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C H A P T E R

Competitor Analysis4

1. Essence of a “Strategy”

2. Increasing Importance

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Continuiting from Chs. 2 & 3Continuiting from Chs. 2 & 3

• Define the competitive set Boundary• Industry Analysis Macro level• Competitor Analysis Micro level

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Competitor Analysis SystemCompetitor Analysis System

What are they going to do?

Differential competitor advantage analysis i.e. Who has the competitive product advantage?

Key questions: - Who are they?- What are the

competing product features?

- What do they want?

- What is their current strategy?

Primary dataSecondary data

Differential Advantage Analysis

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Key Questions to AskKey Questions to Ask

• Do you know…?• What are the Capabilities of competitors?• What are the Competitors’ Objectives?• What are the Current Strategies being

used and how successful have they been?• What are their likely Future Strategies?

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Secondary Sources of Competitor Secondary Sources of Competitor InformationInformation

Secondary data

Customer communications

Internal sources

Local newspapers

Annual reports

Patent filings

Business press

10Ks

GovernmentElectronics databases

News releasesTrade associations

Promotional literature

Internet

Trade press

Consultants

www.dialog.comwww.dnb.com

http://www.beernet.comhttp://www.crn.com

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Primary Sources of Competitor InformationPrimary Sources of Competitor Information

Primary data

Consultants/Specialized

Firms

Investment bankers

Employees

Customers

Suppliers

Sales force

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Other Sources of InformationOther Sources of Information

• Help-Wanted Ads• Reverse Engineering • Monitoring Test Markets• Hiring Key Employees* • Plant Tours

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Information Sources with Ethical ConsiderationsInformation Sources with Ethical Considerations

• Aerial Reconnaissance• Buying/Stealing Trash (Garbology)• PCs/Printers• Phony Want Ads

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Step1: Assess Competitors’ ObjectivesStep1: Assess Competitors’ Objectives

Three Categories Market share or profit Issues to consider

Ownership structureOperating philosophy and procedures Country of origin

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Step 2: Assess Competitors’ Current StrategiesStep 2: Assess Competitors’ Current Strategies

Assess competitors’ Marketing StrategyTarget Market SelectionCore Strategy (Value-chain comparison)Implementation (Supporting Marketing Mix)

PricingPromotionDistributionProduct/Service Capabilities: Product Features

Matrix (Figure 4-8)

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Value ChainValue Chain

ServiceService

Firm InfrastructureFirm Infrastructure

Human Resource ManagementHuman Resource Management

Technology DevelopmentTechnology Development

Procurement Procurement

Marketing Marketing and Salesand Sales

OperationsOperations Outbound Outbound LogisticsLogistics

Inbound Inbound LogisticsLogistics

Margin

Margin

Support Activities

Primary Activities

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Example) Energy Bars: Example) Energy Bars: Competitor Feature/Strategy MatrixCompetitor Feature/Strategy Matrix

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Step 2: Assess Current Strategies (Cont’d)Step 2: Assess Current Strategies (Cont’d)

How to Assess Competitors’ StrategiesTwo key elements of a strategy:

Segments appealed toCore strategy

For Industrial Products: Sales literature For Consumer Products: Media Tracking (SOV)

Marketing Mix variables: Ask Distributors, Salespeople, Customers

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Step 2: Assess Current Strategies (cont’d)Step 2: Assess Current Strategies (cont’d)

Assessing Competitors’ Technological Strategy

1. Technology selection or specialization

2. Level of competence

3. Sources of capability: internal versus external

4. R&D investment level

5. Competitive timing: initiate versus respond

6. R&D organization and policies

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Step 2: Assess Current Strategies (cont’d)Step 2: Assess Current Strategies (cont’d)

Four Basic Technological Strategies (Figure 4-11)

1. First to Market

2. Second to Market

3. Late to Market or Cost Minimization

4. Market Segmentation

For your report: Figure 4-12* (p. 102)

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Step 3: Assess Competitors’ CapabilitiesStep 3: Assess Competitors’ Capabilities

Ability to conceive and design Ability to produce Ability to market Ability to finance Ability to manage

Don’t Forget to include your firm too!

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What to do with all the information? What to do with all the information? Make a Table! (Differential Advantage Analysis)Make a Table! (Differential Advantage Analysis)

Gallo Heublein Vintners Canandaigua Seagram

Commitment to wine business 1 5 2 3 4

Financial strength2 1 4 5 3

Brand awareness1 2 3 5 4

Management ability 1 4 2 3 5

Highest = 1

Lowest = 5

Market Factors

Simplified Competitive Analysis: WineSimplified Competitive Analysis: Wine

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Energy Bars: Differential Advantage AnalysisEnergy Bars: Differential Advantage Analysis

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Energy Bars: Differential Advantage Analysis Energy Bars: Differential Advantage Analysis

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Step 4: Assess A Competitor’s Will and Step 4: Assess A Competitor’s Will and Future StrategyFuture Strategy

Questions to assess a competitor’s will

- How crucial is this product to them?

- How visible is the commitment to the market?

- Who is involved? To Figure out Future Strategy

Forecast with historical dataSimulation with historical dataGame Theory

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A Competitive Conjecture ProcessA Competitive Conjecture Process

Customer response

We lower our price

Our unit sales

Their expected price

Our profit

Their price reaction

Customer response

Our unit sales Our profit

Our total

outcome

Second period

First period

Should we cut price?

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Example:Example:Energy Bars: Current & Future Strategy MatrixEnergy Bars: Current & Future Strategy Matrix

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In summary, you need to knowIn summary, you need to know

Major Competitors’ Objectives

Major Competitors’ Strategies* Target MarketCore Strategy

Major Competitors’ Capabilities