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Competitor and Competitive

Life Cycle Analyses


Learning Objectives
Independently conduct competitor and
competitive life cycle analyses

MGT 450: Business Policy & Strategy


Ranucci, Spring 2016

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Connecting Industry & Competitive


Analysis
2. Within that industry context
how can my firm be different
from the other competitors?
Analyze the firm-competitor dyad
Firm

1. What are the drivers


of an industrys
profit potential?
MGT 450: Business Policy & Strategy
Ranucci, Spring 2016

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Competitor

Competitors
Competitors are firms operating in the
same market, offering similar products and
targeting similar customers

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Ranucci, Spring 2016

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Competitive Rivalry
Competitive Rivalry includes ongoing actions and
responses taking place between an individual firm and its
competitors for advantageous market position

Firms study competitive rivalry in order to predict the competitive


actions and responses that each of the their competitors likely will take.

MGT 450: Business Policy & Strategy


Ranucci, Spring 2016

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Competitive Analysis

Step1:Identifyyour
competitors

MGT 450: Business Policy & Strategy


Ranucci, Spring 2016

Step2:Gather
intelligenceonyour
competitors

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Step3:Analyzethe
competitivepositionsof
rivalsandcompare
strengthsandweaknesses
withyouownandother
competitors

Who are a firms direct competitors?


1. Market commonality
Number of markets (product, geographic, consumer) with which the
firm and competitor are jointly involved
Multimarket competition occurs when firms compete against each
other in several product or geographic markets
Degree of importance of the markets to the firm and the competitor

What product markets does AT&T have in common with Verizon?


With Comcast?
What information can you use to ascertain the relative importance of a
market to a firm (e.g. how would you do this for your project)?

MGT 450: Business Policy & Strategy


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Who are a firms direct competitors?


2. Resource similarity
Extent to which the firms tangible and intangible resources are
comparable to a competitors in terms of type and amount
What are AT&Ts key resources?
How similar are they to Verizons resources?
Comcasts resources?
High on both (market commonality
& resource similarity) then more
likely to be direct and mutually
acknowledged competitors

MGT 450: Business Policy & Strategy


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Gather Intelligence on competitors

Organization Website to identify a wide array of organizational details


from geographic footprint to stated strategy (usually in a tagline or About
us section)
Performance Metrics (revenues, market share, ROA, R&D investment,
profit margins, etc.), past and present to identify trends
Analyst Reports (in Lexis Nexus database) to provide indicators of
strengths/weaknesses, market expectations, future outlook
Hiring activity to identify areas/geographies of strategic focus or growing
capability
Press releases and News coverage of strategic partnerships, product
launches, new services, geographic expansion, plant closures, employee
issues, etc.
Put it in a spreadsheet or table for easy comparison
These will be appendices in your written projects
Link on Blackboard to book templates

MGT 450: Business Policy & Strategy


Ranucci, Spring 2016

59

Analyze Rivals

FutureObjectives:

Assumptions:

CurrentStrategy:

Capabilities:

Whatdrivesthe
competitor?

Whatdoesthe
competitorbelieve
abouttheindustry?

Whatisthe
competitorcurrently
doingandwhatcan
theydo?

Whatarethe
competitorsstrengths
andweaknesses?

In undertaking a competitor analysis a firm is trying to understand:

What will our competitors do in the future?


Where do we hold an advantage and where do they hold an advantage?
How will any action change our relationship with our competitors?

MGT 450: Business Policy & Strategy


Ranucci, Spring 2016

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Use your Competitive analysis to


draw insights.
Will your competitors take a particular action? If you act will
your competitors react? Their action will be a function of their:

Awareness

Doesthefirmrecognizetheresourcesimilarity
andmarketcommonalityenoughtoactorreact?

Motivation

Dothegainsofengagingincompetitiverivalry
outweighthelosses?

Ability

Doesthefirmhavetheresourcesandflexibility
toactorreact?

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Types of Actions and Responses


Afterconsideringlikelihoodofactionorresponse,itisimportantto
consider:
Speed,Magnitude,Location..and Type:
Tactical
Involvesfewerresourcessoeasiertoimplementand
reverse
Shouldonlybeusedtofinetuneastrategy

Strategic
Significantcommitmentoforganizationalresources
Difficulttoimplementandreverse

MGT 450: Business Policy & Strategy


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Act or React?
FirstMovers
(takesinitial
competitiveaction)

SecondMovers
(Followersor
imitators)

Advantages

Disadvantages

Gainearlycustomerloyalty
andmarketshare
Candictatethedirectionor
focusofthecompetition

Higherrisk
Largeresource
commitment
Learningcurvemaybe
steep

Learnsfrommistakesof
firstmover
Takesadvantageof
additionaltime,somore
efficientandlowerinitial
outlay

Moreefforttoshiftloyalty
andcapturemarketshare
Lessofanunderstanding
abouthowtocreatevalue
forcustomers

HenryFordiscreditedwithsayinghewouldratherbethefirstpersontobesecond.
Beingasecondmovercanbeanintentionalstrategy Canyouthinkofanysuccessful
secondmovers?
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Competitive life
cycle (CLC)
analysis
Analysis of the pattern
of competitive action
and reaction among all
firms in an industry

Maturity

Emergence

Marginallycompetitive
firmsexit(Shakeout)
Focusoncostsavingsand
incrementalinnovation.
Pricepressurecompresses
margins

Disruptivenewtechnology,
product,process
Widespreadmarketentry,lots
ofvariance&experimentation

Growth

Emergence

Profitability

Maturity

MGT 450: Business Policy & Strategy


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Convergenceonadominantdesign(annealing)
leadstoincreasedadoptionbycustomers
Significantgrowthindemandmovesfocusto
meetingdemandandheadtoheadcompetition

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Step One: Chart your position and


your competitors positions on the CLC

What phase of the life


cycle are your products
and technology in?
Repeat for competitors
products and technology

Maturity

The book charted Apple in


2011. How would you chart
Apple products today?

MGT 450: Business Policy & Strategy


Ranucci, Spring 2016

Emergence

Growth

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Step Two: Characterize the CLCs


How long is each phase?
Emergent phase

Is there a dominant design or multiple designs?

How close is the industry to a dominant design?

Maturity Phase

How significant are the price pressures?

How many more incremental improvements can be made?

Is there a lot of room for prices to move down?

Is there a new disruptive product or technology on the


horizon?

MGT 450: Business Policy & Strategy


Ranucci, Spring 2016

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Emergence

Growth phase

Is demand still growing?

Are there barriers to imitation?

Are competitors starting to exit?

Are competitors starting to compete on cost?

Are competitors starting to make just incremental


improvements to the product or technology?

Profitability

Maturity

Time

Slow Cycle Markets

Competitive advantages are shielded from


imitation commonly for long periods of time
Imitation is costly
Example: Proprietary advantages, Pharmaceuticals

Emergence
Discovered:1972
BeechamResearchLaboratories
MGT 450: Business Policy & Strategy
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Growth

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Time

Maturity
1998
Genericbrands

Fast Cycle Markets


Imitation is rapid and inexpensive
Cannibalization common
Examples: PCs, Smart phones,
Tablets

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Time

Standard Cycle Markets


Each new disruption moves through
the cycle at a different speed

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Time

What can you learn from a CLC analysis?


About you current product & technology portfolio
Need to understand where your current products or technology are in their
life cycle so you can anticipate future returns to profitability (e.g.
profit margins tend to be higher for products in the growth phase than in the
mature phase)

May want to diversify across phases

What does the Apple CLC tell you about future margins on their products?
The diversity of their portfolio?

Profit potential of new product or technology investments


If entering with a product in the mature phase, demand may be high but
competition will be tough and margins will be lower
Important inputs for future tools
Scenario planning, Portfolio planning
MGT 450: Business Policy & Strategy
Ranucci, Spring 2016

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StratSim CLC Analysis


Step 1: Chart your position and your competitors positions on the CLC
Step 2: Characterize the CLCs
These require insights across gathered across tabs and over time:
Internal (e.g. product margins)
Market (e.g. demand, new product launches or product development)
Competition (other products, product price and features)
Tools (e.g. demand expectations)
You dont have a lot of history to do Step 2 at this point which is why CLC is
not required for your StratSim Strategic Analysis but it is required for your
individual assignment

MGT 450: Business Policy & Strategy


Ranucci, Spring 2016

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StratSim Competitor and CLC


Analysis
Step 1: Identify your competitors (Some will be more direct than
others)
Market commonality product, consumer (consumer-customer
segments), geographic market (dealers)
Resource similarity technology and product attributes, financial
resources

Step 2: Gather intelligence on your competitors


Hint: Use competition tab in StratSim

Step 3: Analyze the competitive positions of rivals and compare


strengths and weaknesses with your own and other competitors
MGT 450: Business Policy & Strategy
Ranucci, Spring 2016

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Take-Aways
Dont assume you will be able to execute your strategy without
competitive challenges. Competitive analysis plays an
important role in strategy development.
Competitor analysis involves gathering and analyzing
information on competitors to anticipate competitive actions
and develop differentiated strategies
The set of competitive actions and responses will differ with
the competitive life cycles in which a firm operates

MGT 450: Business Policy & Strategy


Ranucci, Spring 2016

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