How to Assess a Company Against Its Competitors

A company that has a competitive edge over its competitors can usually succeed in the long-term. This can be said for companies that operate in any industry, be it healthcare, technology or food and beverage.

Therefore, investors should compare some key aspects of a company’s business with its rivals to get a better picture of the company’s outlook. In this article, I will highlight three comparisons that we can make to identify companies with deep “economic moats” that can give it an edge over its competitors.

Brand perception

We can find numerous market surveys online that assess the quality and the awareness that a brand has amongst its consumers. This is extremely useful for investors to get an idea of how a company’s brand fairs against its competitors.

For instance, when comparing a fast food chain’s brand awareness and perception, investors can simply look up information on the Internet. Surveys and market data can give us an idea of how consumers perceive the brand, how often they patronise the shops, and where the brand ranks amongst its competitors.

Having a strong brand can ensure a company stands out against its rivals in the long-term.

Quality of product

Besides branding, the quality of a company’s product is essential to ensure it can maintain an edge over its competitors.

There are a few ways that investors can compare the quality of a product. For instance, if the business is client facing, investors can simply purchase the products or patronise the shop to judge for themselves. Investors can also make use of the information on the Internet to get a better idea of what other customers think about the company’s product.

Naturally, the company with the best product will be better equipped for long-term growth and to gain market share from its competitors.

Sustainability and a long history of success

It is also important to look at which company has a longer history of success. A company with a history of achieving stronger profits and better returns is more likely to continue to do so going forward.

This may be because it has a stronger management team that knows the ins-and-outs of the industry or is willing to adapt to any changes in the business environment.

The Foolish takeaway

By comparing companies with its peers, we can get a better idea of the outlook and sustainability of a company. These three simple aspects of a business can be easily compared to its rivals to give investors a better understanding of the company and the industry it operates in.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.