Introduction rival firm. There are three domains for recognizing

IntroductionCompetitivemarketing strategies are the weapons used by the firm in order to get one stepahead of their competitors. As such, they require that the strategists must beas knowledgeable about competitors’ strengths and weaknesses as about customers’needs or the firm’s own capabilities. The purpose of this paper is designed toassist the strategists to understand how to gather and analyze informationabout the competitors that is useful in the strategy development process. Itdiscusses the objectives of competitor analysis and proceeds through theprocesses involved in identifying important competitors and information needs,gathering necessary information, and interpreting the information.   THE OBJECTIVES OF COMPETITOR ANALYSIS Theultimate objective of competitor analysis is to remain one step ahead of thecompetitor so that firm’s competitive strategy can be formulated to take intoaccount about the competitors’ likely actions and responses. From a practicalviewpoint, a strategist needs to be able to live in the competitors’ strategicshoes. The strategist needs to understand the situation of the market so thatthey can take some measures for their firm to survive to what actions thecompetitors would take in order to maximize their outcomes, and must be able toforecast the actual financial and personal outcomes of the competitor’sstrategic choices.1.

         Estimate the nature of the market andlikely successes of the potential strategy changes available to acompetitor.   2.         Predict each competitor’s probableresponse to important strategic moves on the part of the othercompetitors.  3.         Understand competitors’ potentialreactions to changes in the key industry and environmental factors.

Best services for writing your paper according to Trustpilot

Premium Partner
From $18.00 per page
4,8 / 5
4,80
Writers Experience
4,80
Delivery
4,90
Support
4,70
Price
Recommended Service
From $13.90 per page
4,6 / 5
4,70
Writers Experience
4,70
Delivery
4,60
Support
4,60
Price
From $20.00 per page
4,5 / 5
4,80
Writers Experience
4,50
Delivery
4,40
Support
4,10
Price
* All Partners were chosen among 50+ writing services by our Customer Satisfaction Team

  Competitoridenti?cationCompetitoridentification is a key task for managers not only to survive in the marketbut, also for keeping themselves at the dominant position in the market. It isa necessary step to the task of competitor analysis, and the starting point foranalyzing the dynamics of competitive strategy. Before one can assess therelative strengths and weaknesses of rivals, or track competitive moves andcountermoves, one must first identify the competitive set of firms and developan accurate sense of thedomainin which strategic interactions are likely to click.Twocomplementary approaches are possible. The first approach is demand-side based,comprised of firms satisfying the same set of customer needs. The secondapproach is supply-side based where, firms possess same resource base, technology,operations to that of the rival firm. Thereare three domains for recognizing the sources and types of direct and lessdirect competitors to which the firm must focus.

  These domains represent (1)the areas of influence, (2)the contiguous area, and (3) the areas of interest •           The area of influence is theterritory, market, business, or industry in which the firm is directlycompeting with other firms to serve the same customer needs using the sameresources. It is the arena in which Ford, Honda, Toyota, Kia, and General Motorscompete with each other; where Samsung competes against Motorola and Xiomi incellphones and Haldirams competes against Bikano, Bikaji, and A2B in snacks.These are a firm’s direct competitors.  •           Immediately contiguous areas arethose in which competition is close but indirect, comprising those firms thatserve the same customer need but with different resources. Many food productsfit into this category such as snack foods (potato chips versus pretzels versuspeanuts: E.g.

Haldirams vs Lehar Pepsi), or packaging (glass versus plasticversus aluminum; E.g. Saint Gobain vs Freshwrapp). They may serve the same needbut through different distribution channels (direct such as Avon versus retailsuch as Revlon). These are a firm’s indirect competitors.  •           Areas of interest are composed offirms 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 rangeof digital electronic devices whether cell phones, PDAs, cameras, or “pad”computers. These comprise a firm’s potential competitors.

Eg: Samsung vsPhilips vs Cannon vs hp.   Wemust identify competitors in two levels•           Product-Market Level•           Firm Level  Product-MarketLevelThe most direct competitor competes forthe exact same customers and sells the same product to them in exactly the sameway 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 doany better against its indirect or potential competitors A business is further defined in terms ofa number of key dimensions, which reflect the ways and places in which it choseto compete.

Primary among these are the products it offers and the types ofcustomers to whom it chooses to sell.  Products offered are defined by threedimensions: Customer Functions, Technology, and Materials1.      Customerfunction is concerned with customer need beingsatisfied.

This is the natural way to think about a product. Electromechanicaldevices, for example, can frequently be designed to satisfy any size, anyfunctions varying from narrow to wide. For example, some cooking appliances area single function (microwave ovens), others are the dual function (combinationconvection-microwave ovens), while others are multifunction (combinationconvection-microwave-conventional ovens). Another example concernsover-the-counter medications which, although identical in ingredients, may bepositioned 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.      Technologyshows how the customer function(s) are being satisfied.

For example, kitchenranges 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 differenttechnologies used in medical diagnostic imaging. Eg. Futura, Prestige.3.      Thematerials used in the manufacturing of the product may also differ,producing slight differences in products that are otherwise identical. Cabinetsmay be made of chipboard versus plywood; bottles of glass or of such plasticsas PET, polypropylene, or polyethylene; and beverage cans of aluminum or steel. IdentifyingCompetitors at the Firm LevelInterfirm rivalry concept goes beyond theproduct & market level.

Competition can also occur as firms use relatedresources to bear on individual product & market level. The theory ofmultimarket competition describes those situations where firms compete againsteach other in multiple markets. For example, in 1989, America West entered theHouston, Texas market which was Continental Airline’s home base came with lowintroductory fares. Continental retaliated, not by lowering prices in Houstonbut by lowering prices in Phoenix, Arizona which was America West’s home baseand then they communicated its displeasure with America West’s actions inHouston. As a result, America West stopped its low prices in the Houston marketand subsequently, Continental shutdown its low-price counterattack in Phoenix,Arizona. Such behavior requires that the manager must understand the broaderfirm-level competition and manager must be capable of such competitive behavior& make some approaches in order to survive in the market.

One approach isto identify the different strategic groups in an industry. The strategic group approach is toidentify the competitors based on the differences in firms’ strategies fordominating the market. As such, it is a more general approach than the businessdefinition approach.

Like the business definition approach, the concept isintuitively appealing and understandable. For example, a hypothetical industrymay be composed of three strategic groups: 1.      Largefirms pursue a strategy of low-cost production of a full line of standardizedproducts through mass-market outlets. 2.      Anotherset of firms whose strategy relies on high-quality, differentiated, and brandedproducts sold through specialty shops.

3.      Smallerfirms always posses a strategic advantage by specializing in serving eitherspecific customer groups or producing a very narrow products range.The strategic group concept is useful inidentifying and analyzing firm-level competition because members of a strategicgroup not only resemble each other but are also getting affected similarly byany given event or change in the environment. Even if they are playing the samegame, in the same way, it will indicate that their economies are similar. Thecommonality in their strategies means that they will likely to respond in asimilar fashion to competitive threats or moves.

A further point must be taken intoconsideration about strategic groups. While all of the firms are in competitionat a broader level, those in the same strategic group compete more closelyamong themselves than with those in other groups. For example, Proctor &Gamble, Unilever, and Colgate-Palmolive in the household and personal careproducts markets are in closer competition against each other than they arewith direct sellers of household and personal care products such as Amway orAvon.

Further, the competition between and among groups is not equal, variouspairs of groups may compete more or less intensely. By noting down thesuccesses of the different strategic groups, one can better understand thepotential for multimarket competition. IDENTIFYINGCOMPETITOR INFORMATION NEEDS  Thegoal for the competitor analysis is to predict a competitor’s future outcome,especially those made in response to the actions of the local business. Thisrequires information that is both quantitative and factual i.e. what thecompetitor 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.      Thecompetitor’s marketplace agenda in terms of scope, posture, and goals. 2.      Thesources of competitive advantage that shows its marketplace strategy magnitudeincluding resources, capabilities, organization, mindset, and its place in theindustrial ecosystem.  3.

      Alarmingmessage is sent by the competitor in both ways, by its actions andcommunications.  4.      Acompetitive response profile which analyzes the competitor’s possible futuremoves.  TheCompetitor’s Marketplace Strategy The competitor’s marketplace strategydefines how a competitor competes in the marketplace according to the currenttrend.

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 customersegments the organization is in or wants to be in; 2. Posture – how it competes or wants togo head-on in those marketplace segments; 3.

Goals – its sole purpose of being inthose segments.TheCompetitor’s Source(s) of Competitive Advantage Inside of a competitor’s marketplacestrategy lies the organization and the functional operations and processes thatmake the strategy possible. If the competitor is rational, then its marketplacestrategy must be built around those functions and activities where it iscompetitively on winning the place against competitors. The ability to analyzethe competitor’s economics is the key to competitive analysis. Providingknowledge about the competitor’s advantages and disadvantages is the key tounderstand its strengths and weaknesses and its future mind games in themarketplace.  Inputs are a key source of advantage inevery industry.

  Since few businesses arecompletely vertically integrated, but simply adds value to the purchased inputsthrough its operations, analyzing a competitor’s costs of its raw materials isan important factor. Identifying a competitor’s suppliers and transportationcosts is the first step. In businesses for labor is the second step.  Labor contracts are one source of suchinformation as various wage surveys are available. The third element of inputsis the firm’s weighted average cost of capital (WACC).  A firm with a lower WACC can invest at alower hurdle rate – the rate of return an investment must earn a gain oncorporate approval and expand faster as compared to the firm with higherWACC.  Equity analysts and many financialdata 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 thedirection of its technology investments is the second step. Many firms announcethe present and future state of their technology to show the signal tocompetitors about their competitive advantages. In other instances, following acompetitor’s published patents and scientific publications can provide theanalyst about the good indications of its direction.

  Estimating the number of R personnel isanother common technique. As a generalization, a competitor that put moreresources against its possessed technology will create better technology fasterthan competitors giving it better products and operations. Eg. Pwith Gillette.

 Operations are the third step. Many aspects ofa competitor’s operations can be accessed simply by observing the purchase ofits products and examining or reverse engineering them. Quality, fit n finishand durability can give the analyst an insight into the aspects of itsoperations. In service businesses, it is not difficult to analyze one’s ownoperations versus competitors’ to understand how customers experience thoseservices through operations.     Products are the primary need for marketplacestrategy. 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 thisanalysis.

While many of the technical performance features are easy to measure,understanding the sources of customer value indicates what aspects of theproducts to analyze.Assessingand Interpreting Competitive Signals and ActionsCompetitor analysis is more than astatistics and mathematics. It requires more than the making of a comprehensivereport detailing the discrete strategies of the key industry competitors. Itmeans that having only an hour or two describes the meaning of a competitor’s10% across-the-board price cut and to generate a response. It generally meansthat being able to predict the reaction of competitors to your announcement ofa major joint venture with neighboring industry, or to your preannouncement ofa major new product. It means being able to understand what the leadingcompetitor’s chief executive says, “We must absolutely be as competitiveas we possibly can.” Is this message intended for creating the troops orto provide a red alert alarm to the competitors?TheCompetitor’s Response Profile The anticipation of competitive reactionsdepends on: 1. The characteristics of the firmexecuting the action.

For example, its size and reputation for competitiveness.2. The action characteristics. It could beeither a new market entry or a price change. 3. The characteristics of the rivalindustry. Its size, performance, endurance or reputation.

4. Environmental characteristics such asmarket turbulence and growth.   Givensome insight into these four factors, the firm or analyst can take some moreironclad steps as shown in Exhibit 5 which portrays a helpful framework foranalyzing present and potential competitor chess moves and responses. Thesummation of these analyses of competitors’ goals and assumptions together withcompetitors’ current strategies and capabilities allows one to estimate theirresponse profiles. A response profile suggests what kind of actions acompetitor 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 andexecute your work like your competitor.  ConclusionA competitive marketing strategy suggeststhat the strategist must position the firm’s offerings so that they minimizedirect competition either by choosing vulnerable competitors or by working onstrengths against weakness. The goal of competitor analysis is to provide apathway to the strategist with the means to achieve the result i.

e. profit &wealth maximization.