competitor analyses lecture 3

7/28/2019 Competitor Analyses Lecture 3

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Competitor Analysis


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A central aspect of strategy formulation is

perceptive competitive analysis

Answer the question who should we pick a

fight with in the industry and with what

sequence of moves.

Should have this belief that competitors can

be systematically analyzed.


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Components of Competitor Analysis

What drives the competitor

Future goals

Assumptions ( Held about itself and the industry)

What the competitor is doing and can do? Current strategy( How the business is currently

competing?)

Capabilities (Strength and weakness)

The first one is difficult to analyze though this one oftendetermines how a competitor will behave in future

The same concept also provide a company framework forprobing its own position in is environment.


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Which competitor to analyse

Firms not in industry but can overcome entry

barrier particularly cheaply

Firms for whom there is obvious synergy for

being in the industry

Firms for whom competing in the industry is

an obvious extension of the corporate strategy

Customers and suppliers who may integrate

backward or forward.


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COMPETITORS RESPONSE PROFILE

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?

Future Goals

At all levels of management andin multiple dimensions

Current Strategy

How the business iscurrently competing

Assumptions

Held about itself and the industry

Capabilities

Both strengths and weaknesses

What Drives the Competitor What the Competitor Is Doing and Can Do

Figure: The Components of a Competitor Analysis


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Future Goals

Allow predictions about whether or not eachcompetitor is satisfied with its presentposition and financial results

How likely that competitor is to changestrategy and the vigor with which it will reactto outside events.

Apart from financial goals it will involvequalitative goals such as, market leadership,technological position, social performance etc.


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Diagnostic questions-Business unit

goals What are the stated and unstated financial goals

of the competitor

What is the competitors attitude towards risk?

What is the organizational structure?

What controls and incentive systems are in place?

What kinds of managers comprise the leadership

How much apparent unanimity is there amongmanagement about future direction?

What is the composition of the board?

What contractual commitment may limitalternatives?


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Diagnostic questions-Business unit

goals

What are competitors values and beliefs?

What accounting system and controls are in

place?


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Diagnostic questions-The corporate parent and

business unit goals

Why did the parent get into business

Where does the corporate parent recruit from?

What are the current results and overall goal of the parentcompany

What are the overall goals of the parent?

What strategic importance does the parent attach to the particularbusiness unit?

What is the economic relationship between the business and othersin the parent company portfolio?

Is there a generic strategy that the parent has applied in a number

of businesses? What are the parent companys diversification plans?

Does its corporate parent has an emotional attachment to the unit?


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Diagnostic questions-Portfolio analysis and

competitors goals What criteria are used to classify businesses at the

competitors parents? How is the business classified?

Which businesses are counted on to be cash cows

Which businesses are candidate for harvest/disinvestment?

Which businesses are habitual source of stability to offsetfluctuating elsewhere in the portfolio?

Which businesses represent defensive moves to protect other

businesses?

Which businesses are the star areas for the parent? Which businesses have a lot of leverages in the portfolio?

Some one providing a lot of cash flow to the parent.


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competitors goals and strategic positioning

Analysis of competitors goals are crucial,

because it helps the firm avoid strategic

moves that will touch off bitter warfare by

competitors.


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Portfolio analysis ( Growth/share matrix)

Star

Modest cashflow

Question Mark

Large negativecash flow

Cash Cow

Large positivecash flowDog

Modest cashflow

Growth

Relative market share

High

Low

High Low


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Hig

h

M

edium

Low

High Medium Low

Busine

ssUnitPosition

Industry Attractiveness

Build

Hold

Harvest

Criteria

Size

Market Growth,

Pricing

Market Diversity

Competitive

Structure

Industry Profitabilit

Technical Role

Social Environmental

Legal

Human

Criteria

Size

Growth Share

Position

Profitability

Margins

TechnologicalPosition Strengths/

Weaknesses

Image

Pollution

People

Figure: Company Position/Industry Attractiveness Screen


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Assumptions

The competitors assumptions about itself

The competitors assumptions about the

industry and the other companies in it.

Examining assumptions can identify biases or

blind spots


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Diagnostic questions towards identifying competitors

assumptions

Competitors belief about its relative position based on public

statement, sales force claims etc.

Strong historical or emotional identifications with particular

products which will be strongly held.

Cultural, regional or national differences that will affect the

way threats are perceived.

Competitor belief about future demand of its product and

industry trend.

Competitor belief about the goals and capabilities of its

competitors.

Competitor belief in industry conventional wisdom


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Capabilities

Goals, assumptions, and current startegy will influence the

likelihood, timing, nature, and intensity of a competitor's

reaction.

Capabilities will determine 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 competitors position with respect to five forces.


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Areas of Competitor strength and weakness

Products

Dealers/distribution

Marketing and selling

Operations Research and engineering

Overall costs

Financial strength

General managerial ability Corporate portfolio

Organisation


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Capability

Core capabilities

Ability to grow

Quick response capability Ability to adapt changes

Staying power


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The Competitor Response Profile

Offensive moves

Satisfaction with current positions

Probable moves

Strength and seriousness of moves

Defensive capability

Vulnerability

Provocation

Effectiveness of retaliation


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Competitor's response profile

Is the competitor satisfied with its current

position

What likely moves or strategy shifts will

competitor make?

Where is the competitor vulnerable?

What will provoke the greatest and most

effective retaliation by the competitor

competitor analyses lecture 3

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