Conducting a competitor SWOT analysis can help businesses make better decisions by understanding their competitors more thoroughly. Ultimately, making the right decision is about having the right information and taking decisive action.
When you conduct a SWOT analysis, you use a framework for gathering and analyzing data that makes the whole process more efficient and effective. In this article, we’ll discover exactly what a SWOT analysis is, when to use one, and 5 steps to conducting an effective competitor SWOT analysis.
What is a Competitor SWOT Analysis?
SWOT stands for:
- Strengths: What do we do well? What makes us unique?
- Weaknesses: What are our areas for development? How can we improve?
- Opportunities: What are our goals? Are there changes in the market we can take advantage of?
- Threats: Are there industry trends or changes we need to overcome? Are there any external factors that pose a threat to us?
When conducting a competitor SWOT analysis, each of these four elements are placed on a matrix and considered in turn.
While a SWOT analysis can be used to understand your own strengths, weaknesses, opportunities, and threats, it can be extremely useful to complete one from your competitor’s point of view. In doing so, you gain a better understanding of your competitor’s business and, indeed, your own.
When to Conduct a Competitor SWOT Analysis
Now that you understand what a competitor SWOT analysis is, you may be wondering when and why you would want to conduct one.
Well, there are various reasons to take a closer look at your competitor in more detail. Here, we will discuss the most common ones:
When you’re feeling stagnant
Perhaps you’re unsure what your next move is, you haven’t been generating new leads, or you’ve noticed your competitor is making some big marketing moves. Maybe you just feel like your business is stuck in a bit of a rut.
You may even have invested in software to give you a competitive edge, but feel like it’s just not hitting the mark. If this is the case, using application rationalization alongside your SWOT analysis will be helpful. What is application rationalization? This is the ongoing process of critically appraising an organization’s application stack to ensure it is effectively serving its purpose.
Additionally, consulting a B2B sales guide can provide structured strategies and insights to enhance your sales approach and drive growth.
Whilst looking inward at your own organization is essential, it is also highly useful to understand your competitor’s position. Conducting an effective competitor SWOT analysis can help you gain a fresh perspective, identify any possible issues, and come up with a plan to address them.
When you’re entering a new market
If you plan to enter a new market, you need to do your research. You might initially want to conduct a profitability analysis to determine where to allocate your efforts and resources.
You may wonder, what is profitability analysis? It is simply understanding which products and services are most profitable. It can be used to assess the possible impact of changes such as changing pricing, launching a new product, or entering a new market.
An important part of your research will be understanding your own position and “what if” scenarios. You will also want to gain an understanding of your competitors and their position in the market.
By understanding your competitors’ strengths, you can plan how to overcome them. By understanding their weaknesses, you can plan how to take advantage of the areas in which they lack. Additionally, you can anticipate any threats and gain insight into how likely it is that you will succeed in the new market.
A thorough and effective competitor SWOT analysis will help you formulate the best course of action when entering a new market.
When you’re launching a new product
Similarly, if you plan to launch a new product, it is essential to understand your competitors and their products. A competitor SWOT analysis helps you to answer questions such as:
- Are our competitors offering a similar product?
- Does this product appeal to our target market?
- What features do customers value?
- What prices are customers willing to pay for this product?
Gaining insight into the market in this way will help you position your product appropriately in the current market and stay a step ahead of your competitors.
When you’re planning a marketing campaign
When you’re about to launch a marketing campaign, it is helpful to understand your competitor’s marketing strategy, too. You can take inspiration from their successes and avoid their shortcomings. A data-driven marketing strategy will help you optimize your campaign and increase your conversion rates.
What’s more, a competitor SWOT analysis will give you insights into who your competitors are targeting and which channels they are using to do so. Armed with this information, you gain clues into their overall marketing strategy and can make decisions about your own. Additionally, consider leveraging technology to automate marketing efforts, which can enhance efficiency and consistency in your campaigns.
Furthermore, a thorough examination of their social campaigns can reveal critical insights into their strategies for digital engagement and audience interactions. This detailed analysis will enable you to identify which tactics have been successful and where your approach may provide a competitive advantage. By doing so, you can make more informed and targeted marketing decisions.
5 Steps to Conducting an Effective Competitor SWOT Analysis
Understanding your competitors and their position in the market is essential. Yes, you could use AI to predict your competitor’s next move, but this is best done alongside tools such as a SWOT analysis.
Here, we will discuss the 5 steps to conducting an effective competitor SWOT analysis to improve your business decisions and set you apart from the rest.
1. Identify your target competitor
The first step in conducting an effective competitor SWOT analysis is to identify who your competitors are. This may sound simple, but there is not always a clear-cut answer and will depend on your industry and market. For example, in a niche market, you may only have one direct competitor. However, a business in a more saturated market may be competing with dozens of similar businesses.
When conducting a competitor SWOT analysis in a larger market, you will want to choose specific competitors depending on your overall goal or objective.
For example, if you are entering a new market, choose competitors who are established in that market. If you are conducting a SWOT analysis because your business has grown stagnant, choose a competitor who is dominating the market.
To help you identify your target competitor for your SWOT analysis, you can consider direct or indirect competitors.
Direct competitors are those organizations that are offering similar products or services to the same target market. Meanwhile, indirect competitors target your customers with a different solution to the same problem.
2. Gather information from the competitor
Once you have carefully considered which competitor or competitors you wish to analyze, you can start gathering information about them. You can gather data in various ways, including:
- Website. This can give you information about their products or services, pricing, and tone of voice.
- Social media presence. This gives you an insight into their marketing strategy, target audience, and their interactions with their customers.
- Newsletters and blogs. Read their blog posts and subscribe to their newsletters. Are they sending out highly targeted emails that blow yours out of the water? This will help you understand their branding and how they communicate with their customers.
- Industry reports and financial reports. These can give you valuable insights into your competitors’ revenue and market share. If their financial reports are public, you’re going to want to see them!
- Press. Read news articles and press releases about your competitors. What are the media saying about them?
- Reviews. Read customer reviews and testimonials about your competitors. What are their customers happy and unhappy about? Depending on the objectives of your SWOT analysis, you may even want to read some employee reviews on sites like Indeed.
From this data, you will build a picture of your competitor and their position in the market. You will also begin to see how they view themselves and how they want to be seen.
3. Use the SWOT matrix to organize your data
Okay, you’ve gathered LOTS of data about your competitor. Now it’s time to organize the information into the SWOT matrix that we discussed earlier. Remember, SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
It is good practice to complete a SWOT analysis for your own business and directly compare this to your competitor’s. Simply take the data you have gathered about your competitor and organize it accordingly, alongside information you have about your own company. This should help you clearly see where you stand compared to your competitor.
Let’s take each section of the SWOT analysis in turn and delve a little deeper.
Strengths
Identify your competitor’s strengths. What makes them stand out? Where are they excelling? Perhaps they have a strong social media presence with high levels of interaction from their customers or high levels of website engagement. Maybe their product has superior features, or their pricing is highly competitive.
Whatever their strengths are, it’s important to recognize them. Of course, you’d like to think you outperform your competitors in all areas of business, but that is an unrealistic view.
Recognizing and acknowledging that your competitor has the one up on you in some areas is a necessary step in understanding the market as a whole and will help you make better business decisions.
Weaknesses
Where do your competitors fall short? There will inevitably be areas where your competitors need to improve. Pinpointing these weaknesses can help you understand how to use their vulnerabilities to your advantage.
You might notice that you outshine one of your competitors in a particular area of business. Perhaps their customer reviews are less than glowing, or your business operations are far superior. Maybe they are asking themselves, “how do multi-line phone systems work?” while you already have one in place.
If that’s the case, great! You can use this knowledge to your advantage, perhaps as part of your next marketing campaign, to highlight where you have the competitive edge.
Opportunities
These are the external opportunities that your competitors may be able to capitalize on. For this section, consider:
- Are there any market trends that will benefit your competitor?
- Are there segments of the market they may be planning to tap into?
- Are you aware of any strategic partnerships they are planning?
- Are there opportunities in the market that you can capitalize on before your competitors do?
Staying abreast of industry trends, changes in the market and social trends helps you take advantage of opportunities before your competitors do. Understanding the opportunities your competitors may be faced with will allow you to dominate the market.
For instance, while identifying opportunities your competitor may want to take, you might notice an emerging trend in ecommerce; this will help you tailor your eCommerce ads to appeal to a wider audience before your competitors have a chance to do the same.
Threats
Threats are external factors that could hinder your competitor’s success. This could be anything from inflation to a worldwide pandemic. Threats could even be slight shifts in consumer preferences or expectations.
Depending on your industry or type of business, threats could also be changes in legislation or regulations. Those in the financial sector, for example, should be aware of the Digital Operational Resilience Act and how it will affect them.
Additionally, vulnerabilities in transaction processes can lead to increased chargebacks, posing significant financial risks. Proactively implementing strategies to prevent chargebacks is important for mitigating potential losses and enhancing customer trust.
Recognizing threats to your own business is important, but understanding the threats that your competitors are facing can help you predict their next move. Depending on your market, your competitors may be facing the same external threats as you are, but how you react may determine how successfully you overcome those threats.
4. Analyze your findings
Once you have gathered all of the data and established your competitor’s strengths, weaknesses, opportunities and threats, it’s time to really unpick the information at your fingertips.
Identify any patterns or trends you can see, and think about what this information means for your business. The strategic insights you gather from this process will inform your decisions and give you an edge over your competitors.
Understand where your competitor’s strengths lie and how you can mitigate them. Consider the weaknesses of your competitors and how you can exploit them. You must also consider the external opportunities that you and your competitor face and how you will seize them before they have the chance.
5. Identify next steps/take action
This is arguably the most important step in this process.
You need to take action. Put the information you have spent time collecting and analyzing to use.
Come up with a strategic plan for your next steps. Maybe you need to improve your product or invest in your customer service. Perhaps you need a better social media strategy or to invest in APM to streamline your tech stack.
Whatever you decide, you can rest assured that your next move is based on a thorough data analysis and will help you outdo your competitor in some way.
Develop a plan that clearly sets out:
- Your goals or objectives
- Why this is a focus for you
- How you will achieve them
- A timeline
Whether you want to increase customer lifetime value or launch a new product to the market, remember to take it one step at a time. It is not realistic to overhaul your whole business at once.
If your competitor SWOT analysis has highlighted multiple areas for development, you must prioritize them based on your overall business goals.
Final Thoughts
Conducting an effective competitor SWOT analysis can be a huge factor in your business’s long-term success. It helps you understand the market and your place in it compared to your competitors.
Understanding your competitors’ strengths, weaknesses, opportunities, and threats can help you stay one step ahead and position yourself as a market leader.
If you feel like your company is a little stagnant, use a competitor SWOT analysis to plan your next steps. You can also conduct a competitor SWOT analysis when you’re entering a new market, launching a new product, or embarking on a marketing campaign.
Don’t forget that an effective competitor SWOT analysis involves taking action. Take your time to gather the appropriate data, analyze your findings, but most importantly take decisive action. When you complete a competitor SWOT analysis using the tips outlined in this article, you will be well on your way to success.