Competitor Analysis

• A central aspect of strategy formulation is

perceptive competitive analysis
• Answer the question “who should we pick
a fight with in the industry and with what
sequence of moves”.
• Should have this belief that competitors
can be systematically analyzed.
 Which competitor to analyse
• Firms not in industry but can overcome
entry barrier particularly cheaply
• Firms for whom there is obvious synergy
for being in the industry
• Firms for whom competing in the industry
is an obvious extension of the corporate
strategy
• Customers and suppliers who may
integrate backward or forward.
 COMPETITIVE
INTELLIGENCE ANALYSIS
TECHNIQUES
 Industry Structure and Competitiveness
 
• SWOT
• SCP Framework (
Structure-Conduct-
Performance)
(The SCP framework is process to
understand how players’ behavior
and external shocks can affect an
industry’s future profitability and
growth. MecKinse added another
dimension recently and said all
three factors influence each
others too)

• ADL Matrix
• Porter's Five Forces
• Industry cost curves
• Value Net
(This analysis extends the
five-forces framework
by examining the role
of complementors
(companies from
which customers buy
complementary
products or service e.g,
Jewlary Industry) 

• The Space Matrix

• Inflection point
analysis

• Hyper
competition

• PEST
 The Space Matrix and Inflection Point
Analysis

• Space Matrix highlights two internal dimensions

(financial strength and competitive advantage) and two
external dimensions (industry strength and
environmental stability) to determine the organization’s
strategic position in the industry. The company’s
strategic strength is then defined as aggressive,
competitive, conservative or defensive.
• An inflection point is: “An event that changes the way we
think and act.” This analysis identifies when and where
inflection points are likely to happen (car industry now).
• Staircases to Growth (The staircase approach is a
method to map a company’s possible growth path by
continuously compounding skills and options)
• BCG Matrix
• Ansoff Growth Strategy Matrix
 Alien Eye Analysis

• The futurist Edie Weiner suggests there might be

only two kinds of intelligent life forms that do
not suffer from educated incapacity: aliens from
other planets and children. This analysis allows a
management team to look at its existing
company, products, and industry with a
drastically new vision, allowing it to avoid blind
spots.
• 3-C framework ( the Company, (current and potential strengths
and weaknesses), Customers (served and not served), and Competitors
(current and prospective) 
• Three value disciplines (Operational Excellence, Customer
Intimacy, and Product Leadership- like generic strategies of Porter)
• Innovation Ambition Matrix
• Strategic Blind spots (like the one we
have while driving. Idea is to avoid it)
• War gaming (This is a process to
anticipate competitors’ likely moves by
getting your executive team to play out
various scenarios and responses as if they
were the competitors themselves,
responding to one of their strategic
 
moves)
• Game theory
• Porter’s Four corners (the one we
will study in detail)
 Components of Competitor
Analysis
• What drives the competitor
– Future goals
– Assumptions ( Held about itself and the industry)
• What the competitor is doing and can do?
– Current strategy( How the business is currently
competing?)
– Capabilities (Strength and weakness)
The first one is difficult to analyze though this one often
determines how a competitor will behave in future
The same concept also provide a company framework
for probing its own position in is environment.
What Drives the Competitor What the Competitor Is Doing and Can
Do
Future Goals Current Strategy
At all levels of How the business is
management and in currently competing
multiple dimensions
COMPETITOR’S RESPONSE PROFILE
•Is the competitor satisfied with its current position?
•What likely moves or strategy shifts will the competitor make?
•Where is the competitor vulnerable?
•What will provoke the greatest and most effective retaliation by
the competitor?

Assumptions Capabilities
Held about itself and the Both strengths and
industry weaknesses
Figure: The Components of a Competitor Analysis
 Future Goals
• Allow predictions about whether or not
each competitor is satisfied with its
present position and financial results
• How likely that competitor is to change
strategy and the vigor with which it will
react to outside events.
• Apart from financial goals it will involve
qualitative goals such as, market
leadership, technological position, social
performance etc.
 Diagnostic questions-Business unit
goals
• What are the stated and unstated financial goals of
the competitor
• Organisational value or belief of competitor? Market
Leader (Reliance),Maverick (Elon Musk), No Bribe
(Tata), Technological leader (Apple)
• What is the competitors attitude towards risk?
• What is the organizational structure? Sale or Product
centric?
• What controls and incentive systems are in place?
(ESOP)
• What kinds of managers comprise the leadership?
Background/ Experiences (Adidas new CEO, Kasper
Rorsted worked in Henkel, Compaq, HP)
• How much apparent unanimity is there among
management about future direction?
• What is the composition of the board?
Diagnostic questions-Business unit
goals
• What contractual commitment may limit
alternatives? (Reliance had it when it split
for mobile telephony)
• What accounting system and controls are
in place? (China)
 Diagnostic questions-The corporate parent
and business unit goals
• Why did the parent get into business (Vertical integration?)
• Where does the corporate parent recruit from? (from within?)
• What are the current results and overall goal of the parent company.
(ROI? Stable growth?)
• What are the values and beliefs of the parent? (Layoffs? Lifetime
employment?)
• What strategic importance does the parent attach to the particular
business unit? (cross subsidy? Amazon does that)
• What is the economic relationship between the business and others
in the parent company portfolio? (Shared resources? Reliance will
do it)
• Is there a generic strategy that the parent has applied in a number
of businesses? (low price- high volume?)
• What are the parent company’s diversification plans? (Consolidation
of Tata, Defense Industry for Tata, Reliance etc)
• Does its corporate parent has an emotional attachment to the unit?
 Diagnostic questions-Portfolio analysis and
competitor’s goals
• What criteria are used to classify businesses at the
competitor’s parents? How is the business classified?
(Tata is bringing all hotels in hospitality business. Same
is for Chemical)
• Which businesses are counted on to be cash cows
• Which businesses are candidate for harvest/
disinvestment?
• Which businesses are habitual source of stability to
offset fluctuating elsewhere in the portfolio?
• Which businesses represent defensive moves to protect
other businesses?
• Which businesses are the star areas for the parent?
• Which businesses have a lot of leverages in the portfolio?
Some one providing a lot of cash flow to the parent.
 Portfolio analysis ( BCG Growth/share
matrix)

Star Question Mark

High
Modest cash flow (Wild Cats)
Growth
Large negative
cash flow
Cash Cow Dog
Low
Large positive Modest cash flow
cash flow (+ or -)

High Low
Relative market share
 Figure: Company Position/Industry Attractiveness
Screen (GE, McKinsey, Shell) Criteria
•Size
•Market Growth,
Pricing
•Market Diversity
Industry Attractiveness •Competitive
Structure
Criteria High Medium Low
•Industry
Profitability
•Size
•Technical Role
•Growth •Social
•Share •Environmental
•Position •Legal
•Profitability •Human
•Margins
•Technologic
al Position
•Strengths/
Weaknesses
•Image Hold
•Pollution
•People Harves
t
competitor’s goals and strategic positioning

• Analysis of competitor’s goals are crucial,

because it helps the firm avoid strategic
moves that will touch off bitter warfare by
competitors.
 Assumptions
• The competitor’s assumptions about itself
(low cost producer, Having best sales
force)
• The competitor’s assumptions about the
industry and the other companies in it.(e-
commerce, telecommunication)
• Examining assumptions can identify
biases or blind spots
 Diagnostic questions towards identifying
competitors assumptions

• Competitors belief about its relative position based on

public statement, sales force claims etc.
• Strong historical or emotional identifications with
particular products which will be strongly held.
• Cultural, regional or national differences that will affect
the way threats are perceived.
• Competitor belief about future demand of its product
and industry trend.
• Competitor belief about the goals and capabilities of its
competitors.
• Competitor belief in industry conventional wisdom
 Capabilities

• Goals, assumptions, and current startegy will influence

the likelihood, timing, nature, and intensity of a
competitor's reaction.
• Capabilities will determine ability to initiate or react to
strategic moves and to deal with environmental or
industry events that occur
• Broadly strengths and weaknesses can be assessed by
examining a competitor’s position with respect to five
forces.
Areas of Competitor strength and weakness
• Products
• Dealers/distribution
• Marketing and selling
• Operations
• Research and engineering
• Overall costs
• Financial strength
• General managerial ability
• Corporate portfolio
• Organisation
 Capability

• Core capabilities
• Ability to grow
• Quick response capability
• Ability to adapt changes
• Staying power
 The Competitor Response Profile

• Offensive moves
– Satisfaction with current positions
– Probable moves
– Strength and seriousness of moves
• Defensive capability
– Vulnerability
– Provocation
– Effectiveness of retaliation
 Competitor's response profile
• Is the competitor satisfied with its current
position
• What likely moves or strategy shifts will
competitor make?
• Where is the competitor vulnerable?
• What will provoke the greatest and most
effective retaliation by the competitor