Creating an industry matrix, often referred to as a competitive matrix or competitor analysis matrix, is a strategic tool designed to help businesses understand their position relative to competitors within the market. It provides a structured way to evaluate various factors, revealing strengths, weaknesses, and potential opportunities.
Steps to Create an Industry Matrix
Developing an effective industry matrix involves several key steps, from identifying market players to analyzing the insights gained.
Step 1: Identify Your Competitors
The foundational step in creating an industry matrix is to research your industry and find out who your direct and indirect competitors are.
- Direct Competitors: These are businesses offering similar products or services to the same target audience. For example, two fast-food chains like McDonald's and Burger King are direct competitors.
- Indirect Competitors: These businesses offer different products or services that could still satisfy the same customer need or capture the same disposable income. For example, a movie theater and a bowling alley are indirect competitors as they both vie for entertainment spending.
Practical Insight: Utilize market research tools, customer feedback, and online searches to compile a comprehensive list of competitors. Don't forget emerging startups that could disrupt the market.
Step 2: Choose Your Criteria
Once competitors are identified, the next crucial step is to choose your criteria. These are the key factors upon which you will evaluate your company and your competitors. Criteria should be relevant to your industry and what truly matters to your target customers.
Consider a mix of quantitative and qualitative factors. Examples include:
- Product Quality: Durability, features, innovation.
- Pricing Strategy: Competitiveness, perceived value.
- Customer Service: Responsiveness, support channels.
- Marketing & Brand Awareness: Social media presence, advertising, brand reputation.
- Market Share: Percentage of total sales in the industry.
- Distribution Channels: Online, retail, partnerships.
- Technological Advancement: Use of cutting-edge tech, R&D.
- Financial Strength: Profitability, investment capacity.
Example: For a smartphone company, criteria might include "Camera Quality," "Battery Life," "Operating System," and "Price Point."
Step 3: Rate Your Company and Your Competitors
With your criteria established, the third step is to rate your company and your competitors against each chosen criterion. A common method is to use a numerical scale, such as 1 to 5 (with 1 being poor and 5 being excellent), or a qualitative scale (e.g., Weak, Moderate, Strong).
- Be Objective: Base ratings on factual data, customer reviews, market reports, and competitive analysis, rather than assumptions.
- Weighting (Optional but Recommended): Assign a weight to each criterion based on its importance to your target customers or business goals. For instance, if "Price Point" is crucial in your market, it might have a higher weight than "Brand Awareness."
Example Rating Scale:
| Rating | Description |
|---|---|
| 1 | Very Weak |
| 2 | Weak |
| 3 | Average / Moderate |
| 4 | Strong |
| 5 | Very Strong |
Step 4: Visualize and Analyze Your Matrix
The fourth step involves visualizing and analyzing your matrix. Organize all the data into a table or spreadsheet. This structured view makes it easier to compare and contrast performance across competitors and identify trends.
Example Industry Matrix Table (Simplified):
| Criteria (Weight) | Your Company | Competitor A | Competitor B | Competitor C |
|---|---|---|---|---|
| Product Quality (0.3) | 4 | 3 | 5 | 4 |
| Pricing (0.2) | 3 | 4 | 3 | 2 |
| Customer Service (0.2) | 5 | 3 | 4 | 3 |
| Brand Awareness (0.1) | 4 | 5 | 3 | 4 |
| Innovation (0.2) | 3 | 4 | 5 | 3 |
| Weighted Score | (Calculate) | (Calculate) | (Calculate) | (Calculate) |
Analysis Insights:
- Identify Strengths and Weaknesses: Pinpoint areas where your company excels and where it lags behind competitors.
- Spot Opportunities and Threats: Discover gaps in the market that your company can fill or emerging threats from competitors.
- Understand Market Positioning: See clearly where each competitor stands in relation to others and your own business. For instance, if Competitor B consistently scores high on "Product Quality" and "Innovation," they might be the market leader in those aspects.
Step 5: Here's What Else to Consider
Beyond the core steps, there are additional considerations to enhance the utility and impact of your industry matrix.
- Regular Updates: The market is dynamic. Competitors evolve, new ones emerge, and customer preferences change. Regularly review and update your matrix (e.g., quarterly or semi-annually) to ensure its relevance.
- Actionable Insights: The goal of an industry matrix is not just data collection but to drive strategic decisions. Translate your analysis into actionable strategies, such as:
- Product Development: Investing in features where competitors are strong.
- Marketing Campaigns: Highlighting unique selling propositions (USPs) where you excel.
- Pricing Adjustments: Adapting your pricing based on competitive analysis.
- Operational Improvements: Enhancing areas like customer service or distribution.
- Deep Dive: If a competitor consistently outperforms you in a critical area, conduct a deeper dive into their specific strategies, processes, and resources to understand how they achieve their results.
By following these steps, businesses can create a comprehensive industry matrix that serves as a powerful foundation for competitive strategy and informed decision-making.
