An approach to competitor analysis - Strategic Management

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. Profiling coalesces all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment. Competitor analysis is an essential component of corporate strategy. It is argued that most firms do not conduct this type of analysis systematically enough.

Instead, many enterprises operate on what is called “informal impressions, conjectures, and intuition gained through the tidbits of information about competitors every manager continually receives.” As a result, traditional environmental scanning places many firms at risk of dangerous competitive blind spots due to a lack of robust competitor analysis. It is useful to think of the various components of industry and competitor analysis as a linked series of steps leading to the building of competitive advantage.

Figure shows this approach as one overall process, as a series of eight steps built around sources of strategic information. It may not be essential for every organization to go through every step each time, but it makes sense to make what to do or what not to do a matter of rational decision.The heart of the diagram is the strategic information system, the outer ring follows a logical sequence. It is recommended that the sequence is maintained, even if some steps are omitted, because each step provides information which is useful to the steps that follow.

Approach-to-competitor analysis

Industry analysis is a way of looking at the relative power of all the players in the chain of supply through to consumer. The purpose is not just diagnosis, but should lead to strategies to improve the position of the company. A large part of this chapter will be spent on the principles of industry analysis. Industry mapping is a way of presenting the results of industry analysis, so that the information is accessible, and conflicts between different pieces of information are forced into the limelight.

We have already met critical success factors. Here we will look more closely at how they might be derived from industry analysis, and used as one element of competitor analysis. Competitor profiling is a way of compressing the strategic information about a competitor so that it can be used more effectively. The method can be extended to customers and suppliers, where the strategies that they are following are important for your own organization’s success. It is a small jump to use these profiles to generate a series of different scenarios about where strategic change might be triggered, and by whom.

Value chain analysis is an approach to help the organisation identify its sources of competitive advantages. It is thus as much about identifying differentiation compared to competitors, although not restricted to market differentiation, as about the company in relation to its markets.Benchmarking is one of those activities that need not be restricted to competitors. It may be desirable for a bank, for example, to compare its counter service with that of competitors.

More frequently benchmarking may be used to lift a level of activity to the best it can be compared with, inside and outside the industry. Thus a study of customer service by one type of retailer might cover many non-competing retailers. Total quality management might be benchmarked against the leaders in the field regardless of industry. An aim of benchmarking is usually to seek excellence in performance by reaching world-class performance in any area of activity which is relevant.

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