Introduction rival firm. There are three domains for recognizing


marketing strategies are the weapons used by the firm in order to get one step
ahead of their competitors. As such, they require that the strategists must be
as knowledgeable about competitors’ strengths and weaknesses as about customers’
needs or the firm’s own capabilities. The purpose of this paper is designed to
assist the strategists to understand how to gather and analyze information
about the competitors that is useful in the strategy development process. It
discusses the objectives of competitor analysis and proceeds through the
processes involved in identifying important competitors and information needs,
gathering necessary information, and interpreting the information. 

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ultimate objective of competitor analysis is to remain one step ahead of the
competitor so that firm’s competitive strategy can be formulated to take into
account about the competitors’ likely actions and responses. From a practical
viewpoint, a strategist needs to be able to live in the competitors’ strategic
shoes. The strategist needs to understand the situation of the market so that
they can take some measures for their firm to survive to what actions the
competitors would take in order to maximize their outcomes, and must be able to
forecast the actual financial and personal outcomes of the competitor’s
strategic choices.

1.         Estimate the nature of the market and
likely successes of the potential strategy changes available to a


2.         Predict each competitor’s probable
response to important strategic moves on the part of the other

3.         Understand competitors’ potential
reactions to changes in the key industry and environmental factors.




identification is a key task for managers not only to survive in the market
but, also for keeping themselves at the dominant position in the market. It is
a necessary step to the task of competitor analysis, and the starting point for
analyzing the dynamics of competitive strategy. Before one can assess the
relative strengths and weaknesses of rivals, or track competitive moves and
countermoves, one must first identify the competitive set of firms and develop
an accurate sense of the

in which strategic interactions are likely to click.

complementary approaches are possible. The first approach is demand-side based,
comprised of firms satisfying the same set of customer needs. The second
approach is supply-side based where, firms possess same resource base, technology,
operations to that of the rival firm.


are three domains for recognizing the sources and types of direct and less
direct competitors to which the firm must focus.  These domains represent

the areas of influence,

the contiguous area, and

 (3) the areas of interest


•           The area of influence is the
territory, market, business, or industry in which the firm is directly
competing with other firms to serve the same customer needs using the same
resources. It is the arena in which Ford, Honda, Toyota, Kia, and General Motors
compete with each other; where Samsung competes against Motorola and Xiomi in
cellphones and Haldirams competes against Bikano, Bikaji, and A2B in snacks.
These are a firm’s direct competitors.


•           Immediately contiguous areas are
those in which competition is close but indirect, comprising those firms that
serve the same customer need but with different resources. Many food products
fit into this category such as snack foods (potato chips versus pretzels versus
peanuts: E.g. Haldirams vs Lehar Pepsi), or packaging (glass versus plastic
versus aluminum; E.g. Saint Gobain vs Freshwrapp). They may serve the same need
but through different distribution channels (direct such as Avon versus retail
such as Revlon). These are a firm’s indirect competitors.


•           Areas of interest are composed of
firms that do not serve the same customer base but have the same resource base.
For example, many firms possess the necessary measures to produce a wide range
of digital electronic devices whether cell phones, PDAs, cameras, or “pad”
computers. These comprise a firm’s potential competitors. Eg: Samsung vs
Philips vs Cannon vs hp. 


must identify competitors in two levels

•           Product-Market Level

•           Firm Level




The most direct competitor competes for
the exact same customers and sells the same product to them in exactly the same
way with same technology as the subject firm via the same marketing channels.
If the firm cannot win customer patronage, then it is unlikely that it can do
any better against its indirect or potential competitors


A business is further defined in terms of
a number of key dimensions, which reflect the ways and places in which it chose
to compete. Primary among these are the products it offers and the types of
customers to whom it chooses to sell.


Products offered are defined by three
dimensions: Customer Functions, Technology, and Materials

1.      Customer
function is concerned with customer need being
satisfied. This is the natural way to think about a product. Electromechanical
devices, for example, can frequently be designed to satisfy any size, any
functions varying from narrow to wide. For example, some cooking appliances are
a single function (microwave ovens), others are the dual function (combination
convection-microwave ovens), while others are multifunction (combination
convection-microwave-conventional ovens). Another example concerns
over-the-counter medications which, although identical in ingredients, may be
positioned or sold for the relief of colds or allergies or sinus symptoms.
Others, such as Nyquil, are sold for even more specific usage applications
(night-time cold relief). Eg. Futura, Prestige.

2.      Technology
shows how the customer function(s) are being satisfied. For example, kitchen
ranges may use two sources of thermal energy (gas or electric) or,
alternatively, microwave energy to cook. X rays, computerized axial tomography
(CAT scan machines), and NMR (nuclear magnetic resonance) are three different
technologies used in medical diagnostic imaging. Eg. Futura, Prestige.

3.      The
materials used in the manufacturing of the product may also differ,
producing slight differences in products that are otherwise identical. Cabinets
may be made of chipboard versus plywood; bottles of glass or of such plastics
as PET, polypropylene, or polyethylene; and beverage cans of aluminum or steel.


Competitors at the Firm Level

Interfirm rivalry concept goes beyond the
product & market level. Competition can also occur as firms use related
resources to bear on individual product & market level. The theory of
multimarket competition describes those situations where firms compete against
each other in multiple markets. For example, in 1989, America West entered the
Houston, Texas market which was Continental Airline’s home base came with low
introductory fares. Continental retaliated, not by lowering prices in Houston
but by lowering prices in Phoenix, Arizona which was America West’s home base
and then they communicated its displeasure with America West’s actions in
Houston. As a result, America West stopped its low prices in the Houston market
and subsequently, Continental shutdown its low-price counterattack in Phoenix,
Arizona. Such behavior requires that the manager must understand the broader
firm-level competition and manager must be capable of such competitive behavior
& make some approaches in order to survive in the market. One approach is
to identify the different strategic groups in an industry.

The strategic group approach is to
identify the competitors based on the differences in firms’ strategies for
dominating the market. As such, it is a more general approach than the business
definition approach. Like the business definition approach, the concept is
intuitively appealing and understandable. For example, a hypothetical industry
may be composed of three strategic groups:

1.      Large
firms pursue a strategy of low-cost production of a full line of standardized
products through mass-market outlets.

2.      Another
set of firms whose strategy relies on high-quality, differentiated, and branded
products sold through specialty shops.

3.      Smaller
firms always posses a strategic advantage by specializing in serving either
specific customer groups or producing a very narrow products range.

The strategic group concept is useful in
identifying and analyzing firm-level competition because members of a strategic
group not only resemble each other but are also getting affected similarly by
any given event or change in the environment. Even if they are playing the same
game, in the same way, it will indicate that their economies are similar. The
commonality in their strategies means that they will likely to respond in a
similar fashion to competitive threats or moves.

A further point must be taken into
consideration about strategic groups. While all of the firms are in competition
at a broader level, those in the same strategic group compete more closely
among themselves than with those in other groups. For example, Proctor &
Gamble, Unilever, and Colgate-Palmolive in the household and personal care
products markets are in closer competition against each other than they are
with direct sellers of household and personal care products such as Amway or
Avon. Further, the competition between and among groups is not equal, various
pairs of groups may compete more or less intensely. By noting down the
successes of the different strategic groups, one can better understand the
potential for multimarket competition.


goal for the competitor analysis is to predict a competitor’s future outcome,
especially those made in response to the actions of the local business. This
requires information that is both quantitative and factual i.e. what the
competitor is doing and can do, as well as qualitative and intentional i.e.
what the competitor will do next. There are four key knowledge areas:


1.      The
competitor’s marketplace agenda in terms of scope, posture, and goals.


2.      The
sources of competitive advantage that shows its marketplace strategy magnitude
including resources, capabilities, organization, mindset, and its place in the
industrial ecosystem.


3.      Alarming
message is sent by the competitor in both ways, by its actions and


4.      A
competitive response profile which analyzes the competitor’s possible future



Competitor’s Marketplace Strategy

The competitor’s marketplace strategy
defines how a competitor competes in the marketplace according to the current
trend. It defines the strategic choices the competitor makes about where, how,
and why it seems to be dominant in the market. 
A competitor’s marketplace strategy has three elements:

1. Scope – the product & the customer
segments the organization is in or wants to be in;

2. Posture – how it competes or wants to
go head-on in those marketplace segments;

3. Goals – its sole purpose of being in
those segments.

Competitor’s Source(s) of Competitive Advantage

Inside of a competitor’s marketplace
strategy lies the organization and the functional operations and processes that
make the strategy possible. If the competitor is rational, then its marketplace
strategy must be built around those functions and activities where it is
competitively on winning the place against competitors. The ability to analyze
the competitor’s economics is the key to competitive analysis. Providing
knowledge about the competitor’s advantages and disadvantages is the key to
understand its strengths and weaknesses and its future mind games in the

Inputs are a key source of advantage in
every industry.  Since few businesses are
completely vertically integrated, but simply adds value to the purchased inputs
through its operations, analyzing a competitor’s costs of its raw materials is
an important factor. Identifying a competitor’s suppliers and transportation
costs is the first step. In businesses for labor is the second step.  Labor contracts are one source of such
information as various wage surveys are available. The third element of inputs
is the firm’s weighted average cost of capital (WACC).  A firm with a lower WACC can invest at a
lower hurdle rate – the rate of return an investment must earn a gain on
corporate approval and expand faster as compared to the firm with higher
WACC.  Equity analysts and many financial
data services calculate the WACCs of firms.

 Technology is always the second focus,
especially in industries that are still in the making. Assessing competitors’
current operations and product technology is the first step. Assessing the
direction of its technology investments is the second step. Many firms announce
the present and future state of their technology to show the signal to
competitors about their competitive advantages. In other instances, following a
competitor’s published patents and scientific publications can provide the
analyst about the good indications of its direction.  Estimating the number of R personnel is
another common technique. As a generalization, a competitor that put more
resources against its possessed technology will create better technology faster
than competitors giving it better products and operations. Eg. P
with Gillette.

 Operations are the third step. Many aspects of
a competitor’s operations can be accessed simply by observing the purchase of
its products and examining or reverse engineering them. Quality, fit n finish
and durability can give the analyst an insight into the aspects of its
operations. In service businesses, it is not difficult to analyze one’s own
operations versus competitors’ to understand how customers experience those
services through operations.   

 Products are the primary need for marketplace
strategy. There are many ways to analyzing advantage of competitors’ products.
The important aspect is to analyze the products as customers see them.  Customer surveys are a key tool in this
analysis. While many of the technical performance features are easy to measure,
understanding the sources of customer value indicates what aspects of the
products to analyze.

and Interpreting Competitive Signals and Actions

Competitor analysis is more than a
statistics and mathematics. It requires more than the making of a comprehensive
report detailing the discrete strategies of the key industry competitors. It
means that having only an hour or two describes the meaning of a competitor’s
10% across-the-board price cut and to generate a response. It generally means
that being able to predict the reaction of competitors to your announcement of
a major joint venture with neighboring industry, or to your preannouncement of
a major new product. It means being able to understand what the leading
competitor’s chief executive says, “We must absolutely be as competitive
as we possibly can.” Is this message intended for creating the troops or
to provide a red alert alarm to the competitors?

Competitor’s Response Profile

The anticipation of competitive reactions
depends on:

1. The characteristics of the firm
executing the action. For example, its size and reputation for competitiveness.

2. The action characteristics. It could be
either a new market entry or a price change.

3. The characteristics of the rival
industry. Its size, performance, endurance or reputation.

4. Environmental characteristics such as
market turbulence and growth. 

some insight into these four factors, the firm or analyst can take some more
ironclad steps as shown in Exhibit 5 which portrays a helpful framework for
analyzing present and potential competitor chess moves and responses. The
summation of these analyses of competitors’ goals and assumptions together with
competitors’ current strategies and capabilities allows one to estimate their
response profiles. A response profile suggests what kind of actions a
competitor will probably take, if any, in response to the firm’s own actions.
Again, what this means is that you have to be resilient enough to think and
execute your work like your competitor.  


A competitive marketing strategy suggests
that the strategist must position the firm’s offerings so that they minimize
direct competition either by choosing vulnerable competitors or by working on
strengths against weakness. The goal of competitor analysis is to provide a
pathway to the strategist with the means to achieve the result i.e. profit &
wealth maximization.