Competitive analysis: template, examples and Porter’s five forces

What is competitive analysis?

Competitive analysis compares businesses and alternatives that meet the same customer need. It examines their offers, target customers, terms, sales channels and available evidence of quality.

It differs from market research, which looks more broadly at demand and buying behaviour. Porter’s five forces, explained below, complements the comparison by examining the industry’s economic pressures.

Before looking for competitors, write down your scope: the service, customer group, geographical area and level of support. “Marketing agencies” is too broad. “Building a first website for independent shops in French-speaking Switzerland, with support after launch” gives you a useful basis for comparison.

Then identify the decision you need to make: designing a package, selecting a customer segment or changing a promise in your sales material. That decision determines which information you need.

This work is useful before launching, when margins fall or when a new entrant changes customer expectations. Ongoing competitor monitoring means keeping your findings up to date. Review your comparison especially when offers, prices or buying criteria change.

Identify direct competitors, indirect competitors and substitutes

Look at the choice through your customer’s eyes. When someone hesitates to buy from you, which options are they actually comparing?

A few carefully selected businesses are usually more useful than an exhaustive list. Include a highly visible provider, a budget option, a specialist offer and the alternatives your prospects mention.

Do not confuse visibility on Google with market dominance. Some providers rely mainly on referrals or professional networks. Ask prospects which businesses they actually considered and why.

Define a local market you can realistically serve

For example, a fictional bicycle repair workshop in Carouge does not face exactly the same alternatives as a mobile service covering the whole canton of Geneva. Compare service areas, travel time, opening hours and services, then test your assumptions with customers. Municipal boundaries help describe a market; they do not automatically define the limits of your customer base.

Collect comparable information and record its date

The Swiss government’s SME portal points out that small businesses rarely publish their revenue or margins. It suggests examining sources such as their websites, documents and offers. Make these information gaps visible in your comparison.

Record a date and source link for each observation. Read package terms and limitations: the number of service visits, minimum commitment, mandatory extras, setup charges and exit costs may change the comparison.

Use simple labels: published, confirmed directly, estimated and unknown. A delivery time absent from a website remains unknown. It does not become poor simply because your business publishes its own.

Customer reviews can reveal buying criteria, but they do not capture every aspect of a provider’s quality. Look for recurring themes, review dates and the responses given. Avoid turning one isolated experience into a general conclusion.

Document information you can access legitimately. A useful analysis does not require a competitor’s confidential data or a false identity.

How to carry out competitive analysis in five steps

1. Define the decision

Specify the service, customers, territory and question to resolve: pricing, the offer, a sales channel or the level of support.

2. Identify the customer’s alternatives

Select the businesses and solutions your prospects actually compare. Include a specialist offer, a lower-cost option and other ways of meeting the need.

3. Gather the same information for each option

Record the scope, full price, delivery times, support, sales channels and available evidence. Keep the sources and dates.

4. Compare and explain the differences

Build your comparison table, then use Porter’s five forces to understand pressures beyond the visible offers. Distinguish a difference customers value from an additional feature they may not need.

5. Decide and test

Choose a few actions, assign responsibility and set a review date. Testing with prospects or on upcoming quotations helps compare your intended positioning with actual demand.

A reusable competitive analysis template

Choose criteria based on your customers’ expectations. A feature that does not influence their decision does not necessarily deserve its own column.

If you assign scores, define the criteria first. A score does not replace evidence. You can weight criteria according to their importance to your target customers, but explain the basis: interviews, sales conversations or customer feedback.

An “unknown” entry is useful information. It shows where more research is needed without creating false precision.

Example: compare three offers over twelve months

The following offers are entirely fictional. They illustrate how to compare costs and deliverables; they are not market prices.

The calculations are 2,400 + 12 × 90, 1,500 + 12 × 40 and 12 × 35. They assume comparable amounts and exclude optional extras, VAT and the customer’s time. Treat these items consistently in a real comparison.

The CHF 420 option is not necessarily the best choice for a shop owner who does not want to build a website. Conversely, regular support does not automatically justify a higher price if the prospect does not need it.

A possible next step is to test a package that clearly specifies the content delivered, handover and support. Then check whether customers will pay for that scope and whether you can deliver it at a sufficient margin.

Porter’s five forces: understand pressures on profitability

Michael Porter introduced the framework in a 1979 Harvard Business Review article. Harvard’s Institute for Strategy and Competitiveness explains how it examines competition and the distribution of economic value within an industry.

Demand alone does not ensure an attractive margin. Customers may push prices down, suppliers may raise charges and alternative solutions may make an offer less appealing.

The framework is a way to organise investigation, not a success score. Your business’s choices still matter: whom you serve, what you provide and how you organise delivery and costs.

For each force, identify a concrete mechanism. Listing suppliers tells you little unless you know which ones can deliver the components you need. Likewise, counting competitors does not explain whether customers see meaningful differences between their offers.

Pressures can overlap. A company might have many customers but rely on a single platform to reach them. It should examine the platform’s terms and the possibility of building direct customer relationships.

1. Rivalry among existing competitors

Look at the quotations your prospects receive and the concessions you make to win work. Are you reducing prices, including extra services or spending more time on sales? Similar offers and easy switching can make these concessions harder to avoid. Spare capacity may also encourage discounting.

2. Customers’ bargaining power

A customer responsible for a substantial share of your sales can influence prices, payment deadlines and service expectations. Count customers, but also measure concentration and assess how easily they could replace you.

3. Suppliers’ bargaining power

Identify inputs you cannot readily replace: essential materials, core software or scarce expertise. Check the cost and time required to switch. A supplier price increase can reduce your margin even while sales remain unchanged.

4. The threat of new entrants

Ask what another business would need to compete credibly: capital, skills, authorisations, reputation or access to sales channels. Low startup costs can make entry easier without making customer trust easy to earn.

5. The threat of substitute products or services

Customers may bring work in-house, use a self-service tool or stop buying a service that no longer seems necessary. Compare the outcome and total cost from their perspective, including their time and the alternative’s constraints.

How to apply Porter’s framework to your project

Define the industry before assessing the forces

A scope such as “services in Switzerland” is too broad. The businesses you compare should face reasonably similar conditions.

Our fictional example concerns outsourced IT support for small businesses in French-speaking Switzerland, delivered remotely with limited on-site visits. It does not automatically include large international contracts, consumer hardware sales or software development.

Define four dimensions: customers, need, territory and delivery model. Then check them against customers’ actual choices. A remote service can compete with a local provider even when its headquarters are elsewhere.

If your company has several activities, analyse them separately where customers, suppliers or economic conditions differ substantially. You can then compare shared dependencies.

1. Gather evidence

Use published offers, customer interviews, supplier quotations and documented industry knowledge. Record dates, limitations and unknowns. Public sources are a starting point; they do not reveal all of a competitor’s costs.

2. Link each finding to an economic effect

“Contracts are easy to cancel” may imply a risk of customer departures. “Switching tools takes several months of training” may imply a high switching cost. Write down the connection without assuming it applies equally to every business.

3. Prioritise the pressures

You can classify a force as low, medium or high if you explain why. These are working judgements. Avoid an overall average that hides a critical dependency.

4. Choose a test or decision

A significant pressure should lead to action: diversify suppliers, review a contract, reduce a cost or target another customer group. Assign an owner and deadline. Without that step, the table remains descriptive.

Five forces example: a small IT services business

This table illustrates the method. It is not a study of Swiss companies and does not claim to rate the actual industry.

The business could focus on a clearly defined service with specific response times. However, the promise is only credible if the team has enough capacity to meet it. Plan for absences and simultaneous requests too.

A recurring contract can improve revenue visibility while creating substantial service commitments. Assess both effects before deciding.

Worked example: a 10% price cut can eliminate the remaining margin

For illustration, suppose you have 20 customers paying CHF 300 per month, giving revenue of CHF 6,000. Variable costs are CHF 60 per customer and fixed costs are CHF 4,200. The simplified monthly surplus is CHF 600: 6,000 − 1,200 − 4,200.

If competitive pressure leads you to cut prices by 10%, revenue falls to CHF 5,400 for the same number of customers. With unchanged costs, the surplus becomes zero. A seemingly modest discount has absorbed the entire remaining amount.

This simplified calculation does not include every item in a company’s accounts. It shows why pricing pressure needs to be quantified in your business plan’s financial forecasts.

Also test the loss of a customer, higher software charges or additional staffing needs. Porter’s analysis helps you select relevant scenarios; you still need to calculate their impact. Carry the timing of receipts and payments into a cash flow forecast, because a profitable offer can still create a short-term cash shortage.

Competitive analysis, Porter and SWOT: what is the difference?

The five forces focuses mainly on the structure of competition. Your experience, process quality and funding capacity need further analysis. A SWOT analysis brings together strengths, weaknesses, opportunities and threats, covering both internal and external factors.

Update the analysis when technology, rules or buying behaviour change. Government is not automatically a “sixth force” in the original model: regulation can affect entry barriers, costs and relationships between businesses.

Before launching, start with market research to test whether the need exists. Use Porter’s framework to examine economic pressures, then assess your positioning against your budget and available resources. Each step answers a different question.

Turn differences into profitable decisions

Choose two or three priorities. For example, clarify what is included, reduce uncertainty about delivery times or focus the offer on a particular customer group.

Give each action a measure and deadline: “Test a simpler offer on the next ten quotations and review objections” is more useful than “Improve our communication”. Ten quotations is an illustrative test plan, not a statistical rule.

Calculate the cost of what makes you different. More telephone support takes time; faster delivery may require stock; fixed pricing transfers certain risks to your company. Build these choices into your business plan.

Once you have your first customers, compare your assumptions with actual requests. Update your SWOT analysis to distinguish proven strengths from benefits you have only promised so far. Reassess competition when an offer changes, a new business enters or prospects change their buying criteria.

For practical exercises in customer interviews and business-model testing, explore our four books for entrepreneurs. Use the exercises to challenge the assumptions behind your competitor comparison.

Frequently asked questions