How to do a Competitive Analysis (6-Step Framework and Template)

"Differentiation is the essence of strategy" (1). You earn profits not just by what you do for customers but by doing it better or differently than competitors. 

A competitive analysis systematically evaluates your competitors' strengths, weaknesses, strategies, and market positions. It reveals where you can stand out and how to outmaneuver rivals.

Drawing from best practices from top consulting firms like McKinsey, BCG, and Bain, this post will walk you through a structured framework for competitive analysis and a practical step-by-step approach to execute it. The goal is to equip you with a simple playbook to analyze your competition and form winning strategies for your business.
 

Why Conduct a Competitive Analysis?

While customers drive your success, competitors shape your opportunities. A competitive analysis is a structured evaluation of competing businesses to uncover their strategies, strengths, weaknesses, and market positioning. It answers critical questions to refine your decisions and avoid costly missteps:

• Who are your direct and indirect competitors?
• What strategies do they employ? 
• Where are they vulnerable? 
• How can you differentiate? 
   

Competitive Analysis Framework

The following framework, adapted from BCG and Mckinsey's approach, outlines the main elements that should go into your competitive market analysis.

As you can see, the competitive analysis framework consists of three main parts:

1. Assess: Identify direct and indirect competitors and the main forces shaping the market you are in. 
2. Benchmark: Zoom in on your main competitors and analyze each rival’s business in detail. Synthesize where you stand versus competitors. 
3. Strategize: Translate insights into strategic implications and recommendations for your business. This involves prioritizing areas of opportunity, shoring up vulnerabilities, and formulating the broad strokes of your competitive strategy. 
    

6 Steps to Crafting Your Competitive Analysis

How do you turn the above framework into a comprehensive strategy?

Let's go through the process step-by-step:
 

Step 1: Define Your Objectives and Scope

Start by clarifying why you are doing the competitive analysis and what questions you need to answer. Are you developing a new product strategy and need to know how it stacks up against competitors? Entering a new market and unsure of the competitive landscape? Or trying to find weaknesses in a dominant competitor to exploit? Defining clear objectives will focus your analysis on what matters most.

For example, your goal might be "to determine how we can increase market share in Segment X against Competitors A and B" or "to anticipate how Competitor Y will react if we cut prices."

From the objectives, define the scope: which product lines, markets, or geographic regions will you analyze? Also, decide the time horizon (current snapshot vs. 3-year outlook). Establishing a clear scope prevents your analysis project from ballooning. 

(A tip from experience: link the scope to your business problem. If you're concerned about a startup disrupting your niche, include emerging players, even if they're small. If you're focusing on one region, you might not need to analyze competitors' global operations, just their presence in your region.)

Key output of Step 1: A clear project brief or set of questions that the competitive analysis must answer, as well as the scope of your analysis.
 

Step 2: Create an Industry Overview

Begin your analysis by painting a clear picture of the industry in which you and your competitors operate. This industry overview provides context for interpreting each competitor's performance. It ensures your competitive analysis isn't done in a vacuum but rather considers the winds (tailwinds or headwinds) affecting all players in the industry.

Note: You don't necessarily need to do a full market analysis here, but it is important to identify the main forces shaping the market you are in.

Here are a few common components to consider when analyzing your industry landscape:

• Market Size and Growth: Determine the current market size and projected growth rates. This helps in understanding the overall opportunity and potential for expansion within the industry.
   
• Key Trends and Drivers: Identify the trends that are reshaping the industry, such as technological advancements, shifting customer behaviors, or emerging business models. Recognize what is fueling growth and which factors could pose risks.
   
• Regulatory and Economic Environment: Assess the regulatory framework, economic policies, and macroeconomic conditions that could affect the industry.

Step 3: Identify and Prioritize Competitors

With the industry backdrop in mind, zoom in on the competitive landscape. This means identifying who your competitors are and understanding their positioning in the market relative to each other.

Identify competitors

To find competitors, put yourself in your customer's shoes: What options would they consider? Use multiple sources for your research:

• Online Search: Search for your product/service category keywords and see which companies appear.
• Industry Resources: Look at market research reports, industry directories, or comparison websites that list top players in your space.
• Customer Perspective: Check social media, forums, or review sites where your target customers talk about solutions. See which alternatives they mention.
• Sales Insights: If you have a sales team, ask them who they frequently compete against in deals.

Make a comprehensive list of competitors. Include direct competitors (those offering similar products/services to the same customers) and important indirect competitors or substitutes. Don't forget new entrants or startups that could become threats.

(It's easy to get caught up analyzing the whole world here – so focus on the most relevant competitors)
 

Prioritize competitors

For each major competitor you identify, try to map out the following two dimensions:

• Market Positioning (Market Share & Growth): Determine each competitor's size and momentum. Who are the market leaders versus the challengers or niche players? Metrics like market share, revenue, and growth rate are telling.
   
• Customer Segments and Target Markets: Determine who each competitor is targeting. Different competitors may serve different segments of the market – by demographics, customer size, or needs. This can often be inferred from their product lines, marketing, and distribution channels. Also note if they are expanding into new segments (for instance, a company traditionally serving enterprise customers launching a "light" version for SMEs). Overlaps in target audience will indicate direct competition, whereas differing segments might mean an indirect competitive relationship for now.

Once listed, prioritize your longlist of competitors by relevance – typically based on market share, customer segment overlap, or threat level. 
It's often effective to prioritize into tiers (e.g. Tier 1: key direct competitors; Tier 2: secondary or niche competitors; Tier 3: emerging or indirect players). This prioritization will guide how you where to focus in the subsequent steps (major competitors warrant deeper analysis). Ensure you also profile your own company for an apples-to-apples view.

Step 3. Competitor Deep-Dive (Benchmarking)

After surveying the broad landscape, the next step is to deep-dive into individual competitors (typically the top 3-5 ones identified in step 2). Start by collecting as much relevant information on each competitor as possible. 

For each competitor, try and collect data on the following key areas:
(Don't worry about drawing conclusions just yet—at this stage, focus on getting accurate and up-to-date facts.)

• Financial Performance: Gather data on each competitor’s financial health and performance. Look at revenue (and its growth rate), profitability (margins, EBITDA, net income), and efficiency ratios (return on equity, return on invested capital). Financials indicate how well a strategy is translating into results. 
   
• Business Model: Compare how each competitor makes money. Even within one industry, business models can vary widely. Does the competitor rely on product sales, subscriptions, advertising, consulting services, transactions/commissions, or a mix?
   
• Product/Services: What exactly do they offer? Note product lines, features, specs, use cases, and any noted advantages or limitations. Are they focused on a single core offering or diversified across many lines?
   
• Pricing Structure: Document their prices, fees, or pricing tiers. Also note any discounts, free trials, or financing options.
   
• Marketing and Messaging: Understand what each competitor promises to customers and what channels they are prioritizing. Visit their website. Subscribe to their newsletter. Follow their social media. If they publish case studies or blog posts, skim a few to see who their target audience is and what they tout as key benefits. 
  What is their unique selling proposition (USP)? What customer pain points do they mention? What marketing channels are they focusing on?
   
• Sales and Distribution Channels: Analyze each competitor’s sales model: do they sell direct, or through intermediaries like distributors, retailers, agents, or online marketplaces? Note if any competitor has key distribution advantages.
   
• Customer Reviews & Reputation: Read reviews on sites like Trustpilot, Google Reviews, G2, Amazon, or industry-specific forums. What do customers praise or complain about? This can be a goldmine for understanding strengths and weaknesses from the user’s perspective. Pay attention to patterns (e.g., “great product but poor customer support” or vice versa) – AI-tools can be a very effective help here. 

• Operational Capabilities: Look under the hood at how each competitor operates. Strong operational capabilities can be a source of sustained competitive advantage, enabling lower costs, higher quality, or faster delivery. Areas to consider include supply chain efficiency, manufacturing or service delivery processes, technology infrastructure, and scalability of their operations.
   
• Talent & Culture: The people aspect – while harder to quantify – often underpins a company’s competitive strengths. Consider the size and skills of the workforce and the company’s culture. Are competitors known for having top talent in certain areas (engineering, sales, research)? Public sources like employee counts, LinkedIn profiles, or even Glassdoor reviews can provide insight.
   
• Strategic Moves & Initiatives: Finally, catalog recent strategic moves by each competitor. This includes M&A, partnerships, investments in new ventures, divestitures, or major strategic pivots. The goal here is to understand not just where competitors stand now, but where they are heading.

Organize the data you collect in a competitive analysis spreadsheet or template for consistency. One approach is to create a table where each row is a competitor and columns cover categories like Financial Performance, Product/Services, etc.)

The result of this step should be a comprehensive profile for each competitor.

Step 4. SWOT Analysis

With your rich competitor profiles in hand, it's time to synthesize how your company stacks up. A classic and effective framework for this is the SWOT analysis – examining Strengths, Weaknesses, Opportunities, and Threats. 
In the context of competitive analysis, you'll be considering your own organization's SWOT relative to competitors, as well as noting competitors' SWOT profiles to understand their relative advantages/disadvantages.

Here's how to break it down:

• Strengths: Ask: What do we do better than our competitors? It could be superior technology, a strong brand, lower costs due to scale or process efficiency, exceptional talent, a loyal customer base, patents, or exclusive partnerships. List out your key strengths, and critically compare them to each competitor – are these strengths unique to you, or do some rivals share them? Also, identify each major competitor's strengths (e.g., Competitor A has the widest product range, Competitor B has the lowest prices due to a lean cost structure). This helps highlight where each player (including you) has an upper hand. Your strategy should likely leverage your unique strengths in areas that matter to customers.
   
• Weaknesses: Identify your weaknesses relative to key competitors. Where are competitors outperforming us? Be honest – perhaps your product lags in certain features, your marketing budget is smaller, your geographic coverage is limited, or your manufacturing cost per unit is higher than the market leader's. A realistic assessment of weaknesses is crucial to avoid overestimating your position and to decide what internal improvements are most urgent.
   
• Opportunities: These are external factors or trends that you can exploit to your advantage. In competitive analysis, opportunities often arise from changes in the environment or market gaps not yet served. Look back to your industry overview and ask: What external trends play to our strengths or could we take advantage of, ideally ahead of competitors? Opportunities could include an emerging customer segment that is underserved, new technologies you can adopt faster than rivals, or regulatory changes that favor your business model. Each competitor will have its own set of opportunities relative to its situation; your aim is to identify those that align best with your company's strengths and strategic intent.
   
• Threats: These are external factors that could harm your performance. They often come from competitors' actions or market dynamics. Key question: What are the biggest external dangers to our business's success? Obviously, aggressive moves by competitors rank high – e.g. a new entrant with a disruptive business model, or a current competitor developing a game-changing product. Threats can also be broader: economic downturn (reducing customer spending), supply shortages (if all industry players rely on a key commodity, for example), changing customer preferences that erode demand for your product in favor of something else.

The outcome of this step is a clear understanding of where you stand versus competitors:

• What you can confidently leverage (your strengths).
• What internal gaps you need to fix (your weaknesses).
• Where the playing field could allow gains (opportunities).
• Where you must defend or avoid pitfalls (threats).

Step 5. Formulate Competitive Strategy Implications

You have now gathered a wealth of data and identified your SWOT relative to the competition. Now it's time to translate these insights into strategic implications for your business. In essence: What does all this analysis mean for how we should compete and win?

This involves prioritizing areas of opportunity, shoring up vulnerabilities, and formulating the broad strokes of your competitive strategy.

You can approach this by following four steps:

A. Areas Where You Can Win 

Leverage the strengths and opportunities from your SWOT to pinpoint where you have the best chance to outperform competitors. These are the arenas to double down on. For example, suppose your analysis finds that your product significantly outperforms competitors' on a feature highly valued by a growing customer segment – that's a space to play hard.

Another area to win might be customer experience – if competitors are weak in service, and you excel there, make it a pillar of your strategy (e.g. extending support hours, personalized services, loyalty programs). Differentiation is key here – the analysis should reveal what makes you unique in a way customers care about. Formulate how to exploit that uniqueness.

B. Gaps and Challenges to Address

Equally important is deciding how to deal with your weaknesses and external threats. Some gaps you may choose to fix; others you might decide to avoid or minimize exposure to. If the analysis flagged a significant weakness, it likely becomes a strategic priority to address it.

Sometimes, the analysis might also suggest exiting or avoiding certain battles: if a competitor dominates a segment where you are weak and it's not profitable to compete, you might divert focus to other segments. In strategy, knowing what not to do is as important as knowing what to do.
 

C. Strategic Choices and Options

Now synthesize a coherent strategy. This may involve classic strategic choices:

• Will you pursue a cost leadership strategy, a differentiation strategy, or a focus/niche strategy? Competitive analysis will inform this.
• Consider the scope of your competition: do you go head-to-head with the market leader on their strengths, or flank them by focusing on an underserved niche?
• Identify any capability gaps that need strategic action – e.g., if speed to market is crucial and your competitor consistently beats you there, perhaps you need an organizational change or a reconfiguration of your supply chain as part of your strategy.
• Think about where to compete: Are there segments or regions to enter or exit? Maybe analysis shows a competitor retreating from a certain market; that could be your chance to fill the void. Or maybe all competitors are fighting over one lucrative customer segment, causing margin erosion, whereas another segment is relatively untapped.
• Assess if you need to reposition your value proposition based on competitor comparisons. You might decide to highlight different benefits or even rebrand if needed to stand out.

D. Possible Strategic Moves: 

With directions in mind, outline concrete strategic moves. These could include:

• Product strategy adjustments: e.g. invest in developing specific features that your competitor lacks, expand your product range to cover a gap, or improve quality to turn a weakness into a strength.
• Pricing changes: e.g. introduce a more competitive pricing tier, offer promotional deals to win competitor's customers, or conversely, raise prices if analysis shows your product is superior and underpriced relative to value.
• Market expansion or exit: e.g. enter a new geographic market where competitors are absent or weak, or withdraw from a segment where competition is too intense and not profitable.
• Marketing and positioning: e.g. launch a campaign targeting your competitor's weaknesses (comparative advertising highlighting where you outperform), or double down on channels where competitors have less presence (maybe they underutilize social media influencers and you can capitalize on that).
• Partnerships/M&A: e.g. form an alliance with a partner that complements your strengths or helps cover a weakness, acquire a smaller competitor or technology provider to leapfrog in capability, or invest in a startup that could be a future disruptor (and thus neutralize a threat or turn it into a collaborator).

For each strategic idea, tie it back to the analysis: Why do this? Because the analysis showed X about the competition, and this move exploits or responds to it.

By the end of this step, you should have a clear narrative of how your company can win in the market.

This provides direction for the next step: turning strategy into an actionable plan.

6. Actionable Recommendations

The final piece of the puzzle is developing clear, actionable recommendations and a roadmap for implementation. Think of this as the executive summary of what needs to happen next – targeted initiatives based on the competitive strategy implications above, complete with suggested timing and resources.

Here's how to formulate this:

Prioritize Strategic Initiatives: From the various strategic responses considered, select a focused set of initiatives that will deliver the most impact. It's tempting to attempt everything, but a successful strategy is about focus. Identify 2–5 key initiatives that align with winning opportunities or critical gap-filling.

Each recommendation should be SMART (Specific, Measurable, Achievable, Relevant, Time-bound) so that execution can be tracked.

Implementation Roadmap: Lay out a high-level timeline (next 12-24 months, for example) for these initiatives. What should happen in the short term (next 3-6 months) versus medium term (6-18 months)?

Plot the sequence: certain steps may need to precede others (for instance, improving the e-commerce platform may be a prerequisite before a big online marketing push). If helpful, break it into phases:

• Phase 1: Preparation (e.g. allocate budget, build team, do detailed planning, quick fixes).
• Phase 2: Execution of core initiatives (product launch, campaign rollout, etc.).
• Phase 3: Scale and sustain (expanding the initiative, continuous improvement, and measuring results).
• Include checkpoints for evaluating progress. For example, recommend a 6-month review of market share or customer feedback to gauge if the strategy is yielding gains versus competitors, and adjust tactics accordingly.

Resource Allocation and Responsibilities: Provide guidance on what resources (budget, team, technology) will be needed for each initiative and who should lead it. Competitive strategies often fail in execution when no clear owner is assigned.

Establish Metrics and Monitoring: Finally, recommend setting up a competitive intelligence and performance monitoring mechanism. For example, "Track market share on a quarterly basis in our key segments and benchmark customer satisfaction vs. Competitor B's." Ensure there is a feedback loop: as you implement changes, measure outcomes (sales growth, customer acquisition, etc.) and keep an eye on competitor reactions or new developments. Competitive analysis is not a one-and-done project; it's an ongoing discipline.

By delivering concrete next steps, an implementation roadmap, and resource guidance, you turn analysis into action. 

With actionable recommendations in hand, you have effectively translated competitive analysis into a strategic game plan. The leadership team can now move forward with alignment on priorities, armed with deep insight into the competitive playing field.

With actionable recommendations in hand, you have effectively translated competitive analysis into a strategic game plan. The leadership team can now move forward with alignment on priorities, armed with deep insight into the competitive playing field.

Competitive analysis template

A well-crafted competitive analysis requires both the right content and structure. Basing your plan on a proven framework and presentation template can accelerate the process, help maintain the proper structure, and offer ideas for designing and organizing various slide types.

Our PowerPoint Competitive Market Analysis Template follows the approach discussed here. It features 217 template PowerPoint slides designed by former McKinsey, Bain, and BCG consultants. Additionally, it includes three examples of what an effective real-life competitive analysis can look like.