Information for competitor analysis - Strategic Management

The lengths that should be gone to are a matter for cost–benefit analysis. Is it worth commissioning a special piece of market research only to assess the strengths and weaknesses of competitors as seen through the eyes of customers?

These sorts of decisions require careful judgement on a case by case basis. Will the information be likely to lead to different decisions? How critical are these decisions? Will the costs of getting the information exceed the benefits? An example of what can be involved is provided by Gulliver, the former chief executive of the Argyll Group, writing about the impact on Argyll of the Guinness affair and the battle to acquire Distillers.

My team went back 15 years with the Distillers accounts and up to ten years with the principal trading subsidiaries. With a total of about 80 trading subsidiaries we were able to prepare a group consolidation which gave us a good feel for the contribution of individual profit centres. In addition, we scrutinized analysts’ reports and trade and financial press cuttings back to the 1960s. Drink industry reports were obtained, and independent market research on Distillers’ products were commissioned on the pretext of Argyll examining new market opportunities. We also looked at its industrial relations.

Finally we made a pavement inspection of Distillers’ properties. After checking trade directories and Yellow Pages, a small team photographed and produced a report on every Distiller’s property we could find. Legitimate sources of information are summarized in Figure. Many of these are self-evident, but there are one or two less obvious sources which are worth special mention.

The thing to remember is that every organisation has to communicate: to shareholders, customers, employees and prospective employees, to certain officials, and in some cases to special interest groups that can affect its business. I find it worth-while to think through the various ways in which a particular company may be doing this. If we take prospective employees the immediate and obvious source is recruitment advertisements. These may give information on new activities, through different skills being sort, new locations, expansion strategies, and in a few instances hard facts like ‘join our team of 25 applied psychologists’, ‘all the main UK banks use our systems’, or ‘we manufacture in five locations round the world’. Small snippets often help the jigsaw of miscellaneous information to fall into a pattern. Many companies also produce recruitment brochures, particularly if they recruit graduates. These brochures often provide information and insights that may not be published elsewhere, as do speeches to professional bodies or business schools.

The company newspaper or journal is often a very good source of information, and there are libraries which keep collections of this type of material. Of course, it depends on the publication, and if it serves a purely social purpose, little will be gained. Often it provides explanations of policies, details of new ventures, and many other insights. Shareholders receive information directly through annual reports, which can be a mine of good information. There is also indirect communication through press statements, speeches, and statements to investment analysts and journalists. To obtain the support of shareholders it is often necessary for organizations to explain their strategies, and library searches or database services are a good source of such information. The databases may be particularly useful because they may include world-wide reports. A company chairman may be called upon to give explanations in one country which are not reported in his or her home base.

Sources-of-information

Customers receive communication through sales literature, trade press announcements, advertisements and sales calls. The hard aspects of communication are usually easy to obtain: few companies will refuse to give a copy of their brochures when requested by a competitor, because they could easily be obtained by other means. Often original research is the only way to identify what the image is among customers of key competitors. In a bid situation much can be learned from failures as well as successes. I know of one organisation who bid for about 80 per cent of contracts in their market segments. By constructing a database, which included information about who won the contract and in most cases the price in which it was let, they had a source of hard information, capable of being analyzed Information for competitor analysis and acquisition studies

One way of thinking about where competitor information might be obtained is to think logically about how and why information becomes available in relation to the specific competitor. The methods apply equally to any organisation you may wish to study, including potential acquisition candidates, alliance partners or even customers and suppliers.

  1. The evidence left by its activities this is the forensics, the traces it leaves for others to find because it trades, builds factories, or runs fleets of lorries. The evidence can be found through marketing research, the analysis of products, and observation of promotional displays, shop layouts and prices, factory buildings, etc.
  2. The organization’s own need to communicate Every organisation has to communicate with customers, current and potential shareholders, present and potential employees, and sometimes the politicians. So annual reports often give more information than the bare minimum, brochures describe products, internal newspapers reveal facts about new building, structure, and vision, and recruitment advertisements sometimes reveal useful facts about plant location, capacities, structure, and new products. Articles may be written, or encouraged, which reveal facts about the organisation.
  3. Legal obligations Things the organisation is obliged to reveal by law, or because it wishes to take advantage of the law. Annual reports, patent applications, monopolies enquiries, and similar requirements will put information into the public domain.
  4. Unwelcome activities of outsiders sometimes other organizations obtain and publish information about an organisation and against its wishes. This may include investigative journalism, court cases and tribunals by geographical region, competitor, customer, influencers, and type and size of installation.

The value of this in competitor analysis is self-evident. Patents have to be filed and may be a rich source of information, although they need to be scanned by appropriately qualified people. Information moves into the public domain as a result of special government enquiries. Reverse engineering of products is often valuable to determine technical or other advantages, and also to calculate the costs of production. Fuld provides a number of examples of such sources of competitor analysis and how to make use of them. There is always more information available than might at first be expected.

Often the missing elements can be deduced from the parts of the picture that can be seen. One of my clients analyzed their competitors. They then had somebody analyze their own organisation from published sources, and were amazed how much of what was thought of as a confidential strategy could be deduced by an intelligent analyst. But remember that strategy is not just what people say: it is what they do. For the most part, actions such as a new product, concentration on a particular segment, or a geographical expansion produce evidence that can be observed, and measured in a way that is independent of any statements by competitors. In the next chapter there is a case history of the application of industry and competitor analysis. This should help show the practical advantages of this type of analysis, and also the limitations that occur in any real-life situation.


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