Competitor analysis: from who your competitors are to how they will respond

A fourteen-person accounting practice in a regional town knew everything about the firm across the street: its fees, its partners, every client the two had fought over. Then it lost twelve small clients in one quarter, and none went to that firm. They had moved to an online bookkeeping platform with a fixed monthly fee and an app that did most of the work. The practice's competitor analysis had been looking in the wrong place.

Competition often comes from outside the industry. In PwC's survey of 4,454 CEOs in 95 countries and territories, 42% said their company had started to compete in new sectors in the last five years (source: PwC, January 2026). A competitor analysis that follows only familiar rivals misses exactly those moves.

What is a competitor analysis?

A competitor analysis maps who competes for your customers, what each important rival wants and can do, and how it is likely to respond to your moves. Porter's five forces look at the structure of a whole industry; a competitor analysis looks at the individual players. The output is a short list of rivals that matter, a profile of each and an expected response.

Three circles of competitors

A quick test: look at the quotes you lost and where your newest customers came from. That list often differs from the one in your head.

Strategic groups: who plays the same game?

Within an industry, firms with a similar offer, type of customer, price level and channels form a strategic group. Richard Caves and Michael Porter introduced the idea of mobility barriers in the Quarterly Journal of Economics (1977): obstacles that keep firms from moving from one group to another, much as entry barriers keep newcomers out of an industry. Rivalry is fiercest inside your own group; threats from other groups build slowly and are easy to miss.

The practice in the example belongs to the regional practices. Its fiercest rivals are other regional firms, but the largest threat comes from the online platforms, and the specialists point to an opportunity: a niche where clients pay for knowledge rather than processing.

Four questions for each competitor

Michael Porter's framework for competitor analysis in Competitive Strategy (Free Press, 1980) rests on four components: a competitor's future goals, its assumptions about itself and the industry, its current strategy and its capabilities. In plain questions:

1. 01

   What does it want?

   Growth, independence, a sale, steady income for the owner, market share? Look at ownership: a firm backed by an investor who wants to sell within a few years behaves differently from a family business planning its succession.

2. 02

   How does it see itself and the market?

   Every firm holds beliefs about its strengths and its customers, and some are wrong. A rival convinced that clients value face-to-face contact above all may ignore a digital offer for too long.

3. 03

   What is it doing now?

   Offer, prices, target customers, channels, recruitment and investments. What a firm does says more than what it announces.

4. 04

   What can it do?

   Money, people, systems, brand, customer relationships and speed. Capabilities decide whether a rival can respond; goals and assumptions decide whether it wants to.

From profile to prediction: how will competitors respond?

The four answers add up to what Porter calls a competitor response profile. Ask whether the rival is satisfied with its current position, which moves or events would provoke it, where it is vulnerable and how effective its retaliation would be.

Past behaviour is the best predictor. A rival that matched every price cut before will probably do so again. Look at who decides, whether a founder, a group board or an investor, and watch signals such as vacancies, announcements and new premises.

Game theory adds discipline. Adam Brandenburger and Barry Nalebuff described in Harvard Business Review (July 1995) five elements of a competitive game: players, added values, rules, tactics and scope, and argued that companies should consider cooperative as well as competitive ways to change it. Before a price cut or a new service, write down how each rival is likely to react and what that does to your result.

Competitor analysis example: four competitor profiles

The lost clients paid an average fee of €1,800 a year, so the practice lost €21,600 in annual revenue. Its first reflex was to cut fees by 20% for its 150 smallest clients. That would cost €54,000 a year (20% of 150 clients times €1,800), two and a half times what it had lost, and the platform could cut its price again. The practice took three other decisions.

• No price war for the smallest clients: it stops competing on price where the platform is strongest.
• A partnership with one platform: the platform handles the processing, the practice advises clients who are growing.
• A conversation across the street: it opens talks with the neighbouring practice about a merger or succession, before a national network does.

Fictitious Firmfocus example. The logic works in any currency.

Competitor and partner at once

A rival can also be a partner. Brandenburger and Nalebuff made the term co-opetition popular for working with a competitor towards a shared goal: two practices can share a specialist, buy software together or refer clients. Firms whose products make yours more valuable they call complementors. The platform in the example is a competitor for bookkeeping and a complementor for advice.

Cooperation has legal limits. The US Federal Trade Commission describes price fixing, bid rigging and market division as practices courts treat as always illegal, and UK guidance says you cannot agree with other businesses to share markets or customers. Check the rules in your market with an adviser before you enter any arrangement with a rival, even an informal one.

Where to find competitor information, legally

• Filed accounts and annual reports: many countries require companies to file accounts with a public register, and listed companies publish annual reports.
• Websites, price lists and reviews: offer, prices and what customers praise or complain about.
• Job vacancies: where a rival is investing.
• Customers, suppliers and wholesalers: won and lost customers tell you why they chose; suppliers often know who is growing.
• Trade fairs, trade press, patents and trademarks: early signs of what a rival plans to launch.

Competitor analysis pitfalls

• Watching only the rivals you know: indirect competitors and entrants do damage because nobody tracks them.
• Describing instead of predicting: a profile is only useful if it ends in an expected response.
• Projecting your own logic: a rival with other goals or owners will make other choices than you would.
• Losing sight of customers: staring at rivals makes you copy them instead of serving customers better.

Competitor analysis in a small business and in a larger organisation

Who your customers are and what they choose on is the other half of the picture, in market and customer analysis. How to turn your findings into a position is the subject of Porter's generic strategies. All models are in strategic analysis, and every other topic in Strategy.