One of the key factors for business success lies in knowing who your competitors are and what they are doing. Sure, you have to concentrate on your own business but the competition is an ever present, formidable threat to your viability and profitability. By knowing what the competition is up to, you are in a good position to anticipate their strategic moves and develop your own tactical offence before it is too late.

And although it is never too late to start, the best time to investigate your competitors is before you've opened your doors. A detailed competitive analysis should be part of every business plan and every strategic planning process thereafter. You can use a formal model like Porter's Five Forces model that looks at the threat of new competitors, the threat of substitute products, the bargaining power of buyers in the industry, the bargaining power of suppliers to the industry, and the degree of rivalry between existing firms, or you can use a framework of your own. The important issue is not how you organize the information, but what information you gather.

A through competitive analysis includes five main sections:

• Competitor list-current and potential competitors including substitute products

• Competitor product summary-look at the 4 P's (product, price, promotion, and place) for each product

• Competitor strengths and weaknesses-identify potential gaps in product or service delivery that you can exploit

• Competitor strategy-use financial and other historical information to paint a picture of where the competition has been and the direction it is heading

• Market analysis-can the market support the industry participants?

To answer the questions raised by the competitive analysis, there are a wide variety of research tools available. The most common sources of competitive information are:

• Direct observation-visit the competition and ask questions

• Customers-find out what people are saying about you and your competition

• Internet-there is a wide array of industry and market information available online

• Marketing material-find out how the competition is positioning its products: watch for brochures, advertisements, trade shows, and promotions.

• Written research-there are many industry journals, business publications, and databases that present competitive information within industries. The local library or Chamber of Commerce are good places to start this type of search.

It's a good idea to become very familiar with the process of competitive analysis because it is not a one-time event. Just as your business changes, so do the industry and your competitors. You need to be doing a competitive scan on a continual basis if you want to stay informed. By keeping current you will improve your ability to not only react to competitive changes, but to anticipate and plan for those changes to mitigate the potential damage to your business.

Competition can be fierce and in order to form sound business strategies, you need to have as much information as possible. There are enough obstacles to business success; arming yourself with knowledge about the industry and the competition before you get too far along in your own business strategy is an effective way to ensure your business will not fall prey to competitive forces. By thinking in a proactive manner about your competition, you significantly increase your chances of business profitability and longevity.

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