Analysis of The Competitive Environment: Examples, Methods, and Stages

Abstract

In an increasingly dynamic market economy, analyzing the competitive environment is essential for enhancing the effectiveness of small business strategies and ensuring sustainable development. Small enterprises often operate under unique conditions shaped by local market structures, consumer influence, short product turnover cycles, and close proximity between production and consumption. This necessitates tailored tools for evaluating competitive dynamics and formulating strategic responses. Despite the acknowledged importance of competitive analysis, existing models often fail to capture the nuanced realities of local markets, particularly for small businesses lacking access to comprehensive statistical data. This study aims to develop a practical algorithm and methodological framework for assessing the competitive environment, defining local market boundaries, and constructing competitive maps to guide small business strategy. The research outlines a six-stage diagnostic process including market segmentation, substitutability analysis, market growth assessment, profitability evaluation, competition intensity metrics, and the formulation of strategic positioning through Herfindahl–Hirschman indices and competitive matrices. The proposed methodology integrates qualitative and quantitative tools including empirical observation, expert evaluations, and elasticity models within a unified framework specifically designed for application in fragmented or data-limited market contexts.  The findings provide a robust basis for strategic decision-making by enabling firms to assess their relative positions, anticipate competitive pressures, and select appropriate tactics for growth, adaptation, or exit. The regular application of competitive mapping is recommended as a monitoring tool for dynamic market positioning and performance management.