COMPETITOR ANALYSIS

Rajan B Pillai
 COMPETITOR ANALYSIS - DEFINITION

What is Competitor analysis?

• 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 to identify opportunities and threats.
• Competitor Analysis is a process of identifying your competitors
and evaluating their strategies to determine their strengths and
weaknesses relative to those of your own product or service.
• Competitor Analysis is a critical part of your company marketing
plan.
 PURPOSE OF COMPETITOR ANALYSIS

• Ascertain the competitor’s Positioning and Value Proposition in

the market and in consumer perception
• Understand the Assortment Breadth and Depth in terms of the
competitor products
• Determining the Price Points of competitor products
• Determining the Promotion Mix used by the Competitors
 5 KEY ASPECTS

• Your company's competitors

• Competitor product summaries
• Competitor strengths and weaknesses
• The strategies used by each competitor to achieve
their objectives
• The market outlook
 TECHNIQUE
One common and useful technique is constructing a competitor array.
The steps include:
• Defining the industry – scope and nature of the industry
• Determining who the competitors are
• Determining who the customers are and what benefits they expect
• Determining the key strengths – for example price, service,
convenience, inventory, etc.
• Ranking the key success factors by giving each one a weightage – The
sum of all the weightages must add up to one
• Rating each competitor on each of the key success factors
• Finding out the total weighted score for each competitor
 COMPETITORARRAY
COMPETITOR ARRAY
This can be displayed on a two dimensional matrix – competitors along
the top and key success factors down the side. An example of a
competitor array follows: be displayed on a two dimensional matrix –
competitors along the top and key success factors down the side. An
example of a competitor array follows: Competitor Competitor
Key Industry Competitor Competitor
Weightage #1 Weighted #2 Weighted
Success Factors #1 rating #2 rating
Score Score
1 - Price point 0.4 6 2.4 4 1.6
2 - Customer focus 0.3 4 1.2 5 1.5
3 - Value for money 0.2 4 0.8 3 0.6
4 - Product innovation 0.1 5 0.5 7 0.7
TOTAL 1.0 20 4.9 15 4.4

Competitor #1 gets a better rating than Competitor #2 (4.9 compared to 4.4).

 MICHAEL PORTER’S ANALYSIS OF
COMPETITIVE STRUCTURE OF INDUSTRY
Michael Porter presented a framework for analyzing competitors based
on the following 4 key aspects of the competitor:
• Competitor’s Objectives (Goals)
• Competitor’s Assumptions
• Competitor’s Strategies
• Competitor’s Capabilities
Objectives and Assumptions are what drive the competitors and
Strategies and Capabilities are what the competitors are doing or capable
of doing.
 COMPETITOR ANALYSIS FRAMEWORK
Goals/Objectives - Current Strategy -
At all levels of
How the business is
management and
currently competing
multiple dimensions

Competitors Response Profile

• Is the competition satisfied with it’s current position? What the
What drives • What likely moves or strategy changes will the competitors
the competition make? are doing or
competitors? • Where is the competitor vulnerable? capable of
• What will be the greatest provocation and the most doing?
effective retaliation by the competition?
Assumptions – Capabilities -
Held about itself Both Strengths
and the industry and Weaknesses
 COMPETITOR’S CURRENT STRATEGY

Two main sources of information about competitors’ strategy are what

they say and what they do. What a competitor is saying about it’s
strategy is revealed in:
• Annual shareholder reports
• Reports submitted to regulatory authorities
• Interviews with analysts
• Statements by management
• Press releases
COMPETITOR’S CURRENT STRATEGY (CONTD.)

However, their action could often be different from what they stated.
What the competitor is actually doing is evident in where its actual cash
flow is directed, such as in following tangible actions:
• Hiring activity
• R&D projects
• Capital investments
• Promotional campaigns
• Strategic partnerships
• Mergers and acquisitions
 COMPETITORS OBJECTIVES
Knowledge of competitors’ objectives facilitates a better prediction of
their reaction to different competitive moves. For example, a competitor
that is focused on short-term financial goals might not be willing to spend
much money responding to a strategic competitive attack. Rather, such a
competitor might focus on holding their positions on the products that
can be better defended. Competitor objectives may be
• Financial
• Growth rate
• Market share
• Technology leadership
• Industry focus.
 COMPETITORS OBJECTIVES (CONTD.)
Goals may be associated with each hierarchical level of strategy:
• Corporate
• Business unit
• Functional
BU level/Functional objectives also depend on organizational structure
Other aspects of competitor that impact their goals are:
• Risk tolerance
• Incentive structure
• Background of executives
• Composition of board of directors
• Legal or contractual restrictions
 COMPETITORS ASSUMPTIONS

A competitors assumptions may be based on a number of factors like:

• Beliefs about its competitive position
• Past experience with same/similar products
• Regional factors
• Industry trends
• Rules of thumb
A thorough competitor analysis would also include assumptions that a
competitor makes about its own competitors and whether that assumption
is accurate.
COMPETITORS RESOURCES AND CAPABILITIES

Knowledge of competitor’s Assumptions, Objectives and Strategy may be

helpful in understanding how the competitor might respond to a
competitive attack. However, its resources and capabilities determine its
ability to respond effectively.
• SWOT Analysis
• Further analysis to evaluate:
• Its ability to enhance capabilities
• Competitor’s agility (ability to respond swiftly)
• Financial strength for sustaining the growth rate
 COMPETITOR RESPONSE PROFILE

• Information from an analysis of competitor’s Objectives, Assumptions,

Strategy and Capabilities can be compiled in to a Response Profile of
possible moves that might be made by the competitor
• This profile includes both potential offensive and defensive moves
• This would also include certain specific moves and their expected
strengths
• Result of competitor analysis should be an improved ability to predict
the competitor’s behavior and even to influence that behavior to the
firm’s advantage.
GENERIC COMPETITIVE
STRATEGIES

Rajan B Pillai
 GENERAL COMPETITIVE STRATEGIES
Michael Porter has defined 5 generic competitive strategies based on two
dimensions:
• Strategic scope – based on the size and composition of the market
• Strategic strength – based on the strength or core competency of the firm
1. Cost Leadership
2. Differentiation
3. Focused Cost Leadership
4. Focused Differentiation
5. Integrated Cost Leadership/Differentiation
 5 GENERIC COMPETITIVE STRATEGIES
Competitive Advantage
Low Cost Uniqueness
Broad
Market Cost Leadership Differentiation
Scope
Integrated Cost
Competitive Leadership/
Scope Narrow Differentiation
Market
Scope Focused Cost Focused
Leadership Differentiation
 COST LEADERSHIP
• A firm tries to reduce its overall production and distribution costs
• By improving process efficiencies
• Gaining unique access to large source of lower cost materials
• Optimal outsourcing
• Vertical integration
• It wins market share by appealing to cost conscious customers
• It sets the lowest price or the lowest price to value ratio
3 Ways to achieve this:
• Economies of scale
• Lower direct and indirect operating costs
• Better control over the supply chain
 COST LEADERSHIP EXAMPLES
• Walmart – established cost leadership by developing close relationships
with its suppliers and achieving cost savings through large volume
purchases and passing those savings to customers
• Dell Computers – achieved cost leadership by cutting down inventory
cost by keeping low inventories enjoyed procurement advantages from
preferential access to raw materials and components (backward
integration)
• Tata Steel – the cost leader in the steel manufacturing sector owns raw
material assets such as iron ore, coal and limestone mines across
Australia, Asia and Africa. Tata Steel has largely been able to withstand
raw material price fluctuations due to captive mining.
 COST LEADERSHIP (CONTD.)
Firms that succeed in cost leadership often have the following internal
strengths:
• Capability to make significant investment in production assets; this
investment will be a barrier to entry that other firms may not overcome
• Skill in designing products for efficient manufacturing; for example,
having small component count to shorten assembly process
• High level of expertise in manufacturing process engineering
• Efficient and extensive distribution channels
 RISKS OF COST LEADERSHIP STRATEGY

Competitive risks associated with the cost leadership strategy

include
• Cost reduction processes become obsolete due to
competitor innovations
• Cost reduction processes come at the expense of necessary
levels of differentiation
• The strategy is imitated too easily
 DIFFERENTIATION
• Develop a product or service having unique attributes that are perceived
by customers to be of better value than competitor products
• This strategy will be appropriate when
• Target customer segment is not price sensitive
• The market is competitive
• Customers have very specific under-served needs
• The firm has unique resources to satisfy such needs in ways that are
difficult to copy
• It might involve
• Patents or other Intellectual Property (IP)
• Unique technical expertise
• Talented personnel
• Improved processes
 DIFFERENTIATION EXAMPLES

• HUL Closeup – used glycerin instead of calcium carbonate for giving a

different appeal for the product and secured differentiation
• Kinetic Honda – developed scooter with electric start and single gear
• Vicco Vajradanti – developed herbal toothpaste and established itself as
a leading player in toothpaste segment by differentiation
• Harpic Toilet Cleaner – with an application friendly nozzle
• Hit for Cockroach – with sleek nozzle for hidden areas
 DIFFERENTIATION (CONTD.)
Firms that succeed in differentiation often have the following internal
strengths:
• Access to leading scientific research
• Highly skilled and creative product development team
• Strong sales team with the ability to successfully communicate the
perceived strengths of the product
• Corporate reputation for quality and innovation
 RISKS OF DIFFERENTIATION STRATEGY

Risks of differentiation strategy are:

• Customers decide that differences between differentiated
and cost leader’s product not worth a higher price
• Competitors offer similar products at a lower cost
• Too high a price premium
• Counterfeiters offer a cheap “knockoff” of a differentiated
good or service (e.g., easily imitated)
• Too much differentiation
 FOCUS
• The firm focuses its marketing effort on serving defined market
segments with narrow scope by tailoring its marketing mix to those
specialized markets; it can better meet the needs of that target market
• The firm typically looks to gain a competitive advantage through product
innovation and/or brand marketing rather than efficiency
• It is most suitable for relatively small firms but can be used by any
company
• A focus strategy should target market segments that are less vulnerable
to substitutes or where a competition is weakest to earn above average
return on investment
• The Focus strategy has 2 variants
• Cost Focus
• Differentiation Focus
 FOCUSED COST LEADERSHIP

• In the Focused Cost Leadership Strategy, a firm seeks a cost advantage in

its target market segment
• It exploits the differences in cost behavior in some segments
• A firm that follows this strategy does not necessarily charge the lowest
price in the industry
• Instead it charges low price relative to other firms that compete within
the target segment
• For example, Ginger Hotel is budget hotel chain by Tatas
• Is a budget hotel chain with about 45 properties at 32 cities in India
• Provide clean, safe rooms at low cost targeting small business travelers
• Provide complementary breakfast and Wi-Fi
 FOCUSED DIFFERENTIATION
In Differentiation Focus, a firm seeks to produce goods or services that a
narrow group of customers perceive as being unique in ways that are
important to them. It exploits the special needs of buyers in the target
segment.
1. Ferrari targets high performance sports car segment
• Differentiation in design
• High performance
• Charges premium price
2. Starbucks Coffee – offers distinctive Starbucks experience
 RISKS OF FOCUS STRATEGIES

• Competitive risks of focus strategies:

• A competitor is able to focus on an even more narrowly
defined market segment
• Industry-wide competitors decide to focus on specific
customer segments—imitation
• The differences are reduced between the needs of a specific
market segment and those of the rest of the industry
INTEGRATED COST LEADERSHIP/DIFFERENTIATION

Integrated cost leadership/differentiation is a business level

strategy where differentiated products are offered in market at low
cost. Differentiated product signifies the unique characteristics the
customer values and cost leadership signifies that the product is
offered at the lower-cost, i.e., at a margin just above average costs.
Firms using Integrated Cost Leadership/Differentiation:
• Provide relatively low cost products with valued differentiated
features
• Use primary and support activities to produce differentiated
products at relatively low costs
Integrated Cost Leadership/Differentiation Example
Southwest Airlines
Low Cost Differentiation
Use a single aircraft model
Focus on customer
(Boeing 737)
satisfaction
Use secondary airports
High level of
Fly short routes employee dedication
No meals
Focus on making the
25 minute turnaround time
flying experience fun
No reserved seats
No travel agent reservations 32
INTEGRATED COST LEADERSHIP/DIFFERENTIATION
The Challenge: the integrated strategy is risky

Potential Pitfalls
• The firm may become “Stuck-in-the-Middle”
lacking an expertise with either type of
generic strategy
• When a firm’s products are too expensive to
compete with low cost producer and too
undifferentiated to provide the value offered
by the differentiated producer
 LOOKING FORWARD: THE ROAD AHEAD

• The post-Porter model was presented by W Chan Kim and

Renee Mauborgne by describing a “Value Innovation” model,
in which companies must look outside their present paradigms
to find new value propositions
• Their approach fundamentally goes against Porter’s concept
that a firm must focus either on cost leadership or
differentiation. This new concept is popularly known as Blue
Ocean Strategy
 BLUE OCEAN STRATEGY
Michael Porter has defined 5 generic competitive strategies based on two
dimensions:
• Strategic scope – based on the size and composition of the market
• Strategic strength – based on the strength or core competency of the firm
1. Cost Leadership
2. Differentiation
3. Focused Cost Leadership
4. Focused Differentiation
5. Integrated Cost Leadership/Differentiation
 GENERAL COMPETITIVE STRATEGIES
Michael Porter has defined 5 generic competitive strategies based on two
dimensions:
• Strategic scope – based on the size and composition of the market
• Strategic strength – based on the strength or core competency of the firm
1. Cost Leadership
2. Differentiation
3. Focused Cost Leadership
4. Focused Differentiation
5. Integrated Cost Leadership/Differentiation
COMPETITOR ANALYSIS
FOR AN UPCOMING MULTI-BRAND
FASHION RETAIL STORE

Rajan B Pillai