ADcumen Leadership Development program

Workshop 2 – Competitive Analysis

Recap - Understanding your market

Four Simple Steps to Understanding Your Market

1. Understand your value• What problem does your product solve? • How does your product compare with the competition? • Who will buy it and why? • How will you reach them?

2. Survey the competitive landscape

3. Understand your target market

4. Plan your sales campaign

MarketWho buys your product?

NeedWhat will they use it for?

PainWhat does your solution offer that others

don’t/What problem does it solve?

SolutionHow does your solution solve the

problem and remove the pain?

Knowing Your Market

• The most challenging part of a business plan

• “Remember the story of Goldilocks and the

three bears? Most customers, like

Goldilocks, are seeking the

product that is 'just right' for them”

• Two kinds of research:

o Primary research -Going directly to the

prospective customers

o Secondary research - Census and demographic

data.

• Who wants what you sell – Do they have a real need for the product I intend to sell?

• Why do they want it? - What problem does your product solve?

• Where are they?• How many of them are they - How many of these

people who have this need are potential customers?

• How much are they spending to address that need today?

• How different is my product from what is being sold today?

Typical Research Questions:

Develop Your Own List of Research Questions:

______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Understanding competitive strengths and weaknesses:

1. SWOT Analysis:

Strengths; Weaknesses; Opportunities; Threats

• SWOT Analysis is a simple but useful framework for analysing your organization's strengths and weaknesses, and the opportunities and threats that you face.

• It helps you focus on your strengths, minimize threats, and take the greatest possible advantage of opportunities available to you.

• SWOT Analysis can be used to "kick off" strategy formulation, or in a more sophisticated way as a serious strategy tool.

• You can also use it to get an understanding of your competitors, which can give you the insights you need to craft a coherent and successful competitive position.

• When carrying out your SWOT Analysis, be realistic and rigorous

StrengthsWhat do you do well?What unique resources can you draw upon?What do others see as your strengths?

WeaknessesWhat could you improve?Where do you have fewer resources than others?What are others likely to see as a weakness?

OpportunitiesWhat opportunities are open to you?What trends can you take advantage of?How can you turn your strengths into opportunities?

ThreatsWhat threats could harm you?What is your competition doing?What threats do your weaknesses expose you to?

Criteria examples

Market developments? Competitors' vulnerabilities? Industry or lifestyle trends? Technology development and innovation? Global influences? New markets, vertical, horizontal? Niche target markets? Geographical, export, import? New USP's? Tactics: e.g., surprise, major contracts? Business and product development? Information and research? Partnerships, agencies, distribution? Volumes, production, economies? Seasonal, weather, fashion influences?

Criteria examples

Disadvantages of proposition? Gaps in capabilities? Lack of competitive strength? Reputation, presence and reach? Financials? Own known vulnerabilities? Timescales, deadlines and pressures? Cash flow, start-up cash-drain? Continuity, supply chain robustness? Effects on core activities, distraction? Reliability of data, plan predictability? Morale, commitment, leadership? Accreditations, etc.? Processes and systems, etc.? Management cover, succession?Criteria examples

Political effects? Legislative effects? Environmental effects? IT developments? Competitor intentions - various? Market demand? New technologies, services, ideas? Vital contracts and partners? Sustaining internal capabilities? Obstacles faced? Insurmountable weaknesses? Loss of key staff? Sustainable financial backing? Economy - home, abroad? Seasonality, weather effects?

Criteria examples Advantages of proposition? Capabilities? Competitive advantages? USP's (unique selling points)? Resources, Assets, People? Experience, knowledge, data? Financial reserves, likely returns? Marketing - reach, distribution, awareness? Innovative aspects? Location and geographical? Price, value, quality? Accreditations, qualifications, certifications? Processes, systems, IT, communications? Cultural, attitudinal, behavioural? Management cover, succession?Philosophy and values?

SWOT Analysis Template State what you are assessing here: ____________________________________________________________________________________________________________(This particular example is for a new business opportunity. Many criteria can apply to more than one quadrant. Identify criteria appropriate to your own SWOT situation.)

A start-up small consultancy business SWOT Analysis:

Strengths:• We are able to respond very quickly as we have no red tape, and no need for higher management

approval.• We are able to give really good customer care, as the current small amount of work means we have

plenty of time to devote to customers.• Our lead consultant has strong reputation in the market.• We can change direction quickly if we find that our marketing is not working.• We have low overheads, so we can offer good value to customers.Weaknesses:• Our company has little market presence or reputation.• We have a small staff, with a shallow skills base in many areas.• We are vulnerable to vital staff being sick, and leaving.• Our cash flow will be unreliable in the early stages.Opportunities:• Our business sector is expanding, with many future opportunities for success.• Local government wants to encourage local businesses.• Our competitors may be slow to adopt new technologies.Threats:• Developments in technology may change this market beyond our ability to adapt.• A small change in the focus of a large competitor might wipe out any market

position we achieve.

Exercise: SWOT Analysis

Understanding competitive strengths and weaknesses:

2. PEST analysis: • The PEST analysis is a useful tool for understanding

market growth or decline, and as such the position, potential and direction for a business. By understanding your environment, you can take advantage of the opportunities and minimize the threats.

• A PEST analysis is a business measurement tool. • PEST is an acronym for Political, Economic, Social and

Technological factors, which are used to assess the market for a business or organizational unit.

• The PEST analysis headings are a framework for reviewing a situation, and can be used to review a strategy or position, direction of a company, a marketing proposition, or idea.

Political Economic

Social TechnologicalCriteria examples

lifestyle trendsdemographicsconsumer attitudes and opinionsmedia viewslaw changes affecting social factorsbrand, company, technology imageconsumer buying patternsfashion and role modelsmajor events and influencesbuying access and trendsethnic/religious factorsadvertising and publicityethical issues

Criteria examples

home economy economy trendsoverseas economies general taxation taxation specific to product/servicesseasonality issuesmarket/trade cyclesspecific industry factorsmarket routes trendsdistribution trendscustomer/end-user driversinterest/ exchange ratesinternational trade and monetary issues

Criteria examples

competing technology developmentresearch fundingassociated/dependent technologiesreplacement technology/solutionsmaturity of technologymanufacturing maturity and capacityinformation and communicationsconsumer buying mechanisms/technologytechnology legislationinnovation potentialtechnology access, licensing, patentsintellectual property issuesglobal communications

Criteria examples ecological/environmental current legislation future legislation international legislation regulatory bodies and processes government policies government term and change trading policies funding, grants and initiatives home market pressure- groups international pressure- groups wars and conflicts

PEST Analysis Template Situation being analysed: ______________________________________________________________________ PEST analysis (political, economic, social, technological) assesses a market, including competitors, from the standpoint of a particular proposition or a business.

Note: PEST analysis can be useful before SWOT analysis because PEST helps to identify SWOT factors. PEST and SWOT are two different perspectives but can contain common factors.

Some people prefer to use different flavours of PEST Analysis.

• PESTLE/PESTEL: Political, Economic, Sociological, Technological, Legal, Environmental.

• PESTLIED: Political, Economic, Social, Technological, Legal, International, Environmental, Demographic.

• STEEPLE: Social/Demographic, Technological, Economic, Environmental, Political, Legal, Ethical.

• SLEPT: Social, Legal, Economic, Political, Technological.

Other forms of PEST – PESTLE, PESTLIED, STEEPLE and SLEPT:

3. Porter's Five Forces• Porter's 5 forces framework is used for strategic

industry analysis. • Developed in 1979 by Michael Porter, Harvard

Business School professor. • Used to examine and analyse the competitive structure of

an industry by looking at 5 forces of competition that influence and shape profit potential.

• Porter's five forces of competition have become a central concept to business theory.

Understanding competitive strengths and weaknesses:

Porter's Five Forces

• Looks at multiple aspects of the industry’s competitive

structure and economic environment, including:

• The bargaining power of buyers,

• The bargaining power of suppliers,

• The threat of new entrants, and

• The threat of substitute products.

• The idea is to look at each of these factors and determine

the degree to which they increase competition in the

industry. If the forces are strong, they increase competition;

if the forces are weak they decrease competition.

5 Forces of Competition

Michael Porter’s 5 competitive forces:

1. Threat of new entrants

2. Bargaining power of suppliers

3. Bargaining power of buyers

4. Threat of substitute products

5. Intensity of rivalry among competitors

And…

6. Complementors

Competitive Analysis

Understanding your competitive strengths and weaknesses is a prerequisite to developing a winning marketing strategy.The Competitor Rating Calculator allows you to rate your offering against that of up to five main competitors. • Competitors can be rated on the basis of the most important factors in the

purchasing decision. • Bar and radar charts are automatically generated based on the ratings input.• The ratings are then adjusted on the basis of the importance/weighting you have

given to each of the factors in the purchasing decision• The weighted ratings are automatically calculated and bar and radar charts are

generated.• A Total Competitive Score is also calculated and a corresponding Bar Chart

is produced.• A Total Adjusted Competitive Score is also calculated and a

corresponding Bar Chart is produced.

Competitive Analysis Calculator

Building a Business Case• Feasibility Study or Project Justification ReportClarify/confirm criteria needed to be fulfilled to justify starting or continuing the project or group – i.e. What do the decision-makers need to see in order to approve the project or its continuation?

• Business CaseA Business Case justifies the start-up of a project. It includes a description of the business problem or opportunity, the costs and benefits of each alternative solution, and the recommended solution for approval.

• ROI AnalysisAn ROI analysis is method of analysis that helps determine if purchasing something is worth the cost by taking into account both initial costs and ongoing costs. Compares the magnitude and timing of investment gains directly with the magnitude and timing of investment costs.

Structure: Map these crucial approval criteria into the following structure and headings:

• Past, present and future ('customer') need (for the outputs/results produced by group or project)

• Benefits and outcomes achieved to date for what cost/investment • Benefits and outcomes to be produced in the future • Resources, costs, investment, etc., required to produce future required

outcomes and benefits (identify capital vs. revenue costs, i.e., acquisition of major assets and ongoing overheads)

• Alternative methods or ways of satisfying needs, with relative cost/return (return on investment) comparisons (i.e.., what other ways might there be for satisfying the need if the group or project doesn't happen or ceases?)

• Outline strategy and financial plan, including people, aims, philosophy, etc (ideally tuned to meet the authorising power's fulfilment criteria) for proposed start or continuation of project (assuming you have a case, and assuming there is no better alternative)

3. Keep it simple. (Clear and concise) Keep to the facts and figures. Provide evidence.

Feasibility study/project justification report:

Building a Business CaseEssential elements of a business case:

• A brief, compelling, service-oriented problem statement• A mission statement or vision of the future that addresses the problem• A description of the specific objectives to be achieved• A description and rationale for your preferred approach• A statement of the benefits that address the concerns of all relevant stakeholders• Measures for gauging improved performance or progress toward each objective• A statement of the likely risks of your initiative and how they will addressed• A basic plan of work with a timeline and key milestones• A project management plan and names and roles of key managers• Alternatives considered and how they would or would not work• Cost estimates and potential sources of funding• Opposing arguments and your responses to them .

Business Case Template Links

http://www.claretyconsulting.com/it/comments/free-business-case-template2/2008-12-12/

http://www.csu.edu.au/adminman/leg/buscasetemp.doc

http://www2.dir.state.tx.us/SiteCollectionDocuments/IT%20Leadership/Framework/business%20case%20template.doc

 

1. Determine the business's financial metrics, goals and objectives.

This will also help in determining if all aspects of your ROI have been achieved.

2. Identify the business's total benefits. Include money saved by the business, money

made and anything that positively adds value to the business’s bottom line.

3. Begin to gather financial data for your particular business. Total costs include

development costs and other capital investments or expenses.

4. Calculate the ROI using the following formula: (total benefit - total costs)/ (total

costs) = ___ X 100 = ROI

5. Determine if the ROI is substantial based on the business's financial

return expectations. A ROI greater than zero is a gain.

ROI Analysis

NOTES