It's good to know who else is trying to do the same thing. Why?
Obvious answers - so that you don't reinvent the wheel; so that you know what they are doing; so that you can differentiate yourself properly.
Non-obvious answers - presence of competition is actually a good thing, it means that the market you're about to enter in fact exists, and you're not delusional. If you're planning to provide Internet services using toilets as hotspots, and noone else is doing anything similar, you are probably a bit off base (crap, how did they - CityNet - get the VC funding with that idea??). On the other hand, if other [sucky] solutions to the same problem exist, you're on the right track.
Well, of course, there are revolutionary things out there, too, but hey, if you're Einstein, you better realize it yourself. As one of my favorite bloggers Guy Kawasaki says, toilet paper is radically better than leaves.
But back to the topic. Competitive analysis. Let's assume for a moment that you decided to believe the crazy author of this blog, and actually do it. Well, I admire your trust in me - even I don't have that kind of trust in me :-).
All right, all right, back on track. Here's what you may want to cover:
1) What's the problem that you're trying to solve? For cocktail builder: find out cocktails you can make from ingredients in your bar.
2) What are adjacent problems? Where to buy liquor; history of cocktails; cocktail pictures; etc.
3) What are the Google search terms for the problem you're trying to solve? For me, it's cocktail, bar, ingredient, etc.
4) Who comes up on top in search results for these keywords? These are likely your top current competitors, if you're doing an Internet business.
5) Who does things right nearby? For cocktail builder, it's food sites that let you put in ingredients you have and find out the meals you can make from 'em. These folks may come in to your market at any moment.
To inspire you a little bit, I'm attaching the competitive analysis doc I used when doing the initial homework for my site. Take a look if you'd like.