Competitor Analysis

Competitor Identification can be done by Customer Choices

-Brand- Industry Form- Generic Product Use associations:- Situations ,applications and contexts/Appropriateness ( Gifting ..? restaurant Hanging out or Home delivery ?) Aircel,Tata Docomo and ITC s Bingo,Ezee from Godrej,Crack by Paras,Tetra food

Strategic group - grouping of firms that pursue similar competitive strategy - Similar chs: size/intensity/ - similar assets and competencies
Mobility barriers?( Pvt label to national brand )

Intensity
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Evaluation
Size /Growth/Profitability
- how attractive is market ?Growth market have strong strategic groups Access to capital is an indicator of profitablity Crude markets estimation

Image and positioning strategy Competitor objectives and commitment

Market share ,sales growth and profitability What are non financial objectives What are objectives of competitors parent company?

Current and past strategies of competitor

Pattern of new products/ new market moves cost ,differentiation or focus

Competitor organisation and culture

Where are CEOs from ?structure ? People?Innovation ?

Cost structure and exit barriers

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Indian Mobile service providers market Company Bharti Reliance Vodafone BSNL IDEA/Spice Tata Docomo Aircel Unitech MTNL Videocon Others Market share 19.74 16.14 15.92 12.43 12.13 8.46 6.72 4.72 0.93 0.58 0.5

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Number of employees ,variable labour cost Relative cost of raw materials Investment in inventory Fixed costs Sales level and number of plants Break even levels

Competitor evaluation
Identify assets and competencies
What assets and competencies successful firms have over time ?What unsuccessful lacks? What are key customer motivations ?What is really important to customers What are large cost components?What are large value added parts of offering Does Value chain offer SCA?

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Arthur D Little competitive position /Industry maturity matrix

Companys Competitive Position Dominant Strong Favourable Tenable Weak

Stages of Industry maturity Embryonic Growth (Latent)/Emergent

Maturity

Ageing

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Competitor SWOT Analysis

Innovation Patents ,R&D, New product capability Manufacturing
Cost structure,Flexible systems,access to raw materil,vertical integration

Management Finance Marketing Customer base Size and loyalty,market share,growth of segments

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Michael Porters Value chain analysis

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 Reaction Pattern/ Response profile

Laid back competitor Selective competitor Tiger competitor Stochastic competitor Maggi vs Yippee (30% growth rate )

Competitor relationships
Conflict Competition Co existence Cooperation Collusion
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The Nirma story

The original Price warrior Affordable price ,adequate quality value proposition and the promise was to deliver a detergent powder at 1/3 of the price of the market leader. Lowest cost detergent manufacturer in the world adopted backward integration to reduce costs by 25% Self sufficiency in key raw materials ad expenditure used to 2% 50% margin to retailers Volumes and economies of scale .Non mechanised production process till 1985 to gain tax and excise benefits Initially dumped large quantities of product at a central point in whole sale market and asked retailers to come and collect stock at a fixed rate per kilo and not as percentage of price Current situation is not good-changing customer attitude,rising income,increased rivalry Current competitive secnario- HUL,Rohit surfactants,Henkel,Jyothi labs
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Competitive cycle source:John B Frey (1982),Pricing over the competitive cycle,Conference board ,NewYork

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 Develop a competitive strength grid by scaling the firms Assets and competencies against competitors or strategic groups Plot Primary and secondary KSF(Key success factors)

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Source:(Dekimpeand Hanssens,95)
Marnik G Dekimpe and Dominique M Hassens , Empirical Generalizations about market Evolution and Stationarity, Marketing Sci ence,14,no .3,pt.1,(1995)

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Market and industry analysis

Market forces: Market size,Market growth rate,Buyer power Market attractiveness Market profitability Porter(1979) Kim and Mauborgne (1999)

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Market or industry analysis Market attractiveness profit potential measured by long term RoI Actual and potential market size Market growth Profitability Cost structure Distribution systems

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Market size/Market share Total sales Market submarket levels Potential market-user gap(New user/frequent usage) Niches Market share (Share of preference/voice and distribution) Growth -more sales and profits -driving forces- rate of growth by which factor?Automobile sales ? -Forecasts- Demographics/sale of related equipments - Detect maturity and decline price wars by overcapacity/buyer sophistication and knowledge/substitutes/No of first time buyers decline ---Growth submarkets

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Threat of Entry
put pressure on price,cost ,profitability and shakes up competition (Pepsi into bottled water segment) Depends on Entry barriers 1)supply side economies of scale 2)network effects demand side (e-bay ?) 3)customer switching costs 4)capital requirement 5)incumbency advantages 6)Unequal access to distribution channels 7)restrictive government policy 8)expected retaliation
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 The power of suppliers

Microsoft and PC makers suppliers serving many industries industry faces switching costs in switching suppliers suppliers threat of forward integration Supplier offering distinct products

The power of Buyers

few buyers ,volume buyers undifferentiated products buyer has few switching costs buyers threat of backward integration

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 The threat of substitutes Rivalry among existing competitors

Will be high if ,

growth rate is low,exit barriers are high,committed competitors, Forms of rivalry: price discounting,ad competition, service improvements ,new product launches affects profitablity if it gravitates solely to price competition Price competition occurs if products are identical,low switching costs,if fixed costs are high and marginal costs are low and if the product is perishable

Competition on other factors (eg:product features,brand image,service) is less likely to erode profits ,it enhances customer value and support higher prices
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 Industry growth rate,Technology and innovation,complementary products and services,government regualtions are just factors and not forces that shape industry profitability

Implications for strategy Positioning the company Exploiting the industries change (Music industry,Xerox,) Shaping industry structure
Redivide profitability vs expanding profit pool Redivide to keep suppliers ,substitutes or new entrants at bay

Redefining the industry

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Typical steps in Industry analysis

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Indian Tyre Industry

What is the structure of tyre industry in India? What is the structure of competition? Is this industry and various segments attractive to existing and new entrants?

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 Submarkets : 40 players , 70 Mn tyres OEM (34%), Replacement (58%), Export(6%)

Depends on automobile growth Major buyers / margin squeeze(40%) Customer bargaining power Replacement Vertical integration ,JK ,CEAT

Technology Cross ply , Radial Segments CV (19 % share ,5% growth projections 60% ,Rs. 90 Bn ( Coss ply ) ; Buyers : Transport companies /truck drivers ; retreading market , Overload capacity Cars: 17% share 10% growth projection
Value chain analysis: Marketing and branding ; Tubeless high growth @20%(6% of total market); Profitable (Goodyear ,28%. Bridgestone 28%,MRF)

, Two wheelers (29% share 7% growth): Overcapacity : Price drops ;intense competition ,High growth market Three wheelers:19% LCV: 6% ; Agri: 10 % (niches)

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Entry costs : 500 1000 crore 5 forces model? Does it make sense for a new firm to enter the market? Takeovers ?? Joint ventures ??

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Competitor MRF 6 FACTORIES, 2500 SALES OUTLET, 21% JK ,20% market 4 factories,110 own sales outlets; Multiple SBUS,Conglommera te CEAT ,(14%) 3+1 Srilankan FACTORIES, 100 Ceat SHOPPES ,Multiple SBUs ,

SALES (Rs) 29,754 mn (60% in replaceme nt market) 20,785 mn

CV& LCV 18%

Cars 24%

Two and Three 42 %

Expor t 14% tubeless tyre

85% of radial market/ 25%

18%

No presence

Tie up with Continenta l

14,998 MN

18%,22%

11%

Planning new facilities 1 1%

17% of total sales

Cross ply in 17 variants , CEAT Italy (16% market share of Agrivehicle s) Late entrant, Pirelli (32% + tractors) Cross Ply, Acquired GoodYear SA(Radial including Bus and Truck) (agri 23%) Inputcost of rubber 25% Replacemen t market interest Backward integration Dunlop distributor 27 Crossply

Birla, 75 market One factory,(1.5 mn capacity) Conglommerate Appollo (20%) 4 factories,188 own outlet,2500 exclusive dealers,2000 MBOs,

5.6% 11%, 68% of productio n +LCV 26%,26%

30% of sales

22,358 mn

13%

No presence

8%

TVS Srichakra One factory ,20 exclusive ,2000+ MBO

1,991 mn

Leader (21%) ( tyres and Tube category)

Falkon

1936 mn

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19% VITBS

OEM Mfoe Hero,Baja,Yamaha

 How to create New Market space thruValue innovation? (Kim and Mauborgne,1999)
Look across substitute industries Looking across strategic group within industries Look across Chain of buyers Look across complementary products and services Look across functional or emotional benefits to buyers Look across time

External environment analysis

Technology
Disruptive tech vs sustaining tech Golden Goose syndrome - innovation- impact of new tech-forecasting. Does old tech have substantial time in the event of emerging tech? ( Electric razor vs safety razors /quartz watches/ . DTH industry/Music industry/MR/pacakging/banking/Travel /mobile ad

Government
Regulatory frameworks/Product standards/international politics

Economics
Inflation /general economic health- unemployment-economic growth/investment climate/currency valuations/heavy investments

Culture
Lifestyle trends/fitness and nutrition/

Demographics Anti ageing industry/migratory patterns/teens/gender ratio/marriage rate/family formation PEST/SLEPT ANALYSIS

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Internal analysis
Necessary to gain insights into Real STRENGTHS , Weaknesses and Objectives Similar to competitor analysis, but has a greater focus on performance assessment and much deeper and richer Can be done at Firm level, SBU groups level ,single SBU level or area level Value Chain analysis Financial performance: Sales and Profitability Other measures of Performance: Beyond profitablity Core Competence Analysis

A) B) C) D)

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Performance analysis
Measure success of past strategy and evaluates current or past performance needs strategic change Sales and Market share Profitablity
RoA = profits/ assets DuPont Model RoA = Profit margin X Assets turnover =Net income/Sales x Sales/Total Assets

RoE = Net profits/equity Du Pont Model RoE = Profitability xOperating EfieciencyxFinancial levaerage =Net proifts/salesx sales /Assets xAssets /equity RoE = Tax Burdenxinterest burdenxoperating proft margin(Ro Sales)x Assets turnoverxleverage ratio (debt equity ratio) RoE =Net profit /Equity=Net profit/Pre tax profit xpretax profit/EBITxEBIT/Salesx Sales/Assetsx Assets/Equity

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