Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other businesses offering the same products and/or services as you..
Indirect competitors are other options that customers have to purchase from or solve a need that aren’t direct competitors. For example, McDonalds’ direct competitors include other fast food restaurants, while indirect competitors include supermarkets, other restaurants, etc.
With regards to direct competition, you want to detail the other businesses with which you compete. Most likely, your direct competitors will be businesses located close to your location.
For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of customers do they serve?
- What products do they offer?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to stand outside your competitors’ locations and ask customers as they leave what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide superior products/services?
- Will you provide products/services that your competitors don’t offer?
- Will you make it easier or faster for customers to acquire your products/services?
- Will you provide better customer service?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.