Business strategy and competitive analysis

Succeeding in business isn’t just about having a great product or service. Because of rivalry from companies offering the same value to customers, success has much to do with organizations creating plans that enable them to compete effectively.¹

When looking to advance a career in strategic business management, you may wonder how to develop an effective strategy and manage a company in a fiercely competitive environment. Read on to discover frameworks firms can use to conduct competitor research, create effective business competition strategies, and gain an advantage over their rivals.

A business strategy is a plan outlining how an enterprise intends to achieve its goals. It guides decision-making and resource allocation. When built correctly, it helps organizations gain an upper hand in the industry.²

Competitive analysis, on the other hand, involves a company researching its direct competitors to understand their strengths and weaknesses. It can help an organization do the following:

• Understand the market landscape in order to make informed strategic decisions.^{3, 4}
• Identify gaps in its business intelligence and strategy that competitors address.^{3, 4}
• Benchmark its own results against competitors’ performance to find out areas of improvement.^{3, 4}
• Build marketing strategies that leverage a brand’s unique value proposition—that is, business value that sets the organization apart from direct and indirect competitors.^{3, 4}
• Stay on top of changes in the industry to improve a company’s competitive advantage.^{3, 4}

Frameworks for strategic planning and competitive analysis

Some of the most popular approaches for assessing a firm’s internal and external environments, and for evaluating the competitive dynamics in business in a given industry, follow here.

SWOT analysis in business is a review of Strengths, Weaknesses, Opportunities, and Threats.

Organizations use it to evaluate internal and external elements that influence their competitiveness in a particular industry.

The four segments are:

• Strengths are internal positives that an organization can control and that often provide a competitive advantage. Examples include high product quality, strong brand reputation, and access to a skilled (and experienced) workforce.⁵
• Weaknesses are internal traits that negatively affect a company. Examples may include unsuitable business location, a low-quality product, knowledge gaps in an organization’s team, and insufficient resources to compete effectively in the market.⁵
• Opportunities are external elements that are likely to contribute to business success. Examples include favorable laws, technological advancements in a particular industry, and the ability to provide value that competitors can’t.⁵
• Threats are external factors that a company has no control over and that can hinder success in the industry. Examples include current and potential future competitors, negative technological changes, and unfavorable regulations.⁵

PESTLE analysis is a framework for strategic business management. It helps organizations understand external factors that can affect business strategy and decision-making.

PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental factors:

• Political factors include all ways a government intervenes in economies. They include tax policies, laws to protect local businesses from international competition, industry-specific regulations, and trade agreements between countries. They help firms gauge their ability to access a target market in different places.^{6, 7}
• Economic factors can directly influence an organization’s profits. Some examples are inflation, interest rates, and consumer spending. Analyzing these elements allows businesses to anticipate economic trends and adjust their strategies accordingly.^{6, 7}
• Social factors involve the demographics, beliefs, traditions, and attitudes of people in a specific region. Evaluating them helps an organization create a marketing strategy that resonates with the needs, preferences, and behaviors of its target audience.^{6, 7}
• Technological factors such as automation show how a company leverages digital tools in its daily operations. They also encompass customers’ preferences for using modern technology. For example, if customers prefer buying products online, a business may prioritize having an e-commerce store rather than a physical storefront.^{6, 7}
• Legal factors consist of laws in the jurisdiction in which an organization operates. They include health and safety requirements, labor regulations, advertising standards, and anti-discrimination laws. Considering them in strategic planning can help organizations stay on top of regulatory requirements.^{6, 7}
• Environmental factors focus on how a business’ operations affect the natural environment. They include pollution, climate change, and waste disposal. Analyzing them when building a business strategy can help companies brainstorm sustainable practices.^{6, 7}

Porter’s Five Forces help businesses analyze the level of competition in an industry. They outline the five key forces for competitor analysis and how they influence profitability in a specific market segment:

• Competitive rivalry: This element focuses on how fierce the competition is among existing players in a particular industry. The more competitors in an industry, the more intense the rivalry. Likewise, competition is intense when products in a given market are closely similar because customers can easily switch from one brand to another.⁸
• Threat of new entrants: This part of the competition analysis framework assesses how easy it is for new companies to enter an industry. Factors influencing how readily new players can step into a market include capital requirements and regulatory hurdles. Industries with high barriers to entry are less susceptible to new competition. Each organization in such sectors has a considerable market share.⁸
• Bargaining power of suppliers: Here, organizations analyze how much control suppliers have over prices and terms. The fewer suppliers of materials there are in an industry, the greater their negotiating power.⁸
• Bargaining power of buyers: This part of the framework evaluates buyers’ level of control over prices and terms. Customers’ negotiating power increases or decreases depending on the number of buyers, the volume of products each can purchase at once, and how well they know the market.⁸
• Threat of substitutes: This force evaluates the likelihood of target customers finding alternatives to an industry's products or services. When substitutes are readily available at a cheaper price than commodities in a specific industry, that’s a huge threat to organizations in that sector.⁸

Today’s volatile marketplaces require agile, strategic thinkers with comprehensive knowledge of business competencies. In KU's online MBA program taught at the KU School of Business, you will learn the core skills and strategic perspectives to manage an organization in the modern business environment.

Because the program is delivered online, you can study on your own schedule to balance your courses with work, family, and other commitments. You’ll also get opportunities to connect with peers and build a professional network.

Talk to an admissions outreach advisor today to learn more.