Understanding & Tracking competition

Competitive Intelligence

“Managers who don’t do competitive intelligence are incompetent. It is irresponsible not to understand your competitors”

--- Gary Costley

Competitive Environment

• Increased level & intensity of competition• Emergence of more & newer competitors who are more

aggressive• Competition now global• Strategic alliances becoming more common

• Faster pace of innovations

• Co’s searching harder for the competitive edge• Price competition becoming more predominant &

aggressive• Low priced/lower quality competition becoming a threat

Competitive Analysis

• Competitive analysis can be defined as a set of activities which examines the comparative position of competing enterprises within a given strategic sector

• Competitive Analysis seeks to:

– Provide an understanding of your competitive advantage/disadvantage relative to your competitor’s position

– Help in generating insights into competitive strategies-past, present & potential

– Give an informed basis for developing future strategies to sustain/establish advantages over your competitors

Analyzing Competitors

• Strengths and Weaknesses– Dominant

– Strong

– Favorable

– Tenable– Weak– Nonviable

Understanding Competition

Who are your target customers / buyers? Who are the major competitors? What is your competition? Why do people buy from your competitors? Why should they switch to you? Are your competitors satisfied with their present position? What likely moves or strategy shifts will the competitors make? Where are your competitors vulnerable? What are they doing right? What will provoke the greatest and most effective retaliation by the

competitors? How aggressive should you be towards your competitors? Who is your non-competitor? To whom are you the non-competitor?

Analyzing individual competitors

• Is the competitor satisfied with it’s current position ?• What future moves is the competitor likely to make ?

• In which segments or areas of technology is the competitor most vulnerable ?

• What move on our part is likely to provoke the strongest retaliation by the competitor ?

Marketing Task: • Where are we most vulnerable, wrt to each

competitor ?• What can we realistically do in order to reduce our

vulnerability ?

COMPETITOR EVALUATION PROCESS

Competitor Characteristics

Competitor Objectives

Competitor Strategy

Competitor Success to Date

Competitor Strengths & Weaknesses

Competitor Future Behaviour

Analyzing Competitors

Three Variables to Monitor when Analyzing Competitors:

• Share of market• Share of mind

• Share of heart

• Sales - market share,trends,sales by units/product lines

• Customers - profiles,buying motives,brand loyalty,satisfaction levels

• Products - range, comparative performance,new prod• Distribution - network used, balance of power,terms

offered, coverage, caliber/size of sales force• Price - cost structure, discount structure• Advtg & Promo – level, pattern, extent of promos• Financials - depth of resources,profitability• Management - short/long term objectives,skills &

competencies, Investment levels & plans• Others - Type of plant & capacity utilisation, labor

relations, nos of employees,extent of integration

What companies need to know about competition

Michael Porter’s approach to Competitive analysis

• According to Michael Porter, there are two basic determinants of competitive analysis

- attractiveness of the industry

- level of competition

• Five forces Model

- Threat of new entrants

- Power of buyers

- Power of suppliers

- Threat of substitutes

- Extent of competitive rivalry

Competitive Strategies

Michael Porters three Generic Strategies

• Overall cost leadership• Focus• Differentiation

Generic strategy : Overall cost leadership

• Low cost relative to competitors• Achieved through

- efficient economies of scale

- experience curve

- tight cost & overhead control

- avoiding marginal customer accounts

- cost minimization in areas like advertising, R&D, service, sales force

• Benefits

- defense against powerful buyers

- entry barriers to competitors

Generic strategy : Focus

• Focusing on a particular buyer group, segment, product line….serving a chosen segment well

• Best suited to smaller firms as they can respond quickly to changing needs & environment changes

• May have the largest economies of scale within the segment

Generic strategy : Differentiation

• Emphasis on creating something that is perceived industry wide as unique– Design or brand image– Technology employed– Features of the product or service

– Customer service

– Distribution network

• Differentiation leads to brand loyalty and thus low price sensitivity & high market share, leading to better profitability

– Defense Strategies• Position Defense• Flank Defense• Preemptive Defense• Counteroffensive Defense• Mobile Defense

– Market broadening– Principle of the objective– Principle of mass– Market diversification

• Contraction Defense– Planned contraction

(Strategic withdrawal)

Designing Competitive Strategies

Designing Competitive Strategies

• Brand-extension strategy

• Multibrand strategy• Heavy advertising and

media pioneer• Aggressive sales force

• Effective sales promotion

• Competitive toughness

• Manufacturing efficiency and cost cutting

• Brand-management system

Designing Competitive Strategies

• Market-Challenger Strategies– Defining the Strategic Objective and Opponent(s)

• It can attack the market leader

• It can attack firms of its own size that are not doing the job and are underfinanced

• It can attack small local and regional firms

• Choosing a General Attack Strategy

Designing Competitive Strategies

– Choosing a specific attack strategy• Price-discount

• Lower price goods

• Prestige goods• Product proliferation• Product innovation• Improved services

• Distribution innovation

• Manufacturing cost reduction• Intensive advertising promotion

Designing Competitive Strategies

• Market-Follower Strategies• Innovative imitation

(Product imitation)

• Product innovation

• Four Broad Strategies:– Counterfeiter– Cloner– Imitator– Adapter

Designing Competitive Strategies

• Market-Nicher Strategies– High margin versus high

volume– Nicher Specialist Roles

• End-user specialist– Value-added reseller

• Vertical-level specialist• Customer-size specialist• Specific-customer specialist• Geographic specialist• Product or product-line

specialist

Product-feature specialist

Job-shop specialist Quality-price specialist Service specialist Channel specialist

What is Competitive Intelligence?

CI – is the process by which organizations gather actionable information about competitors and ideally apply it to their short and long term strategic planning

CI includes information beyond industry statistics and trade gossip. It involves close observation of competitors to learn.

- What they do best and why- Where are they weak and why

Designing the competitive Intelligence System

• Four Main Steps– Setting Up the System– Collecting the Data– Evaluating and Analyzing the Data– Disseminating Information and Responding

Designing the competitive Intelligence System

• Major Steps in Customer Value Analysis:

1. Identify the major attributes customers value.2. Assess the quantitative importance of the different

attributes.3. Assess the companies’ and competitors’

performances on the different customer values against their rated importance.

4. Examine how customers in a specific segment rate the company’s performance against a specific major competitor on an attribute-by-attribute basis.

5. Monitor customer values over time.