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COMPETITOR
ANALYSIS
CHAPTER 5
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Topics To Be Discussed
1. Benchmarking against rivals;
2. The dimensions of competitor analysis;
3. The choice of ‘good’ competitors;
4. The origin, sources and dissemination of competitive
information.
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COMPETITIVE BENCHMARKING
SECTION 1
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What is Competitive benchmarking?

• Competitive benchmarking is the process of measuring your
company’s strategies and operations against ‘best-in-class’
companies, both inside and outside your own industry
(Swain, 1993).
• The purpose is to identify certain practices and methodologies
that can then be adopted or adapted to improve your own
performance.
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Benchmarking Process

Identifying
Identifying who Collecting Comparison
what aspects of
to benchmark relevant data to with own
business to
against benchmark processes
benchmark
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Identifying Who to Benchmark Against

• Industry leaders to learn their best practices
• New entrants or smaller, more focused firms to learn their
particular strengths.
• Benchmarking specific activities against other organizations
outside their immediate sector to transfer good lessons to the
company.
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Identifying What Aspects of Business to Benchmark

• Generally, all aspects of business across the complete value

chain (see below) are candidates for benchmarking.
• Due to scarce resources and time constraints, firms often select
of a few key central processes for detailed benchmarking.
• They will initially center on the key factors for success (KFS) in the
industry.
• Subsequently analyses may be further broadened in attempts to create
fresh competitive advantages in new areas of operation.
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Collecting Relevant Data to Enable Processes &

Operations to Be Compared
• Published sources
• Company’s reports, websites and web forums, technical (trade) reports, industry
studies and surveys commissioned by governments or industry associations.
• Data sharing
• Industry forums such as conferences, through direct, formal contacts or more
informal contacts.
• Direct interviews
• Conduct interviews with customers of competitor, distributors, industry experts,
former employees of competitors, regulators, government officials, etc.
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Comparison With Own Processes

• Compare and contrast the firm’s own processes with the identified
‘best in class’ organizations.
• A number of options may be apparent. If
• Its own processes are close to best practice, then the firm will continue with
them, striving to improve where possible.
• Its processes are inadequate or suboptimal so they need to be overhauled.
This overhaul must still ‘fit’ with the strategy of the organization.
• The firm should set measurable targets to assess its progress towards
achieving better practices.
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Benchmarking notes
• Beyond the benchmarking value of competitor analysis, a
clearer picture of competitor strategies, strengths and weaknesses
also helps firms to develop more effective competitive
strategies.
• We now discuss the main processes involved in competitor
analysis for the purposes of strategy formulation.
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THE DIMENSIONS OF
COMPETITOR ANALYSIS
SECTION 2
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The Dimensions of Competitor Analysis

• In the medium term the focus of competitor analysis must be
firms within the same strategic group as the company concerned.
• In the longer term, such analysis is being so constrained. if the
incumbent’s strategic group shows high profits or growth
potential beyond the rest of the market it is likely to attract new
entrants.
• Competitor analysis, therefore, involves evaluating a series of
concentric circles of adversaries (figure 5.1)
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Figure 5.1 The Targets of Competitor Analysis

STRATEGIC GROUP

INDUSTRY COMPETITION
Firms of other strategic groups that are
willing, able and encouraged to overcome
entry barriers to the strategic group
NEW ENTRANTS OR SUBSTITUTES
Companies seeking to diversify, or with new
skills to exploit in the industry
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Example 5.1: Itunes ends the CD-recorded

industry
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The Components of Competitor Analysis

Figure 5.2
(Lehmann and Winer, 1991)

Assessing Assessing the Assessing

competitors’ current competitors’ current competitors’
& future objectives strategies resources

Predicting competitors’ future strategies

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The Components of Competitor Analysis

1. Assessing competitors’ current and future objectives:
• The firm can find clues as to the direction it will take and the aggressiveness with
which it will pursue that direction.
2. Assessing the competitors’ current strategies:
• The firm can identify opportunities and threats arising from competitor actions.
3. Assessing competitors’ resources:
• The firm can find clues as to how the competitor will move in the future, or how
the competitor will react to threats.
4. Predicting competitors’ future strategies:
• The firm can begin to answer perhaps the most fundamental question in
competitor analysis: what is the firm likely to do in the future?
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FIGURE 5.3: Competitors Objectives

ASSESSING COMPETITORS’
CURRENT AND FUTURE OBJECTIVES

• What are they trying to • Stated goals

achieve? • Ownership
• Why are they trying to achieve? • Market assumptions
• Are they satisfied with their • Investment priorities
achievements?

KEY INDICATORS
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Assessing Competitors’ Current And Future

Objectives
• Goals can indicate where the company is intending to develop
and in which markets.
• The areas of expansion could be particularly competitive but may
simultaneously signify companies not so committed.
• Goals can indicate the company is intending to co-exist
profitably.
• Example: When both General Motors and Ford once declared that the
small car markets in the United States and Europe were intrinsically
unprofitable and therefore of little interest to them.
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Assessing Competitors’ Current And Future

Objectives
• Goals may also indicate the intensity of competitor activity and
rivalry.
• Example : When the likes of Procter & Gamble or General Electric declare that
they are only interested in being the number one or the strong number two in
markets, it is to be anticipated that they will compete very hard for every new
market they enter.
• Goals can indicate the type of trade-off the company is likely to
make when faced with adversity.
• Example: Many US overseas subsidiaries need to report back steady and
slowly increasing profits has meant that they have often been willing to
relinquish market share in order to achieve their short-term profit goals.
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Key indicators of Assessing Competitors’ Current And

Future Objectives
• Competitor goals and objectives can be collected from competitors’
pronouncements through their reports, press releases or be inferred
from observation of the strategies they are pursuing, etc.
• For example, decisions to build additional production facilities are a clear
signal of growth objectives.
• The ownership structure of the competitor is also indicative of future
goals.
• Competitors owned as part of diversified conglomerates may be managed for
short-term cash rather than long-term market position objectives.
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Market Assumptions
• Assumptions that a firm has about itself and the market affect
the goals and objectives it sets and can be a source of
opportunity or threat (see Example 5.2)
• Thus the evaluation of assumptions of competitors and of
the firm itself can be of major strategic significance to the firm.
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Example 5.2
• Dunlop’s assumption that it was pre-
eminent in tire rubber technology meant
that it neglected Michelin’s development of
steel-braced radials.
• The result was a catastrophic decline in its
own market share, and the decline in the
total market size because of the longer life
of Michelin’s new development.
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FIGURE 5.4 COMPETITOR STRATEGIES

ASSESSING COMPETITORS’
CURRENT STRATEGIES
• What target markets are they
pursuing?
• What is their strategic focus?
• What marketing mix do they
use?
• How do they organize their
marketing?
• Advertising media and messages
• New product introduction rates
• Recruitment advertisements
• Price levels changed
• Distribution channels used
KEY INDICATORS
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Assessing Competitors’ Current Strategies and Activities

• Three main sets of issues need to be addressed:
• First, identification of their target markets.
• Second, identification of the strategic focus to build competitive
advantage.
• Third, the marketing mix that is being adopted to enable their
positioning.
• In addition, it can also be helpful to assess the marketing
organization to implement the strategy.
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Identification of competitors’ Target Markets

• The broad markets and more specific market segments of
competitors can often be inferred from an analysis of the
marketing mix they are adopting.
• The elements of the marketing mix are generally highly visible
aspects of a firm’s activities and available for competitor
analysis.
• Products
• Prices
• Place (distribution)
• Promotions.
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Identification of competitors’ Target Markets

through Products
• The product features the type and extent of service offered will
be good indicators of the target market the competitor is seeking
to serve.

JAGUAR LAND ROVER SKODA

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Identification of competitors’ Target Markets

through Price
• Prices charged will also often be an indicator of the target
market aimed for.

ALDI TESCO
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Identification of competitors’ Target Markets

through Promotions
• Advertisements and other promotional materials can also give
clues as to the target markets aimed for. (e.g., The wording of
advertisements, The media used, the scheduling adopted, etc.

VOLVO ads BMW ads

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Identification of competitors’ Target Markets

through Channel (Distribution)
• Similarly, the distribution channels the competitor chooses to
use to link customers physically with offerings may give clues as
to the markets aimed for.

NORSTROM WAL-MART
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Competitors’ Strategic Focus

• Most successful companies attempt to build their strategies on
the differential advantage they have over others in the market.
• Low costs (operational excellence)
• Those firms focus include their attention to overheads, and the tight financial
controls they exert on all functions and activities (Example: in the UK grocery
market Aldi and Lidl).
• Differentiated products and services (product leadership).
• Those firms focus on added features to the product, new product introduction.
• Customer intimacy:
• Those firms focus on service quality, customization and loyalty schemes.
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Competitors’ Supporting Marketing Mix

• Analysis of the marketing mix adopted by competitors can give
useful clues as to their target markets and the competitive
advantage they are seeking to build with those targets.
• Analysis of the marketing mix can also show areas where the
competitor is vulnerable to attack.
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Example 5.6 – Attacking the weakness of

Competitive Product
• It is after examining how
vacuum cleaners typically lost
their suction as their bags
filled that James Dyson
developed the bagless
vacuum cleaner.
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Example 5.7 – Attacking the weakness of

Competitive Pricing
• For example, a firm marketing
vodka in the United States noted
that the leader offered products at
a number of relatively high price
points but had left others vacant.
• This enabled the firm to
position its own offerings in a
medium and low-price market
segments.
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Example 5.8 – Attacking the weakness of

Promotions
• Some competitors may be
better than others at
exploiting new media such as
digital platforms.
• Others may be adept at their
use of public relations.
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Example 5.8 – Attacking the weakness of

Distribution Channel
• Recognizing its established
competitors were already strong
in office retail stores. Dell
decided to market its PCs direct
to businesses and consumers
through telemarketing and its
website.
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Competitors’ Marketing Organization

• Understanding the competitors’ marketing Organization can give
clues as to how quickly, and in what manner, the competitor is likely
to respond to environmental change or competitive actions.
• Competitors where responsibility for products is clearly identified are often
able to respond more quickly than firms where responsibility is vague or
confused.
• Firms organized around markets, rather than products, are most likely to spot
market changes early and be in a position to lead change rather than simply
react to it.
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Value-chain Analysis
• A useful tool for analyzing current activities of competitors is
the value chain.
• Porter (1985) identifies five primary activities that add value to
the final output of a company (Figure 5.5).
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Figure 5.5 The Value Chain

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The Value Chain-the Primary Activities

• Inbound logistics involves managing the flow of products into the
company.
• Operations comprise the processes whereby the inbound items are
changed in form, packaged and tested for suitability for sale.
• Outbound logistics carry the product from the point of manufacture to the
buyer.
• Marketing and sales activities inform buyers about products and services,
and provide buyers with a reason to purchase.
• Service includes all the activities required to keep the product or service
working effectively for the buyer, after it is sold and delivered.
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Benefit of Value Chain Analysis

• It can reveal cost advantages that competitors may have
because of their efficient manufacture, inbound or outbound
logistics.
• Those companies that perceive operations as their primary
source of added value leave opportunities for competitors that
take a more extended view of the value they can add in the
customer’s eyes.
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FIGURE 5.6 COMPETITOR RESOURCES

ASSESSING COMPETITORS’
RESOURCE PROFILE
• Customer relationship strength
• Marketing culture? • New product success rates
• Marketing assets and • Quality of the people
capabilities? • Product availability
• Production and operation • Promotional expenditure
capabilities?
• Financial resources?
KEY INDICATORS
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Assessing Competitors’ Resource Profiles

• Whereas a competitor’s goals, assumptions and current strategy
would influence the likelihood, time, nature and intensity of a
competitor’s reactions, its resources (assets and capabilities) will
determine its ability to initiate and sustain moves in response to
environmental or competitive changes (see Figure 5.6).
• A useful starting point is to profile competitors against the key
factors for success in the particular industry.
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Analysis Of Five Key Competitor Abilities

(Lehmann and Winer,1991)
Ability to conceive
and design

Ability to manage Ability to produce

Analysis of
competitor

Ability to finance Ability to market

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Ability To Conceive And Design

• Assessing the ability of a competitor to innovate will help the
firm to predict the likelihood of new products being brought to
market, or of new technologies being employed to leapfrog existing
products.
• Indications of this type of ability come from:
• Technical resources (such as patents and copyrights held),
• Human resources (the caliber of the creative and technical staff employed)
• Funding (both the total funds available and the proportion devoted to
research and development, relative to industry average).
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Ability to Produce
• Ability to produce is signaled by physical resources (such as
plant and equipment) together with human resources (including
the skills and flexibility of the staff employed).
• In service industries capacity to deliver the service will be
critical.
• Firms with slack capacity clearly have more opportunities to respond to
increased demand.
• Similarly, service firms that can call on temporary staff may enjoy more
flexibility than those with a fixed staff with rigid skills.
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Ability To Market
• Assessing marketing capability is best accomplished through
examining the elements of the marketing mix.
• The skills of the people involved in sales, marketing, advertising,
distribution, and so on.
• The funds available and devoted to marketing activities.
• Ability to understand the market (e.g., the extent and type of marketing
research being undertaken by competitors).
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Ability to Finance
• Examination of published accounts where available can reveal
competitor’s liquidity and cash flow characteristics.
• Assessments of the qualities and skills of the human resources
available within finance.
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Ability to Manage
• The characteristics of key managers can send clear messages on
strategic intentions.
• Indicators include:
• The previous career paths and actions of powerful managers,
• The reward systems in place,
• The degree of autonomy allowed to individual managers and the
recruitment and promotions policies of the firm.
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Figure 5.7 Competitor capabilities

Key success factor Self Competitor A Competitor B Competitor C
Financial strength 2 2 1 0
Staying power 1 2 0 0
Strong R&D 2 1 2 -1
Technological breadth 2 0 2 -2
Quick response capability 0 -1 -1 -1
European Marketing -2 2 0 2
Total 5 6 4 -2

• Key: - 2 (very poor); +2 (very good)

• In overall score, the “self” company is on a par with competitors A and B.
• The overall score does not show clearly that what directions they may move given similar
opportunities.
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FIGURE 5.7 COMPETITOR CAPABILITIES

Key Success Factors Self : Total 5 Competitor A: Total 6 Competitor B: Total 4
Financial strength -2 -1 0 1 2 -2 -1 0 1 2 -2 -1 0 1 2
Staying power -2 -1 0 1 2 -2 -1 0 1 2 -2 -1 0 1 2
Strong R&D -2 -1 0 1 2 -2 -1 0 1 2 -2 -1 0 1 2
Technological breadth -2 -1 0 1 2 -2 -1 0 1 2 -2 -1 0 1 2
Quick response capability -2 -1 0 1 2 -2 -1 0 1 2 -2 -1 0 1 2
European Marketing -2 -1 0 1 2 -2 -1 0 1 2 -2 -1 0 1 2

• Company A could build on its European strength in marketing applied technology,

• Company B may be forced to depend on differentiation achieved through technological
breadth and strength in R&D to maintain its market position.
• If the technology or market shifts in a direction that requires major expenditures (financial
strength), Company B may be weaker compared with A or ‘self’.
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FIGURE 5.7 COMPETITOR CAPABILITIES

Key Success Factors Self : Total 5 Competitor C: Total -2
Financial strength -2 -1 0 1 2 -2 -1 0 1 2
Staying power -2 -1 0 1 2 -2 -1 0 1 2
Strong R&D -2 -1 0 1 2 -2 -1 0 1 2
Technological breadth -2 -1 0 1 2 -2 -1 0 1 2
Quick response capability -2 -1 0 1 2 -2 -1 0 1 2
European Marketing -2 -1 0 1 2 -2 -1 0 1 2

• Although Company C looks weak overall, especially in the financial and

technological areas it has a strong European marketing presence and therefore
may be capable of providing ‘self’ with rapid access to the European markets.
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FIGURE 5.8 FUTURE COMPETITOR STRATEGIES

PREDICT COMPETITORS’ FUTURE

STRATEGIES
• Past strategies
• What might the competitors • Past reactions
do? • Recent resource acquisitions
• What under-utilized resources • Past successes and failures
do they have? • Changes in ownership
• How will they react to our
actions?
KEY INDICATORS
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Predicting Competitors’ Future Strategies

• The ultimate aim of competitor analysis is to determine
competitors’ response profiles – that is, a guide to how a competitor
might behave when faced with various environmental and
competitive changes.
• This covers such questions as the following:
• Is the competitor satisfied with the 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?
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Is The Competitor Satisfied With The Current Position?

• One that is satisfied may allow indirect competitors to exploit
new markets without being perturbed.
• Alternatively, one that is trying to improve its current position
may be quick in chasing market changes or be obsessed by
improving its own short-term profits performance.
• Knowledge of a company’s future goals will clearly play an
important part in answering this question.
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What Likely a Competitor Moves or Shifts Strategy Will

The Make?
• History can provide some guide as to the way that companies
behave.
• Goals, assumptions and capabilities will also give some guidance
as to how the company can respond effectively to market
changes.
• After looking at these issues, a firm may be able to judge which
of its own alternative strategies is the best against competitors’
reaction.
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Where Is The Competitor Vulnerable?

• It is better to compete against large and relatively successful
competitors in niche markets where large scale is a disadvantage,
e.g. in rapidly changing markets where bureaucracy may lead to
inflexibility in responding to niche competition.
• In the past, the Virgin brand has been particularly skillful, and relatively
successful at identifying opportunities in markets where existing competitors
had key vulnerabilities (e.g., attacking financial services suppliers through
branding, high value and product simplicity in its direct marketing strategy)
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What Will Provoke The Greatest And Most Effective

Retaliation By The Competitor?
• Unless some peripheral activity with low margins, the market leaders are
likely to provoke intense retaliation against scale-involved actions.
• Examples: this is what Rolls-Royce learned to expect whenever it approached the US
market for aero engines.
• Porter (1980) suggests examining the way a competitor may respond to the
firm’s strategic moves through a process.
• First, assess the vulnerability of a competitor to the event,
• Second, assess the degree to which the event will provoke a competitor’s retaliation
• Finally, the effectiveness of the competitor’s retaliation to the event.
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CHOOSING “GOOD”
COMPETITORS
SECTION 3
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Choosing “Good” Competitors

• When a company chooses to enter a market it also chooses its
competitors.
• In the selection of new opportunities, therefore, it is important to
realize that not all competitors are equally attractive.
• Just as markets can be attractive and a company’s strengths can fit
those markets, so competitors can be attractive or unattractive.
• Porter (1985) lists the characteristics that make a “good” competitor.
• In Figure 5.9 these features are organized to show how certain
features of competitors can make them attractive.
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Figure 5.9 “Good” competitors

Balance Strength weakness
Competitive • Understand the rules • Credible/viable • Clear weakness
maturity • Realistic • Know the industry • Limited strategic
assumptions costs concept
• Support industry
structure
Reconcilable goals • Moderate strategic • Comparable ROI • Short-time horizons
stake targets • Risk averse
• Accept current
profitability
• Desire cash
generation
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The Competitively Mature Company-Balance

• This company can help promote the industry’s stability by understanding the
rules governing the market and by holding realistic assumptions about the
industry and its own relative position.
• This company can support industry structure if it invests in developing its
own product and enhancing quality differentiation and market development
rather than confrontational price-cutting or promotional strategies.
• Example: The global pharmaceutical industry, where legislation and the
differentiation of drugs allow a large number of medium-sized companies to
survive in many leading markets.
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The Competitively Mature Company -Strength

• It has a thorough understanding of industry costs and therefore
sets standards for cost-efficient services, ensure that the market
does not become too ‘comfortable’ for the incumbents.
• Finally, the existence of the credible and viable large company
within the strategic group can act as a deterrent to other
entrants.
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The Competitively Mature Company-Weakness

• It has a clear understanding of its strengths and weaknesses and
would have avoided ventures that would not only weaken its
profitability but also damage the market generally.
• In that sense a company with a limited strategic concept or a
clear idea of the business it is in is a better competitor than one
with more vague statements about its intent.
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Reconcilable Goal Company - Balance

• A reconcilable goal company whose strategic stake is moderate
may not see market dominance or the maintenance of its own
market position as a principal objective.
• A company that accepts its current profitability will be a seeker of
stability rather than of new opportunities.
• Its desire to maintain its cash flow can have a further impact on
promoting an industry’s stability..
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Reconcilable Goal Company - Strength

• This company can also provide a beneficial, steady pressure on
the other companies within the industry.
• If a competitor has comparable return on investment (ROI)
targets to its stakeholders, it will face similar competitive
pressures to the rest of the industry.
• In contrast, a state-owned competitor, which does not face the
same profitability requirements can be unhealthy.
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Reconcilable Goal Company -Weakness

• A reconcilable goal company that has a short time-horizon
• This means that when faced with adversity these companies have often
cut back investment to maintain short-term profitability or have taken a
fast route to corporate success rather than investing for internal growth.
• Risk aversion can also lead to a competitor’s being more
attractive.
• Where there is a fear of making errors there are likely to be followers
within an industry, which gives more agile companies a chance to gain
an advantage when the technology or market changes.
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“Bad” Competitors
• Among groups that are more difficult to compete with, and
hence not ‘good competitors’ for the incumbent firm, could be
new entrants from other industries that break the mould of
established competition in the markets.
• By not fully understanding the market, they may destabilize
competition and also be willing to accept zero, or low, profits for
a long time.
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Conclusions About “Good” Or “Bad” Competitors

• Clearly, finding a market in which the competitors are good on all
fronts is unlikely.
• But by examining competitors and looking for markets where they
tend to be good rather than bad, a company is likely to face a more
stable environment and take the opportunities.
• The diversity of competition makes it difficult to draw generic
classes of companies that are likely to be good competitors. Some
groups can be identified as likely to be the good or bad competitors.
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OBTAINING & DISSEMINATING

COMPETITIVE INFORMATION
SECTION 4
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Figure 5.10 Sources of Competitor Information

What they say about What other say

them about them
• Advertisements (media • Newspapers and
and message) magazine
• Recruitment ads • Trade sources
• Promotional material • Customers
• Technical reports
• Press releases
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Disseminating Competitor Intelligence

• Intelligence itself has no value. It becomes valuable only when it
reaches the right people within the organization and is
subsequently acted on.
• If no one is analyzing, discussing and taking action on data
collected, then this is a costly and unproductive exercise.
• Successful dissemination, however, requires two things.
• First, the destination must be clearly identified. Who needs to know this?
• Second, the data must be presented in a manner that the recipient can
understand and assimilate.
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Hierarchical Approach To Dissemination

• For senior management (including CEOs and strategy
formulation groups)
• Intelligence should be limited to high strategic value.
• It should include special intelligence briefings, typically one- or two-page
reports identifying and summarizing specific issues and showing where
more detailed information can be obtained.
• For middle and junior managers
• Intelligence may require more detailed information to enable them to
formulate tactical decisions.
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CONCLUSION
SECTION 5
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Conclusions
• The focus of competitor analysis should be on strategic groups, but should not
neglect other firms within the industry with the ability to overcome entry barriers or
be potential entrants to the industry.
• It provides some frameworks for analyzing competitors and their likely responses.
• It also suggests that when entering markets and instituting strategies firms should be
looking for ‘good’ competitors.
• Finally, means of gathering and disseminating competitive information are
presented.
• Ultimately the goal is to learn from competitors – their successes and their mistakes –
as well as working out how to compete more effectively (Figure 5.11)
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Figure 5.11 Learning from competitors

Analyze successful Analyze unsuccessful Look to other industries

competitors competitors and markets

WHY ARE THEY WHY ARE THEY NOT WHAT CAN YOU ADAPT
SUCCESSFUL? SUCCESSFUL? AND USE?

Adopt and adapt best

Copy and improve on Avoid and overcome
practice from
them these pitfalls
elsewhere
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Conclusions
• Although as important as market information, data on competitors
are rarely gathered systematically or comprehensively.
• There is also such a multiplicity of sources which have to be assessed
that there is little chance of doing so on an ad hoc basis.
• There is therefore good reason for incorporating a competitive
information system within any marketing information system that
exists, and having people responsible for ensuring its maintenance.
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THANK YOU FOR LISTENING!