Latvala arrived at Toyota late in 2016, affecting the immediate and significant change to turn the Yaris WRC into a challenger this season.
The Finn knows Tanak will pose a threat within the team, but he says it will take time for the Estonian to settle in after seven years with M-Sport.
“I have worked to make the Yaris my car and now Tanak will have to adapt to a new car,” Latvala told Motorsport.com.
“I think it will be quite a good fight in the team, but I think we have a strong team for next year.
“I know that I want to be world champion and to be world champion I have to be quicker than everybody and that includes him.”
Drawing on his experience, Latvala admitted moving from one team after a long period was not easy.
He added: “I remember when I came from being with M-Sport and Ford, I was there for quite many years and it was difficult to jump on the Volkswagen.
“But this change to Toyota was easy because I had the experience of moving.
“For Tanak the move from M-Sport to Toyota will be his first change and it can be a little difficult to adapt when you have been in one team for so long.
“When I went to Volkswagen I went with a little bit of the feeling that this was Sebastien Ogier’s team, he had been there from the beginning.
“If you are quicker [than your teammate] then it’s OK, but if not then you can stay a little bit in the shadows.”
Tanak admitted next year would be a step into the unknown for him.
“I need to get used to new people and a new team,” he said. “It will be a big job. As for how difficult will it be to move for the first time, I have no idea – I haven’t moved yet!”