Week 4 Competitor Analysis

Chapter 8 Marketing strategy and competitive positioning

COMPETITIVE BENCHMARKING
Competitive benchmarking is the process of measuring your companys strategies and
operations against best in class companies, both inside and outside your own industry.

The purpose is to identify best practices that can be adopted or adapted to improve
your own performance.

There are four steps in competitive benchmarking

STEP 1- Identifying who benchmark against

Identify industry leaders who are obvious firms to compare your own activities
against
Example: Universities might identify through the means of best research reputations
or best at attracting students to their courses
Organisations might benchmark specific activities e.g. procurements and purchasing

Questions to ask:
What is they do differently from others?
What makes the difference to their operations?
Why are they winners?
STEP 2 -Identifying what aspects of business to benchmark

Aspects across the complete value chain

Scarce resources and time constraints usually are central for detailed benchmarking
Initial focus will also typically be on processes that account for significant costs,
make a significant impact on customer satisfaction and show greatest room for
improvement

STEP 3- Collecting relevant data to enable processes and operations to be compared

There are three main sources of competitor information for benchmarking: published
sources, data sharing and interviews

Publish sources

Data sharing

Company reports
Technical trade reports
Industry studies and surveys commissioned by governments
or industry associations
Conferences
Formal contracts or informal
Industry employees and managers of competing firms meet

Direct interviews

from time to time to swap information

Customers or competitor customers
Distributors
Industry experts
Former employees of competitors
Regulators
Government officials

STEP 4- Comparison with own processes

Compare and contrast the processes of the identified best in class with the firms
own processes, to identify actions that need to be taken as a consequence, and the
setting up of processes to measure and monitor improvement
Make conclusions if the processes are good/not or needs improvement/ new process
This will help to identify strengths and weaknesses to discuss the main processes
involved in competitor analysis

THE DIMENSIONS OF COMPETITOR ANALYSIS

Lehmann and Winer suggests there are four main stages in competitor analysis
1. Assessing competitors current and future objectives

Understanding the goals and objectives of competitors can give guidance to strategy
development on three levels see figure 8.3
goals also give guide the intensity of competitor activity or rivalry
a companys goals can indicate the type of trade-offs it is likely to make when faced
with adversity
where the intention is profitable coexistence it is often better to compete in areas that
deemed of secondary interest to major companies rather than to compete directly

2. Assessing the competitors current strategies

The identification of competitors goals/objectives can allow identifying opportunities

and threats
what is the competitor doing at the moment?
Main issues to attend: identification of the market or markets they have chosen to
operate in, identification of the way in which they have chosen to operate in those
markets: the strategic focus they are adopting with regard to the type of competitive
advantage they trying to convey, supporting marketing mix that is being adopted

Competitors Target Markets

Price, promoting, offering are clues to competitors

The features of the product/service or advertismenets may indicate the target

Competitors strategic focus

Most successful companies attempt to build their strategies on the differential

advantage they have over others in the market
There are two ways of competitive advantage: low costs relative to competitors and
providing valued uniqueness

Competitors supporting marketing mix

Detailed analysis of competitors products and services, particularly through the eyes
of customers can be used to highlight competitor weaknesses
Understanding distribution strengths and weaknesses can unfold opportunities

Competitors marketing organisation

Understanding the competitors organisational structure can give clues as to how

quickly and in what manner the competitor is likely to respond to environmental
change or competitive actions
Firms organised around markets rather than products are more likely to spot market
changes early and be in a position to lead change rather than simply react to it
The position of marketing within the organisational structure can also provide clues to
current and future strategy.
-> useful tool is value chain analysis

3. Assessing competitors resources

The finances and resources can identify what competitors are going to pursue
Competitor resource profiles can be built in much the same way as a firm conducts an
analysis of its own assets and capabilities.

Lehmann Winer suggest concentrating five key competitor abilities:

1. Ability to conceive and design

Innovation define can help predict your competition standard

Indicators come from assessing technical resources such as patents and copyrights,
human resources, relative industry average etc

2. Ability to produce

In manufacturing industries this will include production capacity and utilisation, while
in service industries capacity to deliver the service will be critical
Firms with slack capacity have more opportunities to respond to demand
The connections to have skilled employees on call to produce?

3. Ability to market

Examine the marketing mix

Examine the funds available

4. Ability to finance

Financial resources can either restrict or allow opportunities to implement activities

5. Ability to manage

Key managers delegate and send clear messages on strategic intentions

Indicators of ability to manage include past careers, actions of powerful managers,
reward systems, degree of autonomy, the recruitment and promotion policies of the
firm

4. Predicting competitor future strategies

Is the competitor satisfied with its current position?

What likely moves or strategy shifts will the competitor make?
Where it the competitor vulnerable?

What will provoke the greatest and most effective retaliation by the competitor?

CHOOSING GOOD COMPETITORS

Porter lists below the characteristics that makes a good competitor.

The competitively mature company understands the market it is operating in and

enhances, rather than destabilises, the environment of the strategic group.
The good competitor can help promote the industrys stability by understanding the
rules governing the market and by holding realistic assumptions about the industry
and its own relative position
A good competitor should understand its own weaknesses before leaves opportunities
for others in the market
A good competitor will have reconcilable goals that make it comfortable within the
market it operates, less likely to make massive strategic shifts and tolerant moderate
intrusion

OBTAINING AND DISSEMINATING COMPETITVE INFORMATION

A problem with many of these resources is the inconsistency of information between

various government statistics (may be due to sampling etc)

Publicity material
Propaganda

Leakages

Intermediaries

Surveillance

Dirty tricks

Double agents

Brochures, corporate magazines and websites

Public relation activities. The need to communicate to
shareholders and intermediaries in markets means that frequent
marketing or technological initiatives are broadcast widely. Be
aware of the reliability.
Employees that get into the hands of the press either intentionally
or unintentionally
Can go to conferences or trade shows
Can gather information from intermediaries or posing as one
Both customers and buyers can have regular contact with
competitive companies and can often be source of valuable
information, particularly with the salesperson or buyers from a
researching company with whom they have regular contact
Monitoring competitors advertisements or studying aerial
photographs
Pulling apart the products to examine competitors products
Their speed means that while a company is test marketing its
products over a matter of months a competitor can buy supplies,
put them through a mini-test market, find their market appeal and
maybe experiment with alternative defensive strategies
Either place people in a competitors company purposely or
recruited on payroll while still working for the competitor

DISMMENATING COMPETITOR INTELLIGENCE

Intelligence itself is an essentially valueless commodity

It becomes valuable only when it researches the right people within the organisation
and is acted on

Successful dissemination requires two things:

1. destination must be clearly defined. Who needs to know this?

2. The data must be presented in a manner that the recipient can understand and assimilate.
Be simple and concise to convey relevant information when giving to executives. While,
middle and junior managers may require detailed information.

MARKET SEGMENTS AND CUSTOMER VALUE 48-54

ANALYSING COMPETITON
1. Define the competitive arena for the generic, specific and variant product markets
2. Identify key competitors
3. Evaluate key competitors
4. Anticipate actions by competitors
5. Identify and evaluate potential competitors
INDUSTRY ANALYSIS
Competitor analysis is conducted from the point of view of a particular firm
Two kinds of information are needed:
1. Descriptive profile of the industry
2. Analysis of the value chain distribution channels that link together the various organisation
within the value-added system from suppliers to end users

The analysis includes the following information

1. Industry characteristics and trends, such as sales, number of firms and growth rates

Industry size, growth and competition

Typical marketing practices
Industry changes that are anticipated
Industry strengths and weaknesses
Strategic alliances and potential mergers/acquisitions among competitors

2. Operating practices of the firms in the industry, including product mix, service provided,
barriers to entry and geographical scope
ANALYSIS OF VALUE-ADDED CHAIN

The study of supplier and distribution channels is important in understanding and

serving product-markets.
Some producers go directly to end users while others work with other organisations
through distribution channels.
The types of relationships (collaborative or transactional) should be identified and
evaluated.
By looking at the distribution approaches of industry members, we can identify
important patterns and trends in serving end users
Value-added chain can uncover opportunities that are not served by present channels
Information from various chain levels can help in forecasting end-user sales

COMPETITIVE FORCES
There are five competitive forces
1. Rivalry among existing firms

The nature and scope of the competition may vary according to maturity of the
industry
Helps determine industry performance and direct and intense form of competition

2. Threats of new entrants

Help to prevent new entrants with expansion or aggressive marketing plans

3. Threat of substitute products

Considers the potential substitutes

New technologies can satisfy the same customer, thus, firms must be wary to keep
their product unique and satisfied.

4. Bargaining power of suppliers

The power that suppliers may be able to exert on the producers in an industry.
E.g. the high costs of labour exert major pressures on the commercial airline industry
Companies may pursue vertical integration strategies to reduce the bargaining power
of suppliers. And sometimes collaborative relationships are useful to respond to the
needs of both partners

5. Bargaining power of buyers.

Buyers may use their purchasing power to influence their suppliers.

Walmart for example has a strong influence on the suppliers of its many products

KEY COMPETITOR ANALYSIS

Competitor analysis is conducted for the firms directly competing with each other
1. Describing and Evaluating the Competitor
Information usually used to describe and evaluate key competitors:

Business scope and objectives

Management experience, capabilities and weaknesses
Market position and trends
Market target(s) and customer base
Positioning strategy for each target
Distinctive capabilities
Financial performance (current and historical)

2. Analysis of the value chain distribution channels that link together the various
organisation within the value-added system from suppliers to end users
1. Define the competitive arena for the generic, specific and variant product markets
2. Identify key competitors
3. Evaluate key competitors
4. Anticipate actions by competitors
5. Identify and evaluate potential competitors

IDENTIFYING NEW COMPETIORS

New competitors may come from four major sources:
1. Companies competing in related product-market
2. Companies with related technologies
3. Companies already targeting similar customer groups with other products
4. Companies competing in other geographical regions with similar products

Market entry by a new competitor is likely under one or more of these conditions:

High profit margins are being achieved by market incumbents

Future growth opportunities in the market are attractive
No major market-entry barriers are present
Completion is limited to one or more few competitors
Gaining equivalent or better competitive advantage over the existing firm(s) serving
the market is feasible