You need to know your competition. Not to follow them or to compete with them, but to distinguish yourself from them. Its no use to go into a head-on competition with a powerful market leader. Check for weaknesses in your competitors armor, look for disgruntled customers, dance around your competitors, float like a butterfly and sting like a bee (Mohammed Ali, before his legendary fight against George Foreman in 1974). You can use the Blue Ocean Strategy Canvas to compare yourself with your main competitors. For more traditional competitor analysis see below. Take a look at Abell, Blue Ocean, Customer Value and Pitch & Sales to figure out HOW you want to distinguish yourself from your competitors.
The question 'who are actually my competitors' is not easy to answer. Broadly there are four levels of competition:
One common and useful technique to investigate a market is to construct a competitor array. The steps include:
In this example competitor #1 is rated higher than competitor #2 on product innovation ability (7 out of 10, compared to 4 out of 10) and distribution networks (6 out of 10), but competitor #2 is rated higher on customer focus (5 out of 10). Overall, competitor #1 is rated slightly higher than competitor #2 (20 out of 40 compared to 15 out of 40). When the success factors are weighted according to their importance, competitor #1 gets a far better rating (4.9 compared to 3.7).
Two additional columns can be added. In one column you can rate your own company on each of the key success factors (try to be objective and honest). In another column you can list benchmarks. They are the ideal standards of comparisons on each of the factors. They reflect the workings of a company using all the industry's best practices. (source wikipedia.com).