Competition is the essence of a marketplace and is inevitable, since very few industries have monopoly or near-monopoly conditions. It is vital for companies of all kinds to assess their competition on a regular basis. Although many entrepreneurs believe they know their competition, I maintain that by preparing a formal and systematic assessment of your competitors, you can enhance your position and improve your profitability.

I recently pitched my services to a young would-be entrepreneur who believed his proposed business concept did not exist in the marketplace and had no competition. He believed that once he set up his company and a Web site to sell the product, the world would come knocking on his virtual door. He had no doubt that demand would be there, even though he had done no market research. Last I heard, he was still in search of the venture capital he was sure he deserved.

The meeting gave me food for thought. Too often companies do not take the time to fully understand their competition, acting as though they were operating in a vacuum. This may be understandable: we are usually too busy getting today’s work done to think about what the competition may be doing. But this kind of ignorance rarely leads to bliss.

I recommend companies routinely analyze the strengths and weaknesses of their competitors. Knowing their strengths provides you with insight into what works well. Conversely, knowing their weaknesses often highlights areas in which you could gain an advantage. Above all, it is important to be realistic.

A comprehensive competitive assessment meeting should include representatives from all areas of the company, from senior managers to support staff. Include accounting and customer service representatives. Since your competitors deal with many of the same vendors and customers you do, having full representation from your company’s various divisions will ensure that no stone is left unturned. Each department will have a different view of your competitors. One thing is for sure: the perspective of senior management alone is insufficient. A facilitator, whether internal or external, should be assigned to coordinate and conduct the meeting.

Well before the meeting, distribute an agenda and strongly encourage employees to give some thought to the topics and come to the meeting prepared. The meeting should focus on a mix of qualitative and quantitative topics.

Agenda items might include:

• Each attendee’s thoughts as to who the company’s competition really is and why. You would be surprised at the range of answers this often provides;
• An analysis of competitors by function, i.e. management, sales, marketing, operations, technology, purchasing, public relations, R&D, customer service, accounting and finance, etc. Each area might be given a rating on a scale of 1 to 10. Add up the points. Then ask attendees to rate your own company in a similar fashion. Discuss the results and create an action plan for improvement;
• An analysis of the competitors’ service and product offerings. Obtaining copies of their sales and marketing brochures, and looking at their Web sites can reveal useful information. The fact that they offer a particular product or service does not necessarily mean you should, too. However, such an analysis may suggest areas that are ripe for expansion or elimination;
• Comparisons of pricing. This can provide insight into how the competitor derives its revenue and may also yield details of its cost structure and profitability;
• An assessment of the competitors’ perceived recognition in the marketplace. This information can come from customers and vendors, both yours and theirs. Knowing how much of the competitors’ public persona is merely good PR vs. good work is invaluable;
• An assessment of the competitors’ indirect marketing, i.e. their ability to handle the many administrative tasks that any organization must perform. Here, too, vendors and customers can provide insight;
• A financial assessment, especially where information on publicly traded companies is readily available. Ascertain which divisions are more profitable than others. Note what their growth rates have been year to year and/or quarter to quarter in revenue, cost of sales, and pre-tax profits. Calculate revenue per employee as a simple measure of productivity. Compare this to your company;
• The same documents will indicate how your competitors present themselves, and may include their analyses of the industry, including you as their competitor.

Knowing your competitors’ strengths is a basis for self-improvement. We should always be tuned in to what the competition is doing. This is a year-round project, not just an annual event. Your business works year round, so do your competitors.