more support?

Looking for more support to help you complete your business plan? Find out when our next Each One, Grow One small business workshop is happening. The workshop is offered free for members and non-members, and are a great starting place to create your perfect business plan.

Related posts

Business plan tips: how to clarify your business objective, business plan tips: why you need a swot analysis.

• Business plan tips: how to plan a cash flow projection
• Business plan tips: how to figure out your market potential

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Business plan tips: how to figure our your market potential

How to Write a Competitor Analysis for a Business Plan (with AI in 2023)

Competitor analysis is a critical component of any business plan. It helps you understand the landscape of your industry, identify opportunities for growth and differentiation, and craft strategies that take advantage of your competitors' weaknesses.

Here's a step-by-step guide on how to conduct a comprehensive competitor analysis, including how to leverage AI tools like Bizway to make the process more efficient and effective.

Step-by-Step Guide to Performing a Competitor Analysis

1. identify your competitors.

Understanding your competitive landscape begins with pinpointing who your direct and indirect competitors are.

Points to Consider

• Direct Competitors : Those who offer similar products/services in the same market.
• Indirect Competitors : Businesses targeting your customer base with different offerings.
• Utilize market research and customer feedback to list competitors.
• Identify geographical considerations - local, regional, or global competitors.

2. Analyze Their Products/Services

A thorough examination of competitors’ offerings unveils potential areas for differentiation and enhancement in your product/service line.

• Feature comparisons.
• Pricing structures.
• Unique Selling Propositions (USPs).
• Adopt a customer-centric approach to understand how consumers perceive competitors’ offerings.
• Identify gaps in their product/service lines that you could explore.

3. Assess Their Marketing Strategy

Understanding competitors’ marketing approaches aids in crafting a superior, data-driven marketing strategy.

• Target audience.
• Key messages and value propositions.
• Channel effectiveness and presence.
• Use social listening tools to gauge their social media effectiveness.
• Analyze the SEO performance of competitors’ websites.

4. Examine Their Sales Strategy

Investigating sales channels and tactics employed by competitors reveals market penetration strategies and potential areas for diversification.

• Distribution channels.
• Pricing and sales tactics.
• Customer relationship management.
• Secret shop to observe sales tactics and customer experiences.
• Review customer feedback on their purchasing experience.

5. Analyze Their Strengths and Weaknesses

Identifying what competitors excel in and fall short on enables strategic decision-making in exploiting market opportunities.

• Operational efficiency.
• Customer service quality.
• Brand reputation and loyalty.
• Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) for each competitor.
• Leverage customer reviews and testimonials to gauge reputation.

Using AI for Competitor Analysis

Automated data collection.

AI automates the harvesting of data from myriad sources, ensuring robust research while saving time.

• Use AI tools to scrape and aggregate data from competitors' websites, social media, and customer review platforms.
• Ensure the data is categorized and stored systematically for easy analysis.

Real-Time Updates

AI provides a competitive edge by monitoring and reporting real-time updates on competitor activities.

• Set up AI monitoring for specific competitor activity: product launches, PR releases, or marketing campaigns.
• Ensure to leverage real-time data to inform swift strategic adjustments.

Predictive Analytics

Predictive analytics via AI deciphers patterns and anticipates future competitor moves, positioning your business proactively.

• Leverage AI to analyze historical data for predicting future trends.
• Utilize these insights to anticipate and formulate preemptive strategies.

Using Bizway for Competitor Analysis and Business Planning

One such AI tool that can revolutionize your competitor analysis process is Bizway . Bizway is an AI-powered business planning and research app that can help you research your competitors and write your entire competitor analysis with just a few clicks. Moreover, Bizway can assist you in writing your entire business plan, saving you time and providing you with expert-level planning documents.

With Bizway, you can automate the process of generating clear, concise planning docs across all areas of business, from an SEO Content Plan to User Onboarding Plan. It also helps fill knowledge gaps in areas of business you're not well-versed in.

So, whether you're a solopreneur, a small business owner, or an aspiring entrepreneur still in school, Bizway is the AI assistant you need to take your business planning to the next level.

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Write the Competition Section: Business Plan Writing

Aayushi Mistry

• December 21, 2023

11 Min Read

What is the Competition Section?

Your business plan includes a lot of operational sections. Every section holds a different importance. In that case, competition is one of the most fundamental aspects of your business. And so, it needs to be added to your business plan. The section that explains your competition is your competition section.

While deciding where to add the competition section, pay attention to the flow of your business plan. Moreover, it also depends on the priority. So, it must come next to your objective, problem statement , product/services, and target audience.

Why Do You Need a Competition Section in Your Business Plan?

The why of your business plan depends on your purpose-

If your purpose is to direct your business growth:

Your competition status can play as your reference point. Here, the competition section serves as a medium for understanding your competition. So, you can develop strategic positioning.

This can help you and your team to look at comparative strengths and weaknesses exclusively. So, you can easily come to the strategies that work in your favor, and give you a competitive advantage .

If your purpose is to create a business plan to seek investment:

You must add it to inform your investors about your competition, market position, and brand promise.

You need to describe the competition to reassure probable investors that you know and understand your competition. And that you are ready to take advantage of opportunities and avoid the pitfalls.

Apart from this, your purpose also makes a difference in how to write your competition section in your business plan. However, the difference is minor, and the effect of it is profound.

How to write a competition section in your business plan?

Regardless of your purpose mentioned above, you have to include all the steps mentioned below. Wherever there is the need for that ‘minor’ change, we will include it under the same step.

While following this step, we suggest you take action side by side. So, it becomes easier to implement. Moreover, before putting up your competition section, be ready with your competition data.

Also, make sure that you have conducted a competitive analysis and processed data of at least 5 competition companies. Once you have everything you need, you can go through the following steps-

1. Determining and Documenting Your Business Position

Regardless of your purpose, you will have to follow this step. And there isn’t any major difference here. You need to know your business position in the market and document it properly. However, we will first talk about the determining part. And then, document it for the competition part of your business plan.

How to determine your market position?

Gather crucial details for your company and your competitors’ companies. When you have all the data, you compare them. And put it up on the competition graph.

The details you will need include:

• Sales Figures
• Profit margins
• Distributors

You can also add the marketing column if you find the need. Here, your goal is to make clear positions with respect to your target markets.

However, there are two most reliable ways to determine your position:

1. Position Mapping Graph

You can do this for 5 main aspects of your business-

• For product characters
• The quality of products/services
• The number of products/services
• For user/customer friendliness

You can either put all the points in the same graph or use a separate graph for each.

How to do this?

• Get graph paper and divide it into 4 quadrants
• Add your parameter(s)
• Start plotting your and your competition’s point

2. Competitive Matrix

A competitive matrix is a method that helps you determine your competitive advantages. Usually, you put together this tool to note your market credibility. It is an industry analysis tool that compares the characteristics of you and your competition.

How to do it?

• You draw out a matrix
• Position your company and competitors, at the top, the horizontal blocks
• Put all the aspects you want to compete with, in the vertical blocks
• Put the tick marks to draw the competition

How to document in the competition section for your business plan?

Once you complete the determination, the documentation is quite easy. In fact, you can put the final graphs in your draft. It will not only give color and variety but also make it easy to understand.

While you put all the graphs together, you have to explain your competition and the parameters that you have selected. Moreover, you can go ahead and explain why the companies are your competition. Also, explain why you picked particular parameters.

Mention the date and time frame in your graphs. It makes it easier to have a deeper knowledge of your competition.

Basically, the documentation is journaling the process of drawing the graphs. You may not want to add every detail. As that could make the entire section a little longer than expected. But at the same time, don’t leave out the important details.

As for the difference, you can follow the same process for both purposes. Only make sure that your draft for your investors has been relatively concise. As for your company draft, you can add as many details as you want.

Why is this step important?

When you follow this step, the process of putting the competition section for your business plan is literally half done. It brings you the clarity that you, your team, and your investors need to make your business successful.

2. Determine and Draft Your Competitive Advantages

Determining the competitive advantage.

This process may look hard. But it is not. In fact, it just includes one step to the above one. It can be done side by side while you are drawing the comparison and putting them together in different graphs.

You have to note and add the points where you are doing better (or can do) better than your competition. And then, note how that bonus point can bring you an advantage(s).

Drafting your competitive advantage

You have to note down your bonus points and explain them in detail. You can use those graphs too for more clarity and variety. It is better that you make this up to the point. If you are writing for the investors, they might just want the rounded points after seeing the graphs.

And if you are using it for directive purposes, even then, it is good to have a well-rounded point. However, you might need the back details along the way ahead. So, you can note it down too.

With this step, you became assertive about your success and future in the market.

If brought in front of your investors, they quickly get a clear idea of whether to invest in your business or not. In a way, it helps you store their faith in your business.

And if you are only planning to put the direction of your company’s success, it gives you a clear picture of your strengths and opportunities. In a way, it restores your faith in your product/services.

3. Put in the customers’ review

This step is just like putting that final nail in the coffin! Plus, regardless of the purpose of your business plan, this step and section remain the same. Even more interesting, it takes less time than the two above-mentioned steps.

Here’s how you do it-

• Find out the reviews and ratings of all the competitors, you had begun the process with.
• Be discreet. Don’t only add the good points or the bad points. Add the good, the bad, and the average rating and reviews.
• You can go ahead and make three sections named- The Good, The Bad, and The Average.
• Add 10-12 reviews in total and put them in the respective sections (3 or 4 in each).
• You can find reviews from search engines, social media, websites, forums, and magazines.
• If you want authentic reviews and have enough time and resources, you can even run surveys. Or contact agencies that run unbiased surveys.

How to draft it-

• Put them just the way they are, even if they have typos. Try not to tamper with them.
• Add them at the end of the competition section for your business plan.

Why is this step important

• To add more clarity and favor to your business.
• Gives a chunk of customer points of view.
• Restores your, your team’s, and your investor’s faith in your company.

Basic Template

And that’s all about the competition section in the business plan. We hope we have given you all the information that you needed. However, regardless of how you find notes, we have listed the FAQs for the competition section for a business plan. You can refer to it for questions that look similar to yours.

FAQs for your competition section

What if we think that our business does not have competition?

Ideally, every business has competition. If not directly, then indirectly. Basically, there are three types of competition- Primary, Secondary, and Tertiary.

Primary: The business that has similar products/services as you and, serves the same target audience.

Secondary: The high-end or low-end services/products as you. There may be a slight change in the target audience, depending on the spending capacity location and more.

Tertiary: They have completely different products/services but satisfy the same needs of your target audience.

So, if you think that you don’t have primary competition. Look closely, you may have a secondary or tertiary competition.

What if that time my competition changes?

You have to run the test from the start and draft the section from scratch. It may be the same even when you want to add and remove the parameter.

Do we need a separate team to draw a competition analysis and draft it in the business plan?

Not importantly. However, it is important for everyone involved in your team to be qualified and have adequate experience. If you think that your team doesn’t have that, you can form or hire a separate team.

How long should the competition section be in the business plan?

It should be detailed. But it must not take up most part of your business plan. Moreover, it also depends on the number of other sections you are adding. And it also depends on what these other sections are. In any case, there is no harm in being concise. No matter who the reader is, we all prefer a quick read.

Where else can we showcase this analysis?

You can use this analysis in marketing and sales strategies. You can even use it to further research and develop your product/services.

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Since childhood, I was in awe of the magic that words bring. But while studying computer science in college, my world turned upside down. I found my calling in being a copywriter and I plunged into a world of words. Since then, there is no looking back. Even today, nothing excites me to find out the wonders the words can bring!

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Competitive Edge

A competitive edge is a unique advantage that propels an organization past rivals. It encompasses traits like innovation and cost leadership, with examples like Apple and Walmart showcasing its power. However, sustaining this edge poses challenges in a dynamic market, necessitating adaptable strategies and impactful marketing efforts.

Table of Contents

Characteristics of Competitive Edge:

• Uniqueness : Competitive edge hinges on distinctiveness, setting an organization apart from competitors.
• Sustainability : It is not easily replicable, making it challenging for rivals to imitate or surpass.
• Strategic : It’s a result of deliberate planning and strategic decisions.
• Dynamic : Competitive edges must adapt to evolving market conditions.

Types of Competitive Edge:

• Innovation : Innovating products, services, or processes can create a competitive edge by meeting unmet needs or providing superior solutions.
• Cost Leadership : Becoming the low-cost producer in an industry can give a competitive edge by offering lower prices to customers.
• Product Differentiation : Creating unique and desirable products or services that stand out in the market.
• Market Positioning : Establishing a strong and favorable position in the minds of consumers, differentiating from competitors.

Benefits of Competitive Edge:

• Market Dominance : Organizations with a competitive edge can capture a larger market share.
• Profitability : The ability to charge premium prices or reduce costs leads to increased profitability.
• Customer Loyalty : It fosters customer loyalty as consumers are drawn to unique offerings.
• Sustainability : It provides a buffer against market fluctuations and economic downturns.

Challenges in Maintaining Competitive Edge:

• Sustainability : Ensuring that the edge remains relevant and valuable over time can be challenging.
• Market Changes : Shifts in consumer preferences, technology, or regulations can quickly erode an edge.
• Rival Actions : Competitors may counter or imitate the edge, requiring ongoing innovation .
• Complacency : Success with a competitive edge can lead to complacency, hindering further innovation .

Implications of Competitive Edge:

• Strategic Focus : It guides an organization’s strategic planning and resource allocation.
• Marketing Strategy : The edge shapes marketing efforts, focusing on highlighting unique attributes.
• Market Expansion : It can facilitate entry into new markets or industries.
• Competitor Response : Competitors will react to attempts to establish or maintain a competitive edge.

Examples of Competitive Edge:

• Apple’s Innovation : Apple’s continuous innovation in design and technology sets it apart in the consumer electronics industry.
• Walmart’s Cost Leadership : Walmart’s ability to offer low prices to consumers through efficient supply chain management and cost control.
• Tesla’s Technological Advancement : Tesla ’s dominance in electric vehicles is driven by technological advancements and unique battery technology.
• Coca-Cola’s Brand Positioning : Coca-Cola’s strong brand positioning and marketing differentiate it in the soft drink market.

Case Studies

• Amazon’s Fulfillment Network : Amazon’s vast and efficient fulfillment network allows for quick and reliable delivery, giving it a competitive edge in the e-commerce industry.
• Google’s Search Algorithm : Google’s search engine algorithm provides more accurate and relevant search results, making it the preferred choice for online search.
• McDonald’s Brand Consistency : McDonald’s maintains a consistent brand image worldwide, offering the same menu items and quality, which has led to a strong global presence.
• Toyota’s Lean Manufacturing : Toyota’s implementation of lean manufacturing techniques reduces waste and enhances efficiency in production, giving it a cost leadership edge in the automotive industry.
• Nike’s Marketing and Branding : Nike’s powerful marketing campaigns and brand image make it a leader in the athletic footwear and apparel market.
• Netflix’s Content Library : Netflix’s extensive library of original content and licensed shows and movies differentiates it as a leading streaming service.
• SpaceX’s Reusable Rockets : SpaceX’s ability to reuse rockets significantly reduces the cost of space exploration, providing a competitive edge in the aerospace industry.
• Zara’s Fast Fashion Model : Zara’s fast fashion approach, with quick turnaround from design to store shelves, keeps it ahead in the fashion retail industry.
• Tesla’s Autonomous Driving : Tesla ’s development of autonomous driving technology sets it apart in the electric vehicle market.
• FedEx’s Global Delivery Network : FedEx’s global logistics and delivery network ensure reliable and timely shipping services, giving it a competitive edge in the courier and logistics industry.
• Disney’s Intellectual Property : Disney’s vast portfolio of intellectual property, including iconic characters and franchises, gives it a strong position in the entertainment industry.
• Facebook’s Social Network : Facebook’s massive user base and network effects make it a dominant player in the social media and advertising space.

Key Highlights

• Differentiation : Competitive edge often stems from offering unique products, services, or features that set a business apart from its competitors.
• Cost Leadership : Achieving a competitive edge through cost leadership involves optimizing operations to reduce costs and offer competitive prices while maintaining quality.
• Innovation : Continuous innovation in products, processes, or technology can provide a significant competitive advantage.
• Market Understanding : Deep knowledge of customer preferences and market trends helps businesses tailor their offerings effectively.
• Brand Strength : Building a strong and recognizable brand can create a competitive edge by fostering customer loyalty.
• Efficient Supply Chain : Streamlining the supply chain and logistics can lead to faster delivery times and cost savings.
• Talent and Skills : Attracting and retaining top talent with essential skills can be a source of competitive advantage.
• Customer Experience : Delivering exceptional customer experiences and service can differentiate a business from its competitors.
• Agility : The ability to adapt quickly to changing market conditions and customer needs is crucial for staying competitive.
• Global Presence : Expanding into international markets can open up new opportunities and diversify revenue streams.
• Data and Analytics : Leveraging data and analytics to make informed decisions and gain insights into customer behavior is becoming increasingly important.
• Sustainability : Environmental and social responsibility initiatives can enhance a company’s reputation and competitive positioning.
• Regulatory Compliance : Ensuring compliance with relevant regulations and industry standards is essential for long-term success.
• Risk Management : Effective risk management strategies can protect a business from unexpected challenges and disruptions.
• Strategic Partnerships : Collaborating with other organizations can provide access to complementary resources and expertise.

Read Next:  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 .

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How to Write a SWOT Analysis for a Business Plan

• March 21, 2024
• Business Plan , How to Write

Navigating the complexities of business requires a clear understanding of your strategic position, and a SWOT analysis is an essential tool to help you achieve this clarity. It’s a straightforward method that breaks down into Strengths, Weaknesses, Opportunities, and Threats, providing a snapshot of where your business stands and guiding your future strategic moves.

With this guide, you’ll learn how to leverage your advantages, address challenges, seize new opportunities, and guard against potential threats. Let’s dive into the process together and set a strong foundation for your business’s strategic planning. Let’s dive in!

What is a SWOT Analysis?

A SWOT analysis is a strategic planning tool used to identify and understand the Strengths, Weaknesses, Opportunities, and Threats related to business competition or project planning. This method helps organizations in assessing both internal and external factors that could impact their objectives.

• Strengths : Positive attributes internal to the organization and within its control. Strengths are resources and capabilities that can be used as a basis for developing a competitive advantage.
• Weaknesses : Factors that are within an organization’s control but detract from its ability to attain the desired goal. These are areas the business needs to improve to remain competitive.
• Opportunities : External chances to improve performance in the environment. Opportunities reflect the potential you can leverage to grow your business or project.
• Threats : External challenges to the business’s performance or project’s success. Threats might stem from various sources, such as economic downturns, increased competition, or changes in regulatory landscapes.

Why Use a SWOT Analysis?

We use a SWOT analysis for several important reasons in business and strategic planning:

• Strategic Overview : It provides a concise and comprehensive overview of the current strategic position of the business or project. By examining internal and external factors, stakeholders can get a clear picture of their situation.
• Decision Making : SWOT analysis aids in decision-making by highlighting the strengths to leverage, weaknesses to address, opportunities to pursue, and threats to mitigate. It helps in prioritizing actions based on the analysis.
• Opportunity Identification : SWOT analysis is instrumental in identifying new opportunities for growth and expansion. Opportunities might come from market trends , economic shifts, or changes in technology.
• Risk Management : By identifying threats, organizations can develop strategies to address or mitigate these risks before they become significant issues. It’s a proactive approach to managing potential external challenges.
• Resource Allocation : Understanding the organization’s strengths and weaknesses helps in the effective allocation of resources. Resources can be directed to areas where they are needed most or where they will have the highest impact.
• Competitive Advantage : It helps businesses identify unique features and capabilities that give them a competitive edge in the market. Recognizing these strengths can guide marketing strategies and business development.

How to Write a SWOT Analysis

Writing a strength in a SWOT analysis involves identifying and articulating the internal attributes and resources of a business or project that contribute to its success and competitive advantage. Here’s how to effectively write a strength in a SWOT analysis:

• Identify Internal Positive Attributes : Focus on internal factors that are within the control of the business. These can include resources, skills, or other advantages relative to competitors. Consider areas like strong brand reputation, proprietary technology, skilled workforce, financial resources, strategic location, and efficient processes.
• Be Specific and Relevant : General statements like “we have a good team” are less helpful than specific ones like “our team includes industry-recognized experts in X field.” The more precise you are, the more actionable your analysis will be. Ensure that the strengths are directly relevant to achieving the business’s goals and objectives.
• Use Quantifiable Data When Possible : Whenever you can, back up your strengths with quantifiable data. For example, “a customer satisfaction rate of 95%” or “a 20% lower production cost than industry average” provides concrete evidence of your strengths.
• Compare to Competitors : Strengths are often relative to the competition. Identify areas where your business outperforms competitors or fills a gap in the market. This might involve superior product quality, a unique service model, or a more extensive distribution network.

Example: Instead of simply stating “Experienced management team” as a strength, you could write: “Our management team has over 50 years of combined experience in the tech industry, including a track record of successful product launches and market expansions. This depth of experience provides us with strategic insights and operational expertise that have consistently resulted in market share growth and above-industry-average profitability.”

Writing a weakness in a SWOT analysis involves acknowledging and detailing the internal factors that limit or challenge your business or project’s ability to achieve its goals. Here’s a structured approach to effectively articulate weaknesses in a SWOT analysis:

• Identify Internal Limitations : Focus on internal attributes that are within the control of the organization but currently act as disadvantages. Weaknesses might include insufficient resources, lack of expertise, outdated technology, poor location, limited product range, or inefficiencies in processes.
• Be Specific and Honest : It’s important to be honest and specific about your organization’s weaknesses. Vague statements won’t help in addressing these issues. For instance, rather than saying “we need to improve our marketing,” specify “our current marketing strategy does not effectively reach our target demographic of 18-25-year-olds on digital platforms.”
• Use Internal Comparisons and Feedback : Compare your performance, processes, and resources against your own past performance or industry benchmarks. Utilize customer feedback, employee insights, and performance data to identify areas of weakness.
• Keep it Constructive : While it’s crucial to be honest about weaknesses, frame them in a way that focuses on potential for improvement. Consider each weakness as an area for development and growth.

Example: Instead of a broad statement like “Inadequate online presence,” a more effective description would be: “Our business currently lacks a robust online presence, reflected in our outdated website and minimal engagement on key social media platforms. This limits our ability to attract younger demographics who predominantly discover and interact with brands online. Improving our online visibility and engagement could enhance brand awareness and customer acquisition.”

Opportunities

Writing opportunities in a SWOT analysis involves identifying and articulating external factors that your business or project could exploit to its advantage. Opportunities are elements in the environment that, if leveraged effectively, could provide a pathway for growth, improvement, or competitive advantage. Here’s how to systematically approach writing opportunities in your SWOT analysis:

• Spot External Trends : Focus on the trends and changes outside your organization that could be beneficial. These might include technological advancements, shifts in consumer behavior, market gaps, regulatory changes, or economic trends.
• Be Relevant and Actionable : Ensure that the opportunities you identify are relevant to your business and actionable. They should align with your business’s strengths and capabilities, allowing you to take practical steps toward capitalizing on them.
• Use Market Research : Base your identification of opportunities on solid market research. Understand your target market , industry trends, and the competitive landscape to pinpoint where the real opportunities lie.
• Detail Potential Benefits : Clearly articulate how each opportunity could benefit your business. Whether it’s entering a new market, launching a new product line, or adopting new technology, explain the potential impact on your business growth and success.

Example: Rather than vaguely stating “New market segments,” a more strategic description of an opportunity could be: “With increasing consumer interest in sustainable living, there’s a growing market segment for eco-friendly products. Our business’s strong commitment to sustainability and existing lineup of environmentally friendly products positions us well to capture this emerging market. Expanding our product range to include more items that cater to eco-conscious consumers can tap into this trend, potentially opening up new revenue streams and enhancing our brand’s reputation as a leader in sustainability.”

Writing threats in a SWOT analysis involves identifying external challenges that could pose risks to your business or project’s success. These are factors outside your control that have the potential to harm your operations, financial performance, or strategic positioning. Addressing threats effectively in a SWOT analysis requires a focused approach:

• Identify External Challenges : Start by pinpointing the external factors that could negatively impact your business. This can include new competitors entering the market, changes in consumer preferences, technological advancements that render your product less desirable, regulatory changes, or economic downturns.
• Be Precise and Realistic : Clearly define each threat in specific terms, avoiding vague descriptions. Being realistic about the level of risk each threat poses is crucial; not every external challenge is a dire threat, but understanding the potential impact is key for strategic planning.
• Assess the Impact : For each threat identified, evaluate how it could impact your business. Consider the worst-case scenario and more likely outcomes to gauge the potential severity of the threat. This helps in prioritizing which threats need immediate attention and strategic response.
• Use Reliable Sources : Base your identification of threats on solid, reliable information. This might include industry reports, economic forecasts, and news sources that provide insights into market dynamics and external conditions.
• Consider Your Weaknesses : Link potential threats to your identified weaknesses. Understanding how external threats could exploit your vulnerabilities offers valuable insights for fortifying your business against these challenges.

Example: Instead of broadly stating “Economic uncertainty,” a more actionable description of a threat would be: “The looming economic downturn poses a significant threat to discretionary consumer spending. Given our business’s reliance on non-essential luxury products, a reduction in consumer spending could directly impact sales. This economic uncertainty requires us to diversify our product offerings and identify more value-oriented options to maintain customer engagement and spending during tighter economic conditions.”

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8 Ways to Develop a Competitive Edge in Business

It hardly matters anymore which niche you occupy, you need a competitive edge in business to stay in the game. There’s no denying that competition out there is fierce . As a business owner, you have to make sure you stay at the top of your game if you want to achieve your goals.

If you are relatively new in your particular market, you’re no doubt looking for ways to develop a competitive edge that differentiates you from the crowd. Branding is vital not only for driving sales but also for making it clear how what you have to offer is innovative and unavailable elsewhere.

1. High-End SEO Services Provide Your Competitive Edge in 2021

In today’s digital age, owning a successful business is all about getting your SEO right. This means that you have to make sure your business appears on the first page of Google search results. To achieve this somewhat daunting goal, you’ll almost certainly need to make sure that you outsource your SEO services to a reputable agency.

Any high-quality SEO agency understands and implements only the latest in SEO trends. They ensure that your SEO campaign is 100% compatible with the trends that have been set as a benchmark by Google. In today’s marketplace, consumers begin their decision-making process by grabbing their phones and searching keywords and phrases. If you’re not investing in top-notch SEO, you have cut yourself off from this exploding market segment.

2. Attract the Best Talent in the Market

Your business can only flourish if you have the best people working for your brand. It stands to reason that to have a competitive edge in any business endeavor, you’ll need to hire the best talent in that market.

Of course, hiring the best talent requires investment, and not just in payroll. For example, you’ll want to create a corporate culture that entices talented people to join your team. Apart from that, you’ll have to offer market-competitive salaries and make sure that you give them incentives and bonuses to prevent them from jumping to another company.

3. Maintain a Presence at Industry Events

If you want to make sure your business stays at the top of its game, then you have to show up at all of the major industry-related events. Failure to keep your name in front of potential customers — and your competition — courts the risk of your company being forgotten or considered as an artifact from the past or an also-ran.

If, like many, you are tempted to think that industry events are merely a marketing strategy, you might want to rethink that position. Maintaining a high-visibility presence at industry-related events opens many opportunities for your business. Additionally, it validates the legitimacy of your company and demonstrates to potential customers that you are keen to promote your business and a force to be contended with.

4. Take a Second Look at Your Product Pricing

It may seem counterintuitive, but if you want to establish a competitive edge over other players in your market niche, consider pricing your product on the high end. Most businesses are reluctant to embrace this strategy, fearful the higher pricing will backfire and result in tepid sales. However, if you are offering a high-quality product or service, then you should set your pricing based on that assessment.

Of course, you must make sure that your product or services meet all the standards of the industry you’re in. Once you are sure of that, let the price of your product speak to its quality. If you believe in the higher value of your offering over that of the competition, then your pricing needs to reflect both the real value and your belief in it. Do your research, assess your products and services honestly, and let your pricing speak to the quality of your brand.

5. Give Your Sales System Its Own Competitive Edge

You might be surprised to learn how the latest in sales technology can take your company to the next level and help you attract and retain more customers. To this day, many businesses continue to stumble at the checkout lane. Making sure you can accommodate all popular forms of payment, whether traditional or electronic, is as important as getting your customers in the door in the first place.

Incorporating new sales technologies into your business will help you gain customer trust. Keeping pace with newer transaction tech gives your business operations an air of sophistication and competence. As you implement debit card transactions, ApplePay, or any other newer form of payment, make sure you don’t leave your longstanding cash or check customers behind, though. Accepting the widest possible forms of payment helps make sure you maintain your competitive edge in business.

6. Optimize Your Website for Voice Search

More than 27% of potential customers are now using voice search when looking for products and services. That percentage is only going to grow, which means that you must optimize your website for voice search. Having a competitive edge in this category will help you snag new business from anyone using their phone or built-in GPS to find what you have to offer.

All you have to do to optimize your website for voice search is establish the keywords that are most relevant to your business. It’s important to note that you must be very careful about the keywords that you select as voice searches are typically long tail and precise. This simply means that the user offers precise instructions hoping to see only the most relevant results. It’s critical that you pick your keywords while always keeping user intent in mind.

7. Make Your Customers Feel Special

You already know that your customers have plenty of options. They can easily go somewhere else if they don’t feel special doing business with you. In the 21st century, it’s important to make sure that your customers feel like they are special.

To achieve this, you’ll want to devote a great deal of attention to your customer care department. Hire only front-line staff who know how to deal with customers with patience, grace, and professionalism. Always remember that customer loyalty is something that is hard to achieve but easy to lose. Loyal customers go a long way. When consistently treated with respect and courtesy, they can even serve as unofficial brand ambassadors for your business.

8. Create a YouTube Channel 

YouTube is the second-most-popular search engine after Google. You might think that your product or service does not lend itself to video. Nowadays, however, you can’t afford to leave this resource untapped. Maintaining a competitive edge in business now requires quality video.

You simply can’t afford to not have a presence on YouTube anymore. Start small with product or service demos and then build. Keep in mind it’s better to have five quality videos on your channel than 35 sloppy or boring ones. So many tools are available now that have served to drastically drive down the costs formerly associated with video production. Spend some time seeing how other businesses in your niche have leveraged this powerful tool.

Maintaining a competitive edge in business takes work. If it were easy, everyone would do it. Plan out your work week with time slots set aside for one or more of the ideas presented above. Feel free to experiment and see what works best in your setting .

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Home > Business Plan > Competition in a Business Plan

Competition in a Business Plan

… there is competition in the target market …

Who is the Competition?

By carrying out a competitor analysis a business will be able to identify its own strengths and weaknesses, and produce its own strategy. For example a review of competitor products and prices will enable a business to set a realistic market price for its own products. The competition section of the business plan aims to show who you are competing with, and why the benefits your product provides to customers are better then those of the competition; why customers will choose your product over your competitors.

• Who are our competitors?
• What are the competitors main products and services?
• What threats does the competitor pose to our business?
• What are the strengths and weaknesses of our competitors?
• What are the objectives in the market place of the competitors?
• What strategies are the competitors using?
• What is the competitors market share?
• What market segments do the competitors operate in?
• What do customers think of the competition?
• What does the trade think of the competitor?
• What makes their product good?
• Why do customers buy their product?
• What problems do customers have with the product?
• What is the competitors financial strength?
• What resources do the competition have available?

The focus is on how well the customer benefits and needs are satisfied compared to competitors, and not on how the features of the product compare. For example, key customer benefits might include affordability, can be purchased online, or ease of use, but not a technical feature list.

Competition Presentation in the Business Plan

The business plan competitor section can be presented in a number of formats including a competitor matrix, but an informative way of presenting is using Harvey balls . Harvey balls allow you to grade each customer benefit from zero to four, and to show a comparison of these benefits to your main competitor products. The competitors might be individual identified companies, or a generic competitor such as ‘fast food restaurants’.

In the example below, the key benefits of the product are compared against three main competitors. Each row represents a key benefit to the customer, the first column represents your business, and the remaining three columns each represent a chosen competitor.

The investor will want to understand that your product has the potential to take a major share of the chosen target market by being shown that it is sufficiently competitive for a number of key customer benefits.

This is part of the financial projections and Contents of a Business Plan Guide , a series of posts on what each section of a simple business plan should include. The next post in this series will deal with the competitive advantages the business has in the chosen target market.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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