To provide a strong answer to this question, the candidate should demonstrate their ability to conduct thorough market research and analysis. They can touch on components such as identifying key players, analyzing their market share, assessing their product offerings and pricing strategies, evaluating their strengths (e.g. brand reputation, innovation) and weaknesses (e.g. customer service issues, outdated technology), and understanding their competitive positioning. The candidate can also mention using SWOT analysis or Porter’s Five Forces framework to assess competitive strengths and weaknesses. Additionally, discussing how they stay updated on industry trends and competitor activities to adapt strategies accordingly would showcase their market understanding. Finally, providing examples of how they have used competitive analysis to inform business decisions or gain a competitive advantage would strengthen their response.