A PROFESSIONAL SPORTS team spends all week preparing for their upcoming game by evaluating their competition’s strengths and weaknesses inside and out.  Similarly, an entrepreneur shouldn’t go into a business until they know everything about their competition so they know what they’re going up against.
The first thing you need to establish and define before you can truly evaluate your competition is to understand the difference between direct and indirect competition.
Direct competition, to you, is a company that offers the same products or services to the same niche market as you. Indirect competition is a company that offers the same product or services to a different market than you do, e.g. Burger King, McDonalds, and Jack In The Box are all direct competitors of each other. In contrast, Pizza Hut, Subway, Taco Bell and KFC are examples of indirect competitors as while they all qualify as “fast food,” they all market different types of fast food. 
Once you’ve established who your direct competition is, research those companies as much as possible. If your competitors are publicly traded companies, buy a small portion of stock in those companies. At that point, you can read their annual reports, which disclose any information on future plans of expansion into different regions and/or the release of future products or services as well. Also, you can understand if their sales are increasing or decreasing. You can also get on their email list as well. If your industry has very little competition, this can be a good and bad thing. The good is obvious--you have very little to compete against. The bad could be a red flag. It could mean that you’ve unfortunately chosen an industry that is on decline; I would re-evaluate your choice at that point.
Thereafter, I would advise you to do various in-person market research exercises on your competition. Visit your local competitors’ stores or browse around on their website. Is it easy to navigate? Know their operation hours; if you see that customers are unhappy with their operation hours, consider opening earlier or closing later than them.  
Also, take a look at their ad campaigns and marketing materials. Determine your own opinion of those companies. What are the strong and weak points? How is their customer service? Take notes on price-point, atmosphere, quality of product, customer service, and knowledge of their products and services. Also, how busy are the locations? Talk to the employees. Ask them which days are the busiest. Use this information to then outshine your competition. If their customer service is horrible, use that against them and let you future customers know that you’ll offer outstanding customer service. If their weak point is a failure to market adequately, a strong marketing campaign can differentiate you from them.
So far, I’ve only talked about direct competition, but indirect competition is just as important. An indirect competitor, while not in the same industry, is still competing for that dollar. Let’s say you’re trying to open a miniature golf course; your competition isn’t just other miniature golf courses. You also have to consider bowling alleys, ice cream shops, movie theaters, and fast-food chains as your indirect competitors.  They’re all searching out for those families’ discretionary entertainment dollars. A lot of families have to make the choice on where and how they would like to be entertained. Your ultimate goal is to have them spend that money with your establishment, rather than the competition down the street.
In closing, even after your business is launched, evaluating your competition is a crucial part in keeping the doors open in this ever-changing economic climate. Hopefully, the suggested philosophies will help you do so and keep your competitive edge.