Analysing Competitors

4MBAM30 - week 4

Stokes - Unit 4 (1)Needs, wants, demands

Maslow’s hierarchy of needs

Marketing myopia (Levitt)Matching Benefits to Customers

Benefits vs. featuresProduct mortalityWhat business are we in?

Stokes - Unit 4 (1)Needs:

what we need to survive & thrive

Want:a specific means of satisfying the need

Demand:a want, backed up by the having the ability to pay for it

Stokes - Unit 4 (2)Who are our Customers?

Customers or consumers?Customer chainsInternal customers

Stokes - Unit 4 (3)Markets – old, and new meanings:

Old: a place where buyers and sellers exchange goods/servicesNew: a grouping of customers with similar needs, eg. “the teenage market”New: the total demand for a product, eg. “the jeans market”New: a combination of the two, eg. “the teenage jeans market”

Stokes - Unit 4 (4)Competitive Forces in the market place

Porter’s 5 Forces

Analysing CompetitorsIdentifying

competitorsDeterminingobjectives

Identifyingstrategies

Assessing strengths/weaknesses

Estimatingreaction patterns

Selecting thoseto attack/avoid

(Kotler)

Analysing CompetitorsIdentifying

competitors

Identifyingstrategies

Estimatingreaction patterns

Determiningobjectives

Selecting thoseto attack/avoid

Assessing strengths/weaknesses

(Kotler)

Analysing CompetitorsIdentify competitors

Observestrategies

Assess strengths& weaknesses

Observereactions

Decide whom to attack/avoidJ El-Murad, 2001

Determine objectives

Analysing Competitors - why? 1If you know neither the enemy nor yourself,

you will succumb in every battle. If you know yourself, but not the enemy,

for every victory you gain you will suffer a defeat.

If you know your enemy as you know yourself, you need not fear the result of a

hundred battles.(Sun Tzu Ping Fa)

Analysing Competitors - why? 2Removal of trade barriers (eg EU/GATT/NAFTA)De-regulation, and the encouragement by governments of market forcesThe state of the economy -

domesticglobal in countries where your competitors are based

What is Competitor Analysis? 1

analysis

of data and information about Competitors

to generate outputs

that are useful in decision making

Data » Information » IntelligenceDATA

Unintegrated “raw” individual items• requires identification and collection

INFORMATIONEvaluated data• requires judgements

INTELLIGENCEInformation that informs decision making• requires judgement and use

What is Competitor Analysis? 2

massive data banks

intricate computer retrieval systems

large numbers of data collectors

full-time data analysers

It is NOT about:

Competitor Analysis - Common ProblemsPreoccupation with data - not intelligenceData massaging vs AnalysisOutputs not geared to decision-makers’ needsAnalysts not part of decision making process

Uses of Competitor Analysis

Current and potential competitorscustomersdistributorssupplierstechnology

To learn about the competitive environment

Uses of Competitor Analysis (2)

competences (strengths)vulnerabilities (weaknesses)constraintsstrategies

. . . .

To learn about your own company

Uses of Competitor Analysis (3)

In order to generate more successful

strategies

1: Driven by Decisions

2: Knowledgein

• data gathering• using analysis techniques• drawing inferences• transmitting data

of• organisation• industry• analysis techniques• data sources

3: Skills

3 Requirements for good CA

Identifying CompetitorsWHO ARE OUR COMPETITORS?

All those firms that compete in the same market as we do.

Marketing Myopia (Levitt)

Kodak vs Fuji vs filmless camerasUnilever vs P&G vs ultrasound washing machines

Identifying Competitors 1LEVELS OF COMPETITION

Brand competition

Industry competition

Form competition

Generic competition

Levels of CompetitionROVER’S COMPETITORS:Ford and Vauxhall

but not Skoda or Mercedes

All car manufacturersAll manufacturers of personal transportationAll major consumer spending opportunities

(eg foreign holidays, home improvement, MBA courses?)

Parker Pen

Identifying Competitors 2WHO ARE OUR

current “Direct” competitors?potential “Direct” competitors?current Substitute competitors?potential Substitute competitors?

Identifying Competitors 2WHO ARE OUR

current “Direct” competitors?

potential “Direct” competitors?

current Substitute competitors?

potential Substitute competitors?

Identifying Competitors 4TWO APPROACHES:

The INDUSTRY

The MARKET

The INDUSTRY ConceptAN INDUSTRY IS ...

a group of firms producing products that are close substitutes for each other

(Michael Porter)

Price of X

Demandfor Y

Eg. Vauxhall vs Ford

Substitutes are products that have high cross-

elasticities of demand

a2a1

b1b2

The INDUSTRY ConceptNumber of sellers and degree of differentiationEntry barriersExit barriersCost structuresVertical integrationGlobal reach

The MARKET Concept Instead of looking at companies that make the same product, look at companies that satisfy the same customer need

The MARKET ConceptRefine by market segment:

by end-customerby distribution channelby geographyby technology

Identifying Competitors 5

Identifying competitors by linking

industry and market analysis through

mapping the

Product/Market Battlefield.

The market for toothpaste

Product/Market Battlefieldfor toothpaste

Plain toothpaste

Toothpaste with fluoride

Gel

Colgate Colgate Colgate

Colgate Colgate Colgate

Colgate Colgate Colgate

P&G P&G P&G

P&G P&G P&G

P&G P&G P&GLever Bros Lever Bros Lever Bros

Striped Beecham BeechamSmoker's toothpaste Topol Topol

Children 19-35 36+

Customer segmentation by age group

Prod

uct

segm

enta

tion

Identifying Competitors’ Strategies

Strategic mapping:construct a series of two-dimensional maps

where the axes are key strategic dimensions:plot your company and your competitors

Quality

RangePrice

Qualityx

xy

z

Identifying Competitors’ Strategies

Differen-tiation

CostLeader-

ship

Focus

Industry-wide

Single segment

(Porter)

Identifying Competitors’ Strategies

Who are they Targeting?What is their Positioning?How do they differentiate their product?4Ps/7Psetc

Strategic profiling: summarise the apparent strategy of each key competitor in tables:

Determining Competitors’ ObjectivesWhat is the competitor trying to achieve?

Profit Maximisation

High price rel. costLow investment

Low price rel. costHigh investment

Short Term Long Term?

Possible Competitors’ ObjectivesCurrent profitsCash-flowLong Term profits through

market-share growthtechnological leadershipservice leadershipquality leadership

Assessing their strengths and weaknesses

SalesMarket shareProfit marginROICash flowNew investmentCapacity utilisationMarketing mixEtc

Gather data on:

Desk research (2ry data)Primary marketing research

• customers• suppliers• dealers

Observation

Sources of Data:

Estimating C’s Reaction StyleThe Laid Back Competitor

no quick or strong reaction, because:

feels customers are loyalmilking the businessslow to noticelacks funds to react

Estimating C’s Reaction StyleThe Selective Competitor

Reacts only to certain types of attack, eg

price cuts. Reacts swiftly to demonstrate that

this particular strategy is futile, and will not

be tolerated.

Estimating C’s Reaction StyleThe Tiger Competitor

Reacts swiftly and strongly to any encroachment on its territory.

E.g. P&G will not allow any new detergent to come easily onto the market.

Canada Dry

Estimating C’s Reaction Style

No predictablereaction pattern

The Stochastic Competitor

Whom to attack/avoid?Strong vs. Weak competitors

Levitt:

“If thinking is an intellectual response to a problem, then the

absence of a problem leads to the absence of thinking”

• Close vs. Distantif you destroy your close competitors you

may open the way for tougher competition –

e.g.. Bausch & Lomb forced their competitors to sell out to Revlon and J&J

Whom to attack/avoid?

Good vs. Bad

good competitors “play by the rules”:

prices, accept general level of share & profits

Support these & attack the bad

competitors, who price below cost to buy share

rather than earn it

E.g. For IBM, Cray is good, Fujitsu is bad(Kotler)

Whom to attack/avoid?

Competitor vs Customer OrientationCustomer centred

CompetitorCentred

No Yes

No

Yes

Product/ProductionOrientation

CompetitorOrientation

CustomerOrientation

MarketOrientation

CompetitorCompetitor vs Customer OrientationCompetitor W is going all out to crush us in France

We will withdraw from France because we cannot afford to fight this battle

Competitor X is improving distribution in Germany, and hurting our salesWe will increase advertising in Germany

Competitor Y has cut its price in ManchesterWe will meet competitor Y’s price in Manchester

-- -- -- REACTIVEREACTIVE

Competitor vs CustomerCustomer OrientationThe quality-sensitive segment is growing

We will improve quality, and emphasise it in our advertising

The deal-prone customer segment is growing fast, but these customers are not loyalWe will avoid cutting prices & making deals because we do not want the type of customer who buys in this way.

ProPro--ActiveActive

Market OrientationThe two principal threats facing any marketing organisation:

Someone will “steal” your customersCustomers will no longer need your goods/services

Market Orientation

Need to keep track of both of these elements, need to find and maintain correct balance:

the MarketMarket orientation