UNIT-V

COMPETITIVE ANALYSIS
Concepts and types of competition
Concepts:
Competition is a major environment variable in marketing. The organization to be
successful in the market should be able to deliver greater customer value and
satisfaction than its competitors.
• Competitors can be generic, form, industry, and brand
• Generic competition: This type of competition results from companies that target
the same purchasing power of buyers.
• Form competition: This type of competition results from products that satisfy the
same needs. For ex- several types of drinks-hard. Soft, hot, cold etc-can satisfy the
thirst need.
• Industry competition: This type of competition results out of similar products
satisfying the same needs.
• Brand competition: The most serious competition results at brand level where
similar brands ( Coke vs Pepsi) compete against one another in the market.
Level of competition
• Price competition: It is implemented by raising, lowering and
manipulating prices. It is obvious and easy to monitor.
• Non-price competition: It is implemented through a differentiation
strategy practiced over the product, promotion and distribution.
Key Competitor Analysis
• Understanding competitors and their activities can provide several
benefits.
• An understanding of the current strategy strengths and weaknesses of
a competitor can suggest opportunities and threats that will merit a
response.
• Insights into future competitor strategies may allow the prediction of
emerging threats and opportunities.
• Competitors analysis may result in the identification of some strategic
uncertainties that will be worth monitoring closely over time.
Elements of competitors actions
1. Size, Growth, and profitability
2. Image and positioning
3. Objective and commitment
4. Current and past strategies
5. Organization and culture
6. Cost structure
7. Exit barriers
8. Strength and weaknesses
Size, Growth, and profitability
• The level and growth of sales and market share provide indicators of
the vitality of a business strategy.
• Profitability also affects the way business are done. Competitor
growth are predicted through profitability
Image and positioning
• In order to develop positioning alternatives, it is helpful to determine
the image and brand personality of the major competitors.
Weaknesses of competitors on relevant attributes or personality traits
can represent an opportunity to differentiate and develop advantage.
• Competitor image and positioning information can be deduced in part
by studying a firm's products, advertising, website, and actions, but
often customer research is helpful to ensure that an accurate current
portrayal is obtained.
Objective and commitment
• A knowledge of competitor objectives provides the potential to
predict whether or not a competitor’s present performance is
satisfactory or strategic changes are likely.
• For example, the financial objectives of the business unit can indicate
the competitor’s willingness to invest in that business even if the
payout is relatively long term.
• What are the competitor’s objectives with respect to market share,
sales growth, and profitability. Non financial objectives are also
helpful. Does the competitor want to be a technological leader? Or to
expand distribution
Current and past strategies
• The competitor’s current and past strategies should be reviewed. In
particular, past strategies that have failed should be noted, because
such experiences can inhibit the competitor from trying similar
strategies again.
• Also, a knowledge of a competitor’s pattern of new product or new
market moves can help anticipate its future growth directions.
• For example, is the strategy based on product quality, service, or
distribution type, or brand identification.
Organization and culture
• Knowledge about the background and experience of the competitor’s
top management can provide insight into future actions.
• An organization’s culture supported by its structure, systems, and
people, often has a pervasive influence on strategy.
 Cost structure
• Knowledge of a competitor’s cost structure, especially when the
competitor is relying on a low-cost strategy, can provide an indication of its
likely future pricing strategy and its staying power.
• The following information can usually be obtained and can provide insights
into cost structures:
a) the number of employees and a rough breakdown of direct labour
( variable cost) and overheads (which will be part of fixed costs)
b) The relative costs of raw materials and purchased components.
c) The investment in inventory, plant, and equipment (also fixed cost)
d) Sales levels and number of plants ( on which the allocation of fixed costs
is based
e) Outsourcing strategy
Accessing Strengths and Weaknesses
• Knowledge of a competitor’s strengths and weaknesses provides
insight that is key to a firm’s ability to pursue various strategies.
• It also offers important input into the process of identifying and
selecting strategic alternatives.
Analyzing and Creating Competitive Advantage
(Michael Porter’s Approach
• Michael Porter proposed three “ competitive strategies for
outperform other corporations in a particular industry:
1. Cost leadership
2. Differentiation
3. Focus
4. Differentiation focus
Competitive scope- the breadth of the company’s or business unit’s
target
Cost leadership
• It is the ability of a company or a business unit to design, produce, and
market a comparable product more efficiently than its competitors.
• It aims at the broad mass market and requires “aggressive construction
of efficient-scale facilities, vigorous pursuit of cost reductions from
experience, tight cost and overhead control, cost minimization in areas
like R&D, service, sales force, advertising and so on.
• Because of its lower costs, the cost leader is able to charge a lower price
for its products than its competitors and still make a satisfactory profit.
• Some companies successfully following this strategy are Wal-Mart
( discount retailing), Taco Bell ( fast-food restaurants), southwest
airlines, Timex watches.
Differentiation
• It is the ability of a company to provide unique and superior value to the
buyer in terms of product quality, special features or after-sale services.
• It aimed at the broad mass market and involves the creation of a product
or service that is perceived throughout its industry as unique.
• This company or business unit may then charge a premium for its product.
• This specialty can be associated with design or brand image, technology,
feature, a dealer network or customer service.
• Examples of companies that successfully use a differentiation strategy are
Walt Disney Company ( entertainment), BMW, Apple.
Cost Focus
• It is the ability of a company to provide unique and superior value to
a particular buyer group, segment of the market line or geographic
market.
• In using cost focus, the company or business unit seeks a cost
advantage in its target segment.
Differentiation focus
• Like cost focus, concentrates on a particular buyer group, product line
segment, or geographic market.
• This strategy is successfully followed by Lamborghini (car),
Nickelodeon ( a cable channel for children)
• In using differentiation focus, a company or business unit seeks
differentiation in a targeted market segment.
• this strategy is valued by those who believe that a company or a unit
that focuses its efforts is better able to serve the special needs of a
narrow strategic target more efficiently than can its competition.