Competitor Analysis

1 COMPETITOR ANALYSIS Competitive marketing strategies are strongest either when they position a firm's strengths against competitors' weaknesses or choose positions that pose no threat to competitors. As such, they require that the strategist be as knowledgeable about competitors' strengths and weaknesses as about customers' needs or the firm's own capabilities. This chapter is designed to assist the strategist understand how to gather and analyze information about competitors that is useful in the strategy development process. It discusses the objectives of competitor analysis and proceeds through the processes involved in identifying important competitors and information needs, gathering necessary information, and interpreting this information. The ultimate objective of competitor analysis is to know enough about a competitor to be able to think like that competitor so the firm's competitive strategy can be formulated to take into account the competitors' likely actions and responses. From a practical viewpoint, a strategist needs to be able to live in the competitors' strategic shoes. The strategist needs to be able to understand the situation as the competitors see it and to analyze it so as to know what actions the competitors would take to maximize their outcomes to be able to calculate the actual financial and personal outcomes of the competitor's strategic choices. They must be able to: 1. Estimate the nature and likely success of the potential strategy changes available to a competitor; 2. Predict each competitor's probably responses to important strategic moves on the part of the other competitors; and 3. Understand competitors' potential reactions to changes in key industry and environmental parameters. What then should one expect from competitor analysis? Underneath all of the complexities and depth of competitor analysis are some simple and basic practical questions, of which the following are typical:  Which competitors does our strategy pit us against?  Which competitor is most vulnerable and how should we move on its customers? 2  Is the competitor's announced move just a bluff? What's it gain if we accept it at face value?  What kind of aggressive moves will the competitor accept? Which moves has it always countered? IDENTIFYING COMPETITORS Identifying competitors for analysis is not quite as obvious as it might seem. Two complementary approaches are possible. The first is demand-side based, comprised of firms satisfying the same set of customer needs. The second approach is supply-side based, identifying firms whose resource base, technology, operations, and the …