Internal analysis -how to identify your competitive advantage

The purpose of the internal analysis is to identify your strengths as a company and your weaknesses. Those would be turned into opportunities or threats when compared with your competitors.

Analysing your internal situation to identify your competitive advantages

The analysis should focus on analyzing the following:

  1. Financials
  2. Resources
  3. Product Quality
  4. Organizational Structure
  5. Market structure
  6. Customer perception

By doing a “checklist” of what values are strong/week related to these bullets, you get a good picture of your companies / products / services situation. Once haven done this step you would be able to identify your strengths and what you project in terms of messages to the market.

What is a strength

What differs you from the others on the market. What are your advantages? What is the market perceiving as your strengths? What do you do better than others? Do you have access to low cost material that would give you advantages?

WHAT IS A weakness

Characteristics of your company that will be a hinder in competition with others. It is important to have in mind that these are internal problems, that should be eliminated in the long run or turned into strengths.

How to work with the swot

A SWOT is not a list of “make up” strengths and weaknesses, its a real analysis of what really are your strengths and weaknesses. Once the brainstorming has been done, you need to be able to categorize it in order of value and use these in your value argumentation. Therefore, the normal situation is that you have about 1-3 strengths and a longer list of weaknesses (that you would work on eliminating over time).

understanding competition

It is important to understand that there are 3 types of main strategies to consider which would depend on what product or service you are offering an on what market.

  1. Leader (in cost)
  2. differentiation
  3. Segmentation

If you have a product that is:

  • Targeting the whole market and positioned on low-cost = Cost Leadership
  • Targeting the whole market and positioned as exclusive  = differentiation
  • Targeting segments and positioned on low-cost  = Cost focus
  • Targeting segments and positioned as exclusive  = differentiation and concentration

 understanding COMPETITIVE ADVANTAGES

The competitive advantages MUST answer the question: Why should you buy from me?

The first step is to identify if my value is in one of this area. Its easier to market a value that is tangible (less expensive) than a value that is intangible.

If my competitive advantage is tangible I have to concentrate on (in order of importance)

  1. Product (not only the product as such, is the service etc surrounding it)
  2. Distribution (e.g. oranges Lola, you can only buy on internet, milk via vending machine, the first and only one)
  3. Price

If you have no tangible advantages in these areas, you must focus on

Intangible values

  1. Communication (Heiniken, think in green. Is the only competitive advantage. There are others that are green, but they are the only ones that have said that). If there is nothing that differentiate you – the communication has to be very creative.

Once you have managed to identify what you have that is a competitive advantage, you have to “put it nice” via a slogan.

It is important that you take the value you want to “take” and make it yours (even if others may stand for it, the importance is to make it yours).

Once the slogan is in place it has to live up to:

  1. it’s a clear message and concrete?
  2. Based in primary attribute. Not in 5
  3. that it goes along with the mind of the consumer
  4. that it brings value to the customer
  5. something that is an attribute you can stand for (you can not lie)
  6. differentiate, that what you say is not taken by others
  7. sustainable and “defendable” (that it can work in time)

You need to translate this to all your communication, your product, your customer care. Your competitive advantage is the nod, the key, the core of any action you take.

The competitive advantage is equal to the added value.

Once you have the competitive advantage – defend it!

In conclusion, your competitive advantage is not something you can switch out in a year. Therefore, the slogan (if well set) is not changed unless the market has forced you to change you differentiator.

All this is the final positioning of your products.

What are your thoughts about internal analysis? Share your thoughts here. 

If you like this post you probably like this about analysing the market as part of the external analysis as well.

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