strategy buss landscape_ch 11

Competitor Analysis

SHORT DESCRIPTION

Competitor profiling provides a comprehensive picture of the strengths and weak-nesses of current and potential rivals. This analysis provides both an offensive anddefensive strategic context through which to identify opportunities and threats.Competitor profiling coalesces all of the relevant sources of competitor analysis intoone framework in the support of efficient and effective strategy.

Competitor profiling has four major purposes: to identify competitors' futurestrategies and plans; to predict competítors' likely reactions to competitive initia-tives; to determine how well matched a competitor's strategy actually is to its capa-bilities; and to understand a competitor's weaknesses.

BACKGROUND

The concept of competitor profiling was borrowed by the corporate sector from mili-tary strategists who have long used profiling techniques as an effective and efficientway to manage military intelligence. Generals engaged in the heat of battle were fur-nished with incredible volumes of information about the enemy from all points inthe theater of engagement and from many levels of the military hierarchy. Somehow,all of these data and analyses have to be formulated into a battle plan. From thisnecessity, the concept of the war room was born.

The critical feature of the war room is the inclusion of only relevant intelligence.The support activities of data gathering, information accumulation, and analysistake place outside of the war room. In this way, the war room functions as anextremely effective and efficient method of dealing with information overload.Ensconced within the walis of the war room, generals and their staff are able to con-centrate only on analysis strictly relevant to the battle plan. The war room concepthas been successfully applied within the context of business strategy and competi-tive intelligence (Shaker Gembicki, 1999).

144

For many years, corporate strategists enjoyeci the luxury of operating in "the-aters of engagement" far less hostile than the battlefields of war. The use of war roomprofiling of competitors was not a necessity. Econotnic growth after World War 11provided rich sources of demand relatively free from international competition.However, the energy crisis of the 1970s radically disrupted this ideal scenario, actingas a harbinger of perrnanent environmental turbulence and change. The liberaliza-tion of trade and globalization in the 1980s furthered this new competitive era.Finally, the strategic implication oí the furious pace of technological change hascemented this new competitive environment. Attanasio (1988) suggests that carpo-rate strategy has passed through four phases during the 200 years of its existence asa separate body of principies and practice:

Phase 1. Companies operated explicitly on financial planning premised on func-tional efficiency in order to meet annual budget goals.Phnse 2. Companies used forecast-based planning through which theyextrapolate the past to make inferences about the future. This newtechnique allowed the development of longer budget periods ami resourcegap analysis.Phase 3. Firms began to pursue strategic management based on externally ori-ente(' analysis. During this phase, the predominance of tactical managementyielded to the concept of strategic analysis of trade-offs.Phase 4. Rather [han waiting to react to future challenges when and if theyoccur, firms are now begirming to position themselves in order to "create thefutu re."

During this competitive evolution, the necessity of campetitor intelligencebecame increasingly apparent. Michael l'orter rang the clarion call of change forcompetitor analysis in two of his very influential works, one on competi ti ve strategyin 1980 and the other on competitive advantage in 1985. His essential premise wasthat since strategy is concerned with finding a unique and differentiated customervalue relative to rivals, competitor analysis is quite properly a central componentof strategy.

Since Porter's pioneering work in the area of competitor analysis, many othershave contributed to this important area of strategy. Today, as more and more firmsenter phase 4, competitor profiling has become an integral component of the strate-gic process needed to "create the future."

STRATEGIC RATIONALE AND iMPLICATIONS

Given that competitor analysis is an essential component of corporate strategy,Poder (1980) argued that most firms do not conduct this type of analysis systemati-cally enough. Rather, a lot of firms operate on what he calls "informal impressions,conjectures, and intuition gained tbrough the tidbits of information about competi-tors every manager continually receives." As a result, traditional environmentalscanning places many firms at risk of dangerous competitive blindspots due tu a lackof robust competitor anaiysis.

Chapter 11 Competitor Analysis 145

What Drivesthe Competitor?

Future GoalsAt all levels

of managementand in multiple

dimensions

What Ls the CompettiorDoing and Can Do?

Current StrategyHow is the business

currentlycotnpeting?

Competitor's Response Profilels the competitor satisfied with itscurrent position?

What likely moves or strategy shiftswill the competitor make'?

Where is the competitor vulnerable?

What will provoke the greatest and mosteffective retaliation by the competitor?

CapabilitiesBoth strengths

and weaknesses

AssumptionsHeld about itselfand the industry

To rectify this situation, Porter was one of the first writers to propose a formaland systematic process through which to gather information about competitors.His models as depicted in Figure 11-1 and 'hable 11-1 has a decided proactive orien-tation. The forward - looking stance of competitor profiling is intentional, as its pri-mary design is to predict the future strategic actions of rivals. That is, the modelsencourage the analyst to use current and past information about rivals in order topredict the future strategic moves that a competitor may pursue in response to thefirm's own strategies, the strategies of other firms in the industry, or changes in thecompetitive environment exogenous to business strategies. Armed with this knowl-edge, the analyst is in a superior position to craft both defensive and offensivestrategies.

Figure 1 1-1The Components of Competitor Analysis

Source: Reprinted with the permission of The Free Press, a Division of Simon & Schuster,froin Cornpetitive Strategy: Techniques for Analyzing Industries and Competitors, by

Michael E. Porter. Copyright C) 1980, 1988 by The Free Press.

146 Part II The Techniques of Strategic and Competitive Analysis

BACKGROUND INFORMA:ION PRoDucts/ShiwicEs MA RK E TING

NameLocationShort descriptionHistory

Key eventsMajor transactionsOwnership structure

HUMAN RESOURCES

Quality and skill of personnelTurnover ratosLabor costsLevel of trainingFlexibilityUnion relations

SOCIOP01.1 I ICAL

Number of products/servicesDiversity or breadth of product EnesQuality, embedded customer valueProjected new products/servicesCurrent market shares byproduct and product lineProjected market shares

OPERATIONS

Manufacturing capacityAbility to mass customizeCycle time, manufacturing agility,and flexibilityTQM implementationOverhead costsLean production methods

TECHNOLOGY

Segmentation strategiesBranciing and ImageProbable growth vectorsAdvertising/promotionsMarket research capabilityCustomer service emphasis4 P parameters—product, price,promotion, placeKey customers

MANAGEMENT PROFILES

PersonalityBackgroundMotivations, aspirationsStylePast successes and failuresDepth of managerial talent

ORGANIZATIONAL STRUCTURE

Government contactsStakeholder reputationBreadth and depth of portfolioof sociopolitical assetsPublic affairs experienceNature of government contractsConnections of board memberslssue and crisis managementcapacity

CI CAPACITY

Process technologyR&D expertiseProprietary technology, patents,copyrightsInformation and communicationinfrastructureAbility to internally innovateAccess to outside expertise throughlicensing, alliances, joint venturos

STRATEGY

Nature of hierarchyTeam buildingCross functionalityMajor ownershipCultural alignment

CUSTOMER VALUE ANALYSIS

Evidente of formal CI capacityReporting relationshipsProfileCEO and top managementlevel of supportVulnerabilitylntegration

Data gathering and analysisassets

PositioningFuture plansMission and visionGoals, objectivesCorporate portfolioSynergiesResources/capabilitiesCore competenciesStrengths and weaknesses

Quality attributesService attributesCustomer goals andmotivationsCustomer types and numbersNet worth (benefits minus costs)of ownership

Table 1 1 -1Typical Categories and Types of Competitor Profile Information

(Con tinued on following pase)

Chapter 11 Competitor Analysis

147

Table 1 1 -1 (Continued)

FINANCIAL

Financial statementsSecurities filingsAbsolute and comparative ratio analysisDisaggregated ratio analysisCash flow analysisSustainable growth rateStock performanceCosts

Despite the elegance and theoretical legitimacy of competitor profiling models,a disturbingly large number of firms do not formally profile their rivals with thesystematic rigor required of competitor profiling analysis. In a recent survey ofnine major studies investigating current practices of competitor protiling withinU.S. companies, Ram and Samir (1998) came to a promising conclusion. A 1988Conference Board Study found that only 3 percent of firms surveyed had fullydeveloped systematic competitor profiling systems in place. Their 1998 survey,however, indicated that 24 percent of those firms surveyed had a fully functional,advanced competitor profiling program. lt seems that Western firms are slowlystarting to leam some valuable lessons from their East Asian counterpartswho have benefited from advanced competitor profiling for at least a decade ifnot longer.

The strategic rationale of competitor profiling is powerfully simple. Superiorknowledge of rivals offers a legitimate source of competitive advantage. The rawmaterial of competitive advantage consists of offering superior customer value in thefirm's chosen market. The definitive characteristic of customer value is the adjectivesuperior. Customer value is defined relative to rival offerings, making competitorknowledge an intrinsic component of corporate strategy. Profiling facilitates thisstrategic objective in three important ways. First, profiling can reveal strategic weak-nesses in rivals that the firm may exploit. Second, the proactive stance of competitorprofiling will allow the firm to anticipate the strategic response of their rivals to thefirrn's planned strategies, the strategies of other competing firms, and changes in theenvironment. Third, this proactive knowledge will give the firms strategic agility.Offensive strategy can be implemented more quickly in order to exploit oppor-tunities and capitalize on strengths. Similarly, defensive strategy can be employedmore deftly in order to counter the threat of rival firms from exploiting the firm'sown weaknesses.

Clearly, those firms practicing systematic and advanced competitor profilinghave a significant advantage. As such, a comprehensive profiling capability is rapidlybecoming a core competence required for successful competition. An appropriateanalogy is Lo consider this advantage akin to having a good idea of the next move that

148 Part 11 The Techniques of Strategic and Competitive Analysis

your chess match opponent will make. By staying one move ahead, checkmate is onestep closer. Indeed, as in chess, a good offense is the best defense in the game of busi-ness as well.

STRENGTHS AND ADVANTAGES

Given the close relationship between competitor profiling and competitive advan-tage, many of the strengths of this tool are self-evident. However, several uniquebenefits arise. First, profiling encourages the firm to adopt a confident, aggressive,and proactive stance toward competitive strategy. The knowledge of rivals that pro-filing grants allows firms to define the parameters of strategy rather than react tounexpected competitive sideswipes. Done well, competitor profiling will becomeone of the firm's core competencies, contributing to competitive advantage.

From an organizational performance standpoint, the inclusive nature of profilinggreatly facilitates sharing insights and perspectives across traditional functionalboundaries of the firm. As such, many unique opportunitics are often articulated thatwould have remained bielden in the absence of a formal profiling approach. Otten,the process of profiling acts as a rallying point for many of the firm's employees.

The tactical implementation of profiling also creates an efficient and effectiveapproach to strategy formulation. The analytical product of profiling in the forro ofrelevant, timely, concise, and visually accessible presentation formats is an excellentvehicle to communicate the relevant factors of strategy. Compare this tu the tradi-tional vinyl-bound tomes produced by traditional environmental scanning that areprobably gathering dust on many shelves as you read this.

WEAKNESSES AND LIMITATIONS

The primary criticism of competitor profiling relates to the temptation for firms tomake it the all-encompassing cornerstone of competitive strategy. The irony of this isthat in attempting to become an industry leader, the firm will eventually become afollower if it defines leadership too closely related to current rivals. Severa]. reasonsare responsible for this apparent oxymoron. Comparisons tu rivals must alwaysrelate to the notion of customer value. Constantly referencing the firm's strategy torivals based un the idea of strategic groups or interindustry competition will eventu-ally blind the firm to innovative approaches of potential rivals in delivering superiorcustomer value from outside the industry. This underscores the importante of keep-ing une eye on potential rivals from seemingly unrelated sectors and industries inorder to root out complacency and blindspots that seem to grow unimpeded.

Another related weakness of competitive profiling refers to the copycat nature ofoutpacing the competition. Critics suggest that such a strategy prevents any compet-itive advantage from becoming sustainable. Rather, they insist that firms shouldfocus solely on customer value in search of innovation, not imitation.


PROCESS FOR APPLYING THE TECHNIQUE

The process of competitor profiling is composed of reine stages:

Determine who your competitors are.Determine who your potential competitors may be.Decide upen the information that is required about these rivals.Build a competitor analysis capability in order to secure this information.Conduct a strategic analysis of the gathered information.Present the information in an accessible formalEnsure that the right decision makers get the right information on a ti melybasis.Develop strategy based on the analysis.

9. Continually monitor rivals and continua Ily scan for potential rivals.

Steps 1 and 2: Determine Who Your Competitors Areand Who They May Be in the FutureThe first two steps are very closely related. Determining your current competitors isusually quite obvious upon cursory observation. A typical criterion includes thosefirms that serve the same customer base. However, upen deeper analysis this distinc-tion will probably become blurred. What exactly is the customer base? Is it customersof the same product? The same product category? Ultimately, all firms are rivals in theperspective that they are all trying te attract the same discretionary income. Althoughthis last delineation is extreme, it underscores the importance of cutting a broad-enough swath to effectively include potential rivals en the firm's radar screen at thebeginning of the analysis. Given the industry migration and value chain erosion thatis commonplace these days, it is important to cement this critical assumption at theonset in order to prevent the analysis from becoming too narrowly focused.

There are two very distinctive ways to define competitors. The traditionalmethod has taken a supply side perspective centered en defining strategic groups.Strategic groups are closely related firms that are usually premised on relatively sim-ilar strategies, occupy similar links en the industry's value chain, and share similarresource capabilities. As such, this method is more adept at identifying current com-petitors within strategic groups or within industries. Operationally, strategic groupscan be plotted on a graph with two axes into which all of the traditional rivals are ini-tially plotted in the graph space relativo to some set of distinctions along each axis.Next, the rivals occupying niches within the market are plotted. The final plot locatesthose potential rivals that are currently operating on the fringe of the industry's con-ventional parameters such as firms ernploying a substitutable technology, supplierswho may choose te forward integrate, and customers who may eventually choose toreverse integrate. At a minimum, every member of the industry value chain shouldbe included when the strategic map is finished, starting with the most interese cur-rent rivals and extending outward to potential rivals lurking on the industry'speriphery. It is important to be as creative as possible at this point, because oftenpotential rivals are not obvious.


The other method of defining markets explicitly addresses the fact that potentialrivais are rarely obvious. Usually they are hidden, developing entirely new ways ofdelivering customer value on completely new competitive platforms totally oblivi-ous to current companies that they will soon supplant. 13y focusing on customervalue and the simple question, Which competitors do your customers see to be yourmajor competition? firms can define potential rivais according to their provision ofcomparable customer value but through different platforms. Here, the focus of theanalysis is on defining potential rivais based on changing customer tastes and pref-erences, motivations, product or service deployment, or technological innovation.

Generally, the most valuable sources of information regarding the identificationof both current and potential competitors will be the firm's customers, sales staff,marketers, and operations managers. Other, less valuable sources may be found inindustry directorias, trade association materials, and other such secondary resources.

Step 3: Decide Upon the Information That Is RequiredAbout These Rivals

The first place to start this step is to go to the internal end user of the intelligence-the strategic decision makers within the firm. They will he in the best position toitemize exactly what types of competitor information would be most beneficia!. It isimportant to ensure that the competitive intelligence (C1) efforts around competitorprofiling are user oriented. To facilitate this objective, the information gatheringefforts should be demand oriented from the start.

Related to this requirement to stay closely attuned to interna! demand for CI isthe neeessity to keep the information gathering activities closely relevant to externaldemand—those competitive parameters that impact customer value. Although farfrom exclusive, Table 11-1 depicts the types and categories of information that maybe considered during this stage.

Aside from this main requirement, helpful ideas can be garnered froin the vari-ous CI surveys and benchmarking initiatives that have been conducted. An excellentsummary of nine major studies can be found in the Ram and Samir (1998) study citedpreviously. For example, one study conducted by the Conference Board asked 308responding companies to rate the most useful types of information (see Tables 11-2and 11-3). This may give the analyst some ideas regarding potentially useful types ofinformation. Bear in mirad, however, that information needs will be largely industryspecific or even fi rm specific and will change over time.

Step 4: Build a Competitor Analysis Capability in Orderto Secure This Information

Although this step is beyond the scope of this chapter, some fundamentals arepertinent. First is the concept of the intelligence cycle as it applies to CI capability.The infrastructure of the CI system should include competencies based on fourdistinct organizational skills of collection, processing, analysis, and dissemina-tion. Second, an important item to keep in mirad is the fact that, contrary tu intu-ition, most of the information required already exists inside of the firm. That is,


Table 11-2Most Usefui Type of Information (by type of market)

Ton., (%)INDUSTRIAL.

PRODUCTS (%)

ConsumFR

PRODUCTS (%)

Lkmi CONSUMER

AND INDUSTRIAL (%)

Pricing 23 26 20 19

Strategy 19 20 15 22

Sales data 13 11 18 12

tiew products, product mix 11 13 8 10

Advertising/marketing activities 7 3 19 4

Costs 6 8 3 5

Key customers/markets 3 3 6 1

}MI) 2 2 1 3

Management style 2 3 1

Other 4 4

No answer 10 9 7 15

1(X)°/,, 100% 100% 100%

Number of responding companies 308 158 72 78

Source: Competitivelntdligence. (1988). Conference Board Report No. 911 New York: The Conference Board.

Table 11-3Types of lolormation About Competitors Rated Useful or Fairly Useful

l'RESENT SIATUS TOIAL (%) PROSPECTS Tom,. (%) Cosis Tornt. (%)ORGANIZATION &

OPERATIONS TOTAL (%)

Pricing 97 Strategic plans 93 Manufacturing 83 Company operating 76

Sales statistics 94 New product 91 costs style

Market share 93 plans Marketing costs 71 Service capabilities 76

changes Expansion plans 91 Advertising 48 Manufacturing 75

Key customers 91 Acquisition/ 83 costs processes

Advertising/marketingactivities

81 mergerprospects oractivities

Companyorganiza t ionstructure

62

Company 77 R&D activities 80 Executive changes 58reputation Product design 79 Financing practices 47

Distributors 63 Patents 56 Legal actions 46Suppliers 50 Executive

compensa (ion20

Source: Adapted (mm Competitive Intelligence. (1988). Conference Board Report No. 911 New York: The Conference Board.


TOTAL (%)INDUSTRIAL

PRODUCTS (%)CONSUMER

PRODU(-TS (%)Bolo COM,UMFR

AM) iiM)USIRIAL (%)

Salesforce 27 35 18 23

Publications, databases 16 13 15 22

Clustomers 14 13 11 17

Marketing research,tracking services

linaneial reports

9

5

3

7

24

3

9

1

Distribu tors 3 4 1 I

Employces (unspecified) 2 2 6

Analysis of products 2 1 3 3

Otber 8 6 8 13

No answer 14 16 11 11

100% 100% 100% 100%

Number of respondingcompanies

308 158 72 78

Source . Competitive intelligence. (1988) Confererwe Board Report No. 013 Neto York: Tite Conference Board.

salespeople, marketing staff, operations— in fact, everyone in the firrn —are prob-ably in possession of valuable nuggets of competitive information. Figuringprominently in these primary sources of information are the customers and sup-pliers related to the firm. This has been confirnied by the Conference Board reporton competitive intelligence that cited infernal sources as the most valuable. Table11-4 and Table 11-5 ranks the common sources of competitor information.

Step 5: Conduct a Strategic Analysisof the Gathered Information

Porter's framework depicted in Figure 11-1 can be used as a helpful guide for per-forming the analysis of the gathered information.

Future Goals. Determining the future goals of rivals will help to forecast theirstrategies with other rivals, and planned strategies of the analyst's firm. To under-stand where a competitor is headed, it is crucial to identify the direction intendedwith regard to market share, profitability, and organizational performance, to na me afew. What has been stated xvith regard to their future direction? How do they seethemselves operating in the future?

Current Strategy. First, determine which of the three generic strategies (low cosí,differentiation, or focus) the firm is pursuing. Next, the analysis can be delineated rotothe strategic implications for cach functional crea of the rival's business. A competi-

Table 11-4Most Useful Sources of Information


SOURCFS WITHIN

THE COMPANY

Sales forceMarketing

research staffAnalysis of

competitors'products

I'lanning staffngineeringstaff

bormeremployees ofcompetitors

i > urchasing staff

CONTACT WIT1 UN

TOTAL (%) THE TRADE

96 Customers

83 Meetings,trade shows

81 DistributorsSuppliersTrade

63 associations53 Consultants

Retailers49

Competitors'employees

42 Ad agencies

PUBLISIIED

INFORMA nON

Industryperiodicals

Companies'promotionalmateria ls

Companies'10K reports

Security analysts'reports

Financialperiodicals

Specches bymanagers

General business 54periodicals

National

43

newspapersNewspapers in

42cities wherecompetitorshave facilities

Directories 31(Standard &l'oor 's, etc.)

Govenunent

26publica tions

TUIA I . ('Yo)

92

74

70

65

59

4337

37

24

OTHER

1 OTA [ (%) SOURCFS TO I A I .(% )

89 Security 40

analysts84 Tracking 38

servicesElectronic 35

77 databasesInvestment 22

74 banksCourt records 16

64 Want ads 15

Commerci a l 1155 banks

Source: Adapted from Competitive lntelligence. (1988). Conference Board Report No. 913. New York: The Conference Board.

Table 11 —5

Information Sources Rated Very or Fairly Important

tor's current strategy may be identified on the basis of what the firm says and what itdoes currently. What are its stated short-term goals? Start by identifying the differencesbetween future goals and what it is currently doing. ls there synergy and sense or willit require a major shift if it is to achieve its long-term goals? Are its short-term activitiesin line with its future goals? Remember, in the absence of particular forces for chango,it can be assumed that a company will continue to compete in the future in the sameway it has competed in the past.

Capabilities. Use the information gathered in step 2 to conduct a SWOT analysis(strengths, weaknesses, opportunities, and threats) of each rival. The objective here isto identify what the competitor is doing and what it can really do. This is about capac-ity, skills, and resources. Although a competitor may have announced its strategic

154 Part II The Techniques of Strategy and Competitive Analysis

intentions, these may be quite different to its current capabilities and as such posesquestions about the interna! thinking of the company.

Assumptions. A rival's competitive assumptions about itself, the industry, andother rivals will yield many useful insights regarding any potential incorrectassumptions or blindspots. Often, these blindspots offer competitive opportuni-ties. chis is the crux of the analysis. What assumptions does the competitor holdabout its world and are these reflected in its strategies, both current and future?Assumptions can be identified by the mismatch between capabilities, currentstrategies, and future goals. On the other hand, a company that has all three areasin sync may be a formidable competitor. However, all companies hold assumptionsand tenets about the world and the future and it is these assumptions that need tobe uncovered.

The critical issue underlying competitor analysis is understanding what are thekey assumptions made by the management team of competitors. This identifies fun-damental weaknesses in how they compete and provides a framework of how theysee their marketplace. Answering questions such as, Are they satisfied with this posi-tion? What are their plans? What are their vulnerabilities? can provide the necessarystrategic input and understanding tu take competitors un.

All four of the analyses are then integrated into a competitor profile. The pur-pose of this integration is to forecast with reasonable accuracy how a rival will pre-cipítate or respond to various competitive pressures. First, the offensive stature ofrivals is determined to predict any proactive moves they may initiate. Second, thedefensive stature of rivals is determined tu forecast how a rival will react to variouscompetitive pressures. In making these determinations, qualitative factors often pre-domina te over the more traditional quantitative approach of business analysis.

Step 6: Present the Information in an Accessible Format

Many different formats exist through which to communicate the analysis. Most effec-tive are visual depictions as opposed to written reports. Figures 11-2 to 11-4 depictsthree of many different types of formatting schemes available.

Comparison Grids. Plot rival positions (performance, capabilities, key success fac-tor, etc.) un high/lc.)w dependent and independent variable cross-hair axes.Depending un the application, the analyst's firm's performance or industry averagesare used as the point of reference. Comparison grids provide nice snapshots of therelative performance across two competitive parameters. (See Figure 11-2.)

Radar Charts. Simple to comprehend yet dense with information, radar chartsare often used to communicate profiling analysis. Radar charts are composed ofan underlying circle with several points un the circumference representing indus-try averages around relative competitive parameters. Superimposed over thesecircles are geometric shapes representing the performance of the firm or rivalunder analysis. Depending un superior or inferior performance, the resulting geo-metric shape of the overlay will depict a conciso visual of relative performance.(See Figure 11-3.)


Nlarket Share

Iligh

Low

Low

R&D ROA

MarketAdvertising Share

NewSales Product

Rival A

industry Average Analyst's Firm

Figure 11-2Presentation ToolsComparison Grids

• Color-Coded Competitor Strength Grid. Developed by Aaker (1998), competitorstrength grids are a simple but powerful way of depicting the relative SUperioritybetween rival firms along any number of competitive parameters. By assigning aspectrum of colors to represent relative competitive inferiority, parity, and superior-ity, the graph effectively and efficiently depicts the spectrum of relative competitiveadvantage among rivals. (See Figure 11-4.)

These charts and similar visual depictions should be used as wallpaper for thewar room wall. Being surrounded by many concise summaries of relevant strategicparameters will greatly facilitate the brainstorming sessions during the strategydevelopment process.

Figure 11-3Radar Charts


Assets andCompetencies

Ralston NestléPurina

Mars Heinz Hill's lams lloane

Nana recognition Ni=Breadth of

Breadth ofchannel coverage

Specialty/veterinariancoverage

Financialresources

Cost structure

Gcographical coverage:United States

product lino

.11

,..,.

Gcographical coverage:Inteniational

n Strong n Aboye average n Average E Below average Wcak

Figure 1 1 -4Competitor Strength GridPet Food Competitors in the U.S. MarketSource: Strategic Market Management 2e by D. A. Aaker, Copyright © 1988 John Wiley and Sons, Inc. This material isused by permission of John Wiley & Sons, Inc.

Step 7: Ensure That the Right Decision Makers Get the RightInformation on a Timely Basis

Given the rapidity of environmental and competitive change, competitor intelli-gence has value only if it is received in a titnely fashion by the relevant strategicdecision maker. In this respect, tirneliness and relevance supercede completeaccuracy.

Step 8: Develop Strategy Based on the Analysis

At this point in the analysis, the proverbial rubber hits the road. Competitor pro-files are used to develop strategy around several relevant competitive considera-tions such as determining the probable roles of engagement within that strategicposition; and choosing the arena of engagement—where, how, and against whom

the firm will compete—by developing a strategy that leverages the firm's


strengths, exploits rivals' weaknesses, neutralizes competitive threats, and defendsagainst weaknesses.

In answering these questions, knowledge of how competitors are likely to reactis used to compromise their ability to respond in a strategically optimal fashion.Strategies are chosen that will force rivals to make costly strategic trade-offs shouldthey decide to impinge on the firm's strategy.

Step 9: Continually Monitor Rivais and Continually Scanfor Potential RivaisThe analyst should always assume that rivals are simultaneously performing similarprofiles for their own firm. This is reason enough to engage in continuous monitor-ing counter competitive moves. Volatile markets, hypercompetition, industrymigra tion, and decoupling value chains give acople rationale for continuous moni-toring of current and potential rivals.

Letting Customers Do the Competitor Profiling

A study was conducted to determine a competitiveprofile of U.S. banks, savings and loans, and creditunions to analyze the impact of image and reputationas a possible source of competitor profiling distinction.Specifically, the answers to two questions were soughtthrough a telephone survey of 1,016 randomly selectedhomes:

I. What are the competitive strengths and weak-nesses of banks, savings and loans, and creditunions as perceived by their customers?

2. What image characteristic variables differentiateconsumers' perceptions of their major financialinstitution from their perceptions of their minorfinancial institution from the perspective of theirminor financíal institution?

The image profile variables used were:

I. Having tellers who always call you by name.

Having well-trained tellers.

Leading most other financial institutions út offer-ing new services.

4. Having lower-than-average service charges onchecking accounts.

Having drive-up tellers who give faster -than-average service.

Having higher-than-average interest rates onsavings.

Having officers with an above-average levet ofconcern about you as a customer.

Having tellers in the bank who give faster-than-average service.

Having lower-than-average interest rates on loans.

Having operating hours that meet your needs.

Having above-average drive-up window conve-niente.

Making it easier to obtain a loan.

The friendliness of tellers in helping you manageyour financial affairs.

Showing an interest in helping you manage yourfinancial affairs.

Above-average friendliness of officers.

Having offices that are very easy te get to.

As a result of the survey around the abo ye image vari-ables, the following competitor profile was developed:

(Continued on following page)

158 Part 11 The Techniques of Strategic and Competitive Analysis

Letting Customers Do the Competitor Profiling (Continued)

More personal

* Savings & Loans

Higher costMore convenience

Less costLess convenience

Banks ** Credit Unions

Less personal

CONCLUSIONSSigniticant differences exist between consumers' per-ceptions of the strengths and weaknesses betweenbanks, credit unions, and savings and loans.

Banks: high cost, high convenience

Credit unions: lower cost, lower convenience

Savings and loans: oc.cupies the mental spacebetween banks and credit unions

STRATEGIC IMPLICATIONSThe authors of the survey were able to surmise severalsignificant strategic implications as a result of the com-petitor profile:

Banks have a strong competitive advantage andcredit unions have a weak competitive advantagewith regard tu targeting affluent customers whoare attracted to convenience and are willing topay for it. The source of this competitive advan-tage for banking convenience was found to be

loeation and quick service. 'the flip side of (beseconveniences was found to be higher servicecosts and interest rates on loans.

Credit unions have a competitive advantage overbanks in targeting con.sumers attracted tu no-frills service in exchange for reduced costs.

Despite scoring well on personalized service (arelatively small impact on image perception com-pared to convenience and price), savings andloans are in the classic "sitia( in the middle" posi-tion, having no competitive advantage withregard to banks or credit unions.

To achieve greater customer share, banks would pre-sumably pursue growth by cross-selling tu existingcustomers and attempting tu convince credit unioncustomers to switch based un a relatively diversifiedservice and product offering. Credit unions andsavings and loans would probably emphasizerelationship marketing in order to develop the imageof a "major" financial institution in the eyes of theircustomers.

SOURCE: Adapted from "The Competitive Marketing Profile of Banks, Savings and 'Dans, and Credit Unions," byT. R. Kenneth and J. P. Wong„ 1988, lournal of Professional Services Marketing, 3(3,4), pp. 107-121.


FAROUT SUMMARY

Future orientation Medium to high. The forward-looking orientation of focusing on potential rivalsas defined by customers is mitigated by theemphasis on current rivals as defined by strategicgroups and industry analysis.Accuracy Medium to high. Accuracy is increasedby including the notion of customer value indefining competitors. Also the multitude ofsources and analytical approaches allows for sub-stantial cross-referencing.Resource efficiency Low. Building a robust com-petitor profiling capability requires significantinvestment in human resources and intelligenceinfrastructure.

Objeclivity High. The comprehensiveness ofcompetitor profiling analysis increases theaccuracy through internal checks for consistency.Usefulness High. Used correctly, this tool is one ofthe most pervasive in contributing to the achieve-ment of competitive advantage.Timeliness Low to medium. Starting from theground up will require a significant time laguntil actionable intelligence is produced.Operating Cl systems are quite timely in collect-ing, organizing, digesting, analyzing, anddisseminating actionable intelligence on bothcurrent and potential rivals.

RELATED TOOLS AND TECHNIQUES

• blindspot analysiscomparative cost analysiscustomer segmentation analysiscustomer value analysisfunctional capability and resourceanalysis

industry analysismanagement profilingratio and statement analysissustainable growth rate analysisscenario analysisstructural groups analysis

SWOT analysisvalue chain analysis

REFERENCES

Aaker, D. A. (1998). Strategic market management. NewYork: John Wiley and Sons.

Attansio, O. 13. (1988). "The multiple benefits of com-petitor intelligence." The Journal of Business Strategy,9(3), 16-19.

Cvitkovic, E. (1989). "Profiling your competitors."Planning Review, 17(3), 28-30.

Conference Board, Competitive Intelligence, 1988,Conference Board Report No. 913. New York: TheConference Board.

Kenneth, T. R., Wong, J. P. (1988). "The competitivemarketing profile of banks, savings and loans, andcredit unions." Journal of Professional SeroicesMarketing, 3(3,4), 107-121.


Porter, M. (1980). Competitive strategy: Techniquesfor analyzing industries and competitors. New York:Free Press. . (1985). Competitive advantage: Creating and sus-

taining competitive advantage. New York: Free Press.

Ram, S., & Samir, 1. T. (1998). "C:ompetitor analysis prac-tices of U.S. companies: An empirical investigation."Management International Review, 38(1), 7-23.

Shaker, S., Zr Gembicki, M. (1999). The war-room guide tocotnpetitive intelligence. New York: McGraw Hill.


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