Competitor Response Profile - Output of Competitor Analysis

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?

Diagnostic questions help to determine a competitor's Present and Future goals

We begin by considering the business unit or division, which in some cases will comprise the competitor's entire corporate entity.
Then we examine the impact of the corporate parent on the future goals of the business unit in the diversified company.

Diagnostic Questions

What are the stated and unstated financial goals of the competitor?

How does the competitor make the trade-offs inherent in goal setting, such as the trade-off between long-run and short-run
performance? Between profits and growth in revenue? Between growth and ability to pay regular dividends?

What is the competitor's attitude toward risks? If financial objectives essentially consist of profitability, market position (share),
rate of growth, and desired level of risk, how does the competitor appear to balance these factors?

Does the competitor have economic or non-economic organizational values or beliefs, either widely shared or held by senior
management, which importantly affect its goals?
Does it have a tradition or history of following a particular strategy or functional policy that has been institutionalized into a
goal? Strongly held views about product design or quality? Locational preferences?

What is the organizational structure of the competitor (functional structure, presence or absence of product managers,
separate R&D laboratory, etc.)?

What control and incentive systems are in place? How are executives compensated?
How is the sales force compensated?
Do managers hold stock?
Is there deferred compensation system in place?
What measures of performance are tracked regularly? How often?

What accounting system and conventions are in place? How does the competitor value inventory? Allocate costs? Account for
inflation?

What kinds of managers comprise the leadership of the competitor, particularly the Chief Executive Officer (CEO)? What are
their backgrounds and experience?
What kinds of younger managers seem to be getting rewarded, and what is their apparent emphasis?
What is the composition of the board? Does it have enough outsiders to exercise effective outside review? What kinds of
outsiders are on the board, and what are their backgrounds and company affiliations? How do they manage in their own firms,
or what interests do they represent (banks? lawyers?)?
What contractual commitments may limit alternatives? Are there any debt covenants that will limit what goals can be?
Restrictions due to licensing or joint venture agreements?

Are there any regulatory, antitrust, or other governmental or social constraints on the behavior of the firm that will affect such
things as its reaction to moves of a smaller competitor or the probability that it will try to gain a larger market share? Has the
competitor had any antitrust problems in the past? For what reasons? Has it entered into any consent decrees?

Questions - Assumption about Itself and Industry and Other companies in it

These assumptions about its own situation will guide the way the firm behaves and the way it reacts to events. If it sees itself
as the low-cost producer, for example, it may try to discipline a price cutter with price cuts of its own.

If a competitor believes it has the greatest customer loyalty in the market and it does not, for example, a provocative price cut
may be a good way to gain position.

Examining assumptions of all types can identify biases or blind spots that may creep into the way managers perceive their
environment.
The blind spots are areas where a competitor will either not see the significance of events (such as a strategic move) at all, will
perceive them incorrectly, or will perceive them only very slowly.

Rooting out these blind spots will help the firm identify moves with a lower probability of immediate retaliation and identify
moves where retaliation, once it comes, is not effective.

Diagnostic Questions

What does the competitor appear to believe about its relative position-in cost, product quality, technological sophistication,
and other key aspects of its business - based on its public statements, claims of management and sales force, and other
indications? What does it see as its strengths and weaknesses? Are these accurate?

Does the competitor have strong historical or emotional identification with particular products or with particular functional
policies, such as an approach to product design, desire for product quality, manufacturing location, selling approach,
distribution arrangements, and so on, which will be strongly held to?

Are there cultural, regional, or national differences that will affect the way in which competitors perceive and assign
significance to events?

Are there organizational values or canons which have been strongly institutionalized and will affect the way events are viewed?
Are there some policies that the company's founder believed in I strongly that may still linger?
What does the competitor appear to believe about future demand for the product and about the significance of industry
trends?

Will it be hesitant to add capacity because of unfounded uncertainties about demand, or likely to overbuild for the opposite
reason? Is it prone to misestimate the importance of particular trends?

Does it believe the industry is concentrating, for example, when it may not be? These are all wedges around which strategies
can be built.
What does the competitor appear to believe about the goals and capabilities of its competitors? Will it over- or underestimate
any of them? - M&A analysis and Business Analysis by Company in Annual Report

Does the competitor seem to believe in industry "conventional wisdom" or historic rules of thumb and common industry
approaches that do not reflect new market condition? - These are particularly likely to exist in industries composed of
competitors with a long tradition in the industry

Current Strategy
Diagnostic Questions

A competitor's strategy is most usefully thought of as its key operating policies in each functional area of the business and how
it seeks to interrelate the functions.

Capabilities
Diagnostic Questions

Its Goals, Assumptions, and Current strategy will influence the likelihood, timing, nature, and intensity of a competitor's
reactions.

Its strengths and weaknesses will determine its 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 the five key
competitive forces
ure goals
rporate entity.

Indicators
Quantitative Qualitative
Market Share,
Profitability, Rate of
Growth,

Desired level of Risk

Goals of becoming market leader,

industry statesman, Technology
Leader, Maverick

Organization Structure

Compensation/ incentive Policies

Inventory Policies

Background and experience of Key

Management personnel
 Composition of Board

Licensing agreements, JV agreements

Debt Covenant

Regulatory, antitrust, or other

governmental or social constraints

s in it

Indicators
Quantitative Qualitative
Cost Analysis - Fixed Quality , Technology sophistication
and Variable, Per
employee

Company histroy in terms of products

and/or technology
Industry Growth,
Company growth -
Sustainabe Growth,
Market Share,
Profitability

Indicators
Quantitative Qualitative

Indicators
Quantitative Qualitative
 Interpretation
Quantitative
 Interpretation
Quantitative
Identifying situations where conventional wisdom is inappropriate or can be
changed yields advantages in terms of the timeliness and effectiveness of a
competitor's retaliation.

Interpretation
Quantitative

Interpretation
Quantitative
Interpretation
Qualitative

Does it want to be the market leader (Texas Instruments)? The industry

statesman (Coca-Cola)? The maverick? The technological leader?

Competitor's organizational structure provides some indication about the

relative status of the various functional areas and the coordination and
emphasis that are deemed strategically important. For example, if the sales
department is headed by a senior vice-president who reports directly to the
president, it is an indication that sales is more influential than manufacturing
if manufacturing is headed by a director who reports to senior vice-president
for administration.
Yield important clues Where
aboutresponsibility for decisions
what competitor believesisisassigned
importantwill
and give
how
its managers will respond to events in view of their rewards.

Accounting policy issues can strongly influence the competitor's perceptions

of its performance, what its costs are, the way it sets prices, and so on.
 Composition of Board can provide clues about company's orientation,
posture toward risk, and even preferred strategic approaches.

Such restraints or even just a history may sensitize a firm so that it foregoes
reacting to strategic events unless some essential element if its business is
threatened. The firm attempting to capture a small share of a market from an
industry leader can enjoy some protection as a result of such constraints, for

Interpretation
Qualitative
Interpretation
Qualitative

Interpretation
Qualitative
Example
Example

To take one of many examples, West German companies are sometimes

very oriented toward production and product quality, at the expense of unit
costs and marketing.
Examples of conventional wisdom are such notions as "Everyone must have
a full line," "Customers trade up," "One must control sources of raw
material in this business," "Decentralized plants are the most efficient
manufacturing system," "One needs a large number of dealers," and so on.

Example

Example
Competitors are firms operating in the same market, offering similar products, and targeting simil
Competitive rivalry is ongoing set of:
Competitive actions among firms as they maneuver for an advantageous market position
Competitive responses that occur among firms as they maneuver for an advantageous market positi

Multimarket competition
It occurs when firms compete against each other in several product or geographic markets.

Rivalry Among Competing Firms - Countermoves

Retaliatory countermoves due to rivalry:
Lowering prices,
Enhancing quality,
Adding features,
Providing services,
Extending warranties
Increasing advertising

Rivalry Among Competing Firms

Intensity of rivalry among competing firms tends to increase due to:
1. Increase of number of competitors
2. Competitors become more equal in size and capability,
3. Demand for industry’s products declines,
4. Price cutting becomes common
5. Consumers can switch brands easily
6. When barriers to leaving the market are high
7. When fixed costs are high
8.When the product is perishable
9. When consumer demand is growing slowly or declines such that rivals have excess capacity or inventory
10. When the products being sold are commodities (not easily differentiated, such as gasoline);
11. When rival firms are diverse in strategies, origins, and culture;
12. When mergers and acquisitions are common in the industry

Result of Rivalry
Industry profits decline, in some cases to the point where an industry becomes inherently unattractive

Conditions That Cause High Rivalry Among Competing Firms

1. High number of competing firms
2. Similar size of firms competing
3. Similar capability of firms competing
4. Falling demand for the industry’s products
5. Falling product or service prices in the industry
6. When consumers can switch brands easily
7. When barriers to leaving the market are high
8. When barriers to entering the market are low
9. When fixed costs are high among firms competing
10. When the product is perishable
11. When rivals have excess capacity
12. When consumer demand is falling
13. When rivals have excess inventory
14. When rivals sell similar products/services
15. When mergers are common in the industry
Key Product Features

Price
Benefits
Quality
Durability
Image/style
Service
Warranties
Convenience
Ease of Use
Number of Features
Type of features
Certifications

Oil and Gas Field Services

Offshore Drilling Services

Well Intervention and Workover

Inspection, Repain and Maintenance
Rig Suppliers
Eight components of integrated service management
Product elements.
Place and time.
Process.
Productivity and quality.
People.
Promotion and education.
Physical evidence.
Price and other costs of service.

Type of Contract

Pricing
 Oilfield Services - Categories
Rigs and Drilling Contractors
Procurement, Construction and Installation
Seismic and G&G
Maintenance Services
Engineering Services
Well Services
Drilling Tools and Commodities
Operational and Professional Services
Topside and Processing Equipment
Subsea Equipment and Installation
Transportation and Logistics

Direct Negotiations Competitive Bidding

Drilling Day Rates Drilling Day Rates
Duration of a dayrate drilling contract is generally tied
to time required to drill a single well or a group of
wells, in what we refer to as a well-to-well contract, or
a Fixed period of time - Term contract.

Operating expenses of Rig,

Wages and
Cost of incidental supplies