Customer - Top Tips - Competitor Analysis

Competitor Analysis

This document is designed as a quick reference guide to competitor analysis.

This will enable you to gain knowledge of a particular skill, task or process.

This means you can quickly find the key information that you need and refer to it on an ongoing basis whenever you need to refresh your knowledge.

 

Introduction

Competitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context through which to identify opportunities and threats. Competitor profiling brings together all the relevant competitor information, supporting efficient and effective strategy formulation, implementation, monitoring and adjustment.

Despite the fact that competitor analysis is an essential component of corporate strategy, it can be argued that most firms do not conduct this type of analysis systematically enough. Where this is the case, more reliance is placed on the small fragments of information that are picked up and individual intuition. This can put organisations at risk of dangerous competitive blind spots due to a lack of robust competitor analysis

Customer - Top Tips - Competitor Analysis

What you need to know

Competitor array

One common and useful technique is constructing a competitor array. The steps include:

 

     define your industry - scope and nature of the industry

     determine who your competitors are

     determine who your customers are and what benefits they expect

     determine what the key success factors are in your industry

     Rank the key success factors by giving each one weighting - The sum of all the weightings must add up to one.

     Rate each competitor on each of the key success factors

     Multiply each cell in the matrix by the factor weighting.

     Sum columns for a weighted assessment of the overall strength of each competitor relative to each other.

 

 

 

Customer - Top Tips - Competitor Analysis

What you need to know

Competitor profiling

The strategic rationale of competitor profiling is powerfully simple. Superior knowledge of rivals offers a legitimate source of competitive advantage. The raw material of competitive advantage consists of offering superior customer value (relative to rivals) in a chosen market.

Profiling supports this by:

 

1.   Revealing strategic weaknesses in rivals that we may exploit.

2.   Allowing us to anticipate the strategic response of our rivals to planned strategies, the strategies of other competing firms, and changes in the environment.

3.   Giving us strategic agility. We are better able to implement actions more quickly in order to exploit opportunities and capitalise on strengths.

 

 

Likewise we can respond much quicker to threats from our competitors.

Therefore, organisations that carry out systematic and advanced competitor profiling have a significant advantage.

 

So, how do we create competitor profiles? A common technique is to create detailed profiles on each major competitor. These profiles give an in-depth description of the competitor's background, finances, products, markets, facilities, personnel, and strategies. This involves:

 

Background:

     Location of offices, plants, and online presence

     History - key personalities, dates, events, and trends

     Ownership, corporate governance, and organisational structure

 

Financials:

     P-E ratios, dividend policy, and profitability** various financial

Ratios, liquidity, and cash flow

     Profit growth profile; method of growth (organic or acquisitive)

 

Products:

     Products offered, depth and breadth of product line, and product portfolio balance

     New products developed, new product success rate, and R&D strengths

     Brands, strength of brand portfolio, brand loyalty and brand awareness

     Patents and licenses

     Quality control conformance

     Reverse engineering

 

Marketing:

     Segments served, market shares, customer base, growth rate, and customer loyalty

     Promotional mix, promotional budgets, advertising themes, ad agency used, sales force success rate, online promotional strategy

     Distribution channels used (direct & indirect), exclusivity agreements, alliances, and geographical coverage

     Pricing, discounts, and allowances

 

Facilities:

     Plant capacity, capacity utilisation rate, age of plant, plant efficiency, capital investment

     Location, shipping logistics, and product mix by plant

Personnel:

     Number of employees, key employees, and skill sets

     Strength of management, and management style

     Compensation, benefits, and employee morale & retention rates

Corporate and marketing strategies:

     Objectives, mission statement, growth plans, acquisitions, and divestitures

     Marketing strategies

 

Customer - Top Tips - Competitor Analysis

What you need to know

Media scanning

Scanning competitor's ads can reveal much about what that competitor believes about marketing and their target market.

 

Changes in a competitor's advertising message can reveal:

 

     New product offerings

     New production processes

     New branding strategy

     New segmentation strategy

     Insights from recent marketing or product research

     New strategic direction

     New source of sustainable competitive advantage

     New pricing strategy (e.g. price discrimination, joint product pricing, discounts or loss leaders)

     New promotion strategy (e.g. short term sales generation, long term image creation, new advertising agency)

     New distribution strategy (e.g. new distribution partners)

 

A competitor's media strategy reveals budget allocation, segmentation and targeting strategy, and selectivity and focus. From a tactical perspective, it can also be used to help us implement our own media plan. By knowing the competitor's media buy, media selection, frequency, reach, continuity, schedules, and flights, we can arrange our own media plan so that they do not coincide.

 

Other sources of corporate intelligence include trade shows, patent filings, mutual customers, annual reports, and trade associations.

Some firms hire competitor intelligence professionals to obtain this information. The Society of Competitive Intelligence Professionals maintains a listing of individuals who provide these services.

 

New competitors

In addition to analysing current competitors, it is necessary to estimate future competitive threats.

 

The most common sources of new competitors are:

 

     Companies competing in a related product/market

     Companies using related technologies

     Companies already targeting your prime market segment but with unrelated products

     Companies from other geographical areas and with similar products

     New start-up companies organised by former employees and/or managers of existing companies

The entrance of new competitors is likely when:

     There are high profit margins in the industry

     There is unmet demand (insufficient supply) in the industry

     There are no major barriers to entry

     There is future growth potential

     Competitive rivalry is not intense

Gaining a competitive advantage over existing firms is feasible