What Critical Factors Do You Consider When Conducting a Competitive Analysis for a New Market?

What Critical Factors Do You Consider When Conducting a Competitive Analysis for a New Market?

We asked CEOs and VPs about the critical factors they consider to help a business thrive in new markets. From analyzing market positioning to understanding market maturity, here are five critical factors to consider when conducting a competitive analysis.

• Analyze Market Positioning
• Identify Competitor Strengths And Weaknesses
• Define The Market Clearly
• Focus On The M&A Landscape
• Understand Market Maturity

Analyze Market Positioning

One important thing I take note of when doing a competition analysis and identifying a new market is market positioning—to be specific, which angles do the competitors go into the market while what are the areas which remain unattended? Factors such as their unique selling propositions (USPs), pricing policies, targeted clients, and their responses help in delineating possibilities for repositioning our product or service to the target market.

If we concentrate on these issues, it is possible to develop a strategy that focuses on previously unmet needs or neglected parts of the market—so we would stay ahead of the competition. In this way, the entire product-creation process is substantiated by the case and even so, marketing and selling strategies are designed to appeal to prospective individuals in the new market.

Identify Competitor Strengths And Weaknesses

As a CEO with over 20 years of experience helping businesses thrive, the most critical factor I consider in a competitive analysis is identifying key competitors’ strengths and weaknesses.

For example, when launching OneStop Northwest, I studied various marketing and business-consulting firms in the area. I found most focused on either enterprise clients or small businesses, with few catering to mid-sized companies. By specializing in flexible, customized solutions for this segment, we gained a competitive advantage.

I regularly analyze competitors’ new services, partnerships, and customer reviews to determine how OneStop Northwest can continue gaining ground. Our model may be replicated, but experience delivering sophisticated, custom strategies is hard to match. Elevating our capabilities and client outcomes is key to defending our position. Some competitors have attempted to copy our model, but finding individuals with the expertise and adaptability to meet each client’s unique needs is challenging. OneStop Northwest’s team is our true competitive edge.

Define The Market Clearly

Clearly defining the market you're in is the key. You can define the market to be as big or as small as you like, and in ways that position any company as a winner/leader. The effectiveness of your analysis lies in correctly choosing the market-defining factors that will determine the projected success of the company or the business that is being researched.

Focus On The M&A Landscape

I work in corporate development for an open-source company. When doing competitive analysis for new markets for an open-source company, one crucial aspect to focus on is the M&A landscape and its impact on open-source adoption as well as ecosystem dynamics.

The open-source market is experiencing significant M&A activity, which can drastically alter the competitive landscape.

Large tech companies are acquiring open-source vendors to enhance their portfolios. For example, IBM's acquisition of Red Hat for $34 billion in 2019 significantly reshaped the market and still has an impact on it today. M&A activities can lead to changes in open-source project governance, community dynamics, and product roadmaps, potentially affecting market adoption and customer trust.

When analyzing the market, pay close attention to open-source audits because M&A transactions often involve thorough open-source audits to assess risks and compliance. Understanding common findings can reveal industry-wide challenges and opportunities. Also, you have to pay particular attention to intellectual property risks. Evaluate how companies in the target market manage open-source license compliance and potential IP risks. These are critical factors in M&A deals.

Additionally, you have to consider how M&A trends might affect your market entry strategy. Identify potential partners or acquisition targets that could strengthen your position in the new market. Assess how recent M&A activities have affected the competitive landscape and where gaps or opportunities might exist. Understand how open-source companies in the target market are valued, which can inform your growth and investment strategies.

By focusing on the M&A angle in your competitive analysis, you can gain insights into three very important things: 1) the maturity and consolidation level of the open-source ecosystem in the target market, 2) potential risks and opportunities associated with open-source adoption and compliance, and 3) strategic moves that could give you a competitive edge or accelerate your market entry.

This approach allows you to not only understand the current market dynamics but also anticipate future shifts in the competitive landscape, enabling more informed decision-making for your open-source company's expansion strategy.

Understand Market Maturity

Understanding market maturity—the stage of the market—informs virtually every aspect of analyzing the competitive landscape. The profile of buyers, the number of competitors, and their market penetration provide critical insight into how attractive a new market may be.

For example, if the buyers of a solution are primarily risk-takers and change agents, the number of competitors can be less of a factor, since the main market is still not buying; it is an early market. If the market is experiencing 40%–60% growth and already has 3–4 companies leading in the category, then it is highly likely that those companies will dominate the main market, and it may be too late for organic penetration into the market but might be ripe for penetration via M&A.

The stage of the market also informs what the whole product offering must be. The early stage may accept an MVP solution, while later stages demand a more complete offering.