Competition Analysis
Strategic competition analysis is to look at the competitive environment. Discovery of what your competitors are doing, where the next technological developments are coming from and the directions the market is moving.
A competitive analysis of your markets should include all the key influencing factors that affect the way in which you can compete. A competition analysis review is important for two reason.
Even if you know what the customers want and have the resources to meet demands, it may be that the competitive environment is not worth pursuing particular parts of the market for a range of strategic reasons, such as: a price war, channel conflict and ethical or legal considerations.
You need to know if your competitors are doing certain things better than you are, or more importantly, if they are looking to change the basis of competition in the market. Are your competitors looking to move to a direct sales model, or introducing some revolutionary new product or technology?
The main types of competitive analysis from a strategic point of view are:
Five factors
• Power of Buyers
• Power of Suppliers
• Threat of substitutes
• Barriers to entry
• Competitors
The idea is that change in your market is likely to come as the basis of one of these five areas. For instance, buyers can distort the market by forcing prices down, or by deciding to build products in-house.
In considering how these factors affect your markets, you get a picture of issues such as channel conflict, threats from vertical integration, the impact of regulatory change or the advent of new technology. You can also affect the competitive situation for your own gain, rather than accepting the status quo.
it becomes possible to play around with future competitive scenarios and to use these to test different propositions and guess how the market will change. A sound strategy then includes contingencies and responses to changes that may affect you, and any changes that you make to the market.
Benchmarking is utilized to ascertain how well you are doing against the competition. Are there areas that you can learn from the competition? Are there ideas in markets outside your own that would be worth bringing into your market to give you a competitive advantage?
Your competitors can also be a source for information about the general market. Their advertising and marketing is telling you something about the messages and approaches that they think are applicable to your market. If they have done their research, you can learn from their approaches.
One common issue that comes from looking at the competition is what do you do about it? The options are:
• Ignore
• Fight
• Adopt
In practice, if there is merit in something new and you ignore it, it is likely to bite you later. If you fight against it, you add to your costs potentially just to save market share, rather than to win market share.
Consequently often adoption of the competition’s good ideas is the best way forward Often there can internal cultural issues that mean this can be difficult to accept. But learning from the competition, doesn’t mean following the competition. This approach, known as an “invest in your threats” strategy, can be an extremely effective way of keeping up with and ahead of the market.
