WHAT IS COMPETITOR ANALYSIS?
Competitor analysis is a term used in marketing and strategic management. It means “assessment of the strengths and weaknesses of current and potential competitors” and helps defining competitive strategy (1).
The objectives of analysis include defining possible changes competitors might make to their strategies and how they will respond to moves occurring in the market (2).
Competitor analysis, according to Michael Porter, is also based on asking yourself three questions:
- “Who should we pick a fight with in the industry, and with what sequence of moves?”
- “What is the meaning of that competitor’s strategic move and how seriously should we take it?”
- “What areas should we avoid because the competitor’s response will be emotional or desperate?” (3)
“Clearly all significant existing competitors must be analysed. However, it also may be important to analyse the potential competitors that may come on the scene” (4).
FOUR DIAGNOSTIC COMPONENTS OF A COMPETITOR ANALYSIS
- Future goals
- Current strategy
- Capabilities (5)
Michael Porter divided these points into two groups: understanding what drives the competitor (future goals and assumptions) and competitor’s current strategies, strengths and weaknesses (current strategy and capabilities). He mentions that less attention is paid to comprehend competitors’ purposes (6). Aiming to understand broadly what are their ambitions will definitively helps us establish a better strategy for our business.
Picture 1 – Micheal E. Porter, Competitive Strategy. Techniques for Analysing Industries and Competitors, Published New York : Free Press, 2004, p. 49.
Future goals (7) can be related to finance, targets, technology, social performance etc. Once competitors’ goals are defined, it’s easier to predict “whether or not each competitor is satisfied with its present position and financial results, and how likely that competitor is to change strategy”. The diagnosis of future goals also helps to forecast their reactions and initiatives.
Assumptions (8) refer to two categories: competitor’s assumptions about itself and about the industry and the other companies in it. They “guide the way the firm behaves and the way it reacts to events”. We should be aware that not all assumptions are precise. Sometimes they may lead a business to a wrong direction. Blind spots are “areas where a competitor will either not see the significance of events (such as strategic move) at all, will perceive them incorrectly, or will perceive them only very slowly”.
The analysis of current strategy (9) is based on describing “current strategy of each competitor”.
Competitor’s capabilities (10), the final point of competitor analysis, “is a realistic appraisal” and evaluation.
Picture 2 – Robert M. Grant, Contemporary Strategy Analysis, Published Oxford : Blackwell Publishing Ltd., 2008, p. 108.
Competitors can be grouped in different categories, to help us define our aims and targets (11).
We can divide our competitors into strong and weak. Although competing against less powerful companies is easier and may require less effort, challenging stronger ones will help establishing your position from the beginning.
Competitors can be also defined as close and distant. It’s more obvious to select competitors among those who are more approximate. It influences the selection of our target market and business niche. It’s also worth keeping an eye on distant competitors, those who’s business doesn’t seem related to ours, because it can affect our strategies.
Good and bad competitors refer to those who play industry rules and those who make more risky moves. This category of competitors has its effect on the equilibrium.
No matter which category of competitors will be considered the most significant, there is no doubt that each of them should be taken into consideration and analysed. The better we examine the market and our competitors, the easier it will be to specify our aims. Benchmarking is the action of learning from the best companies, implementing their best practice into our projects and improving them (12). Competitive Intelligence means analysing available information about our rivals in order to predict their strategies and make our decision making more efficient (13).
Customers can be also divided into groups: valuable / not valuable, vulnerable / not vulnerable (14).
Picture 3 – Philip Kotler, Kevin Lane Keller, Marketing Management, Published London : Persons Education Ltd., 2009, p. 340.
The picture above compares various types of customers and suggests which group is worth keeping an eye on. It’s interesting to observe the the once that can influence our business are the ones from extreme top left and bottom right corners. These customers, defined as either valuable and vulnerable or not valuable and not vulnerable, are driving our business by giving us profit and interest in what we do.
To analyse GB Posters website I will use Michael Porter’s four diagnostic components: future goals, current strategy, assumptions and capabilities.
One of the aims of GB Posters could be to compete with international posters and prints suppliers. This will involve establishing contacts with local printing-houses. Opening a POD service outside UK to operate in foreign markets would allow them to deliver products from Britain internationally at lower prices.
They offer a huge range of products and deal with recognised companies in Britain, such as HMV, Amazon, Play.com.
They claim to be the biggest supplier of posters in the UK market.
They provide a wide range and variety of products (prints, badges etc.) and they have competitive prices.
I can see myself competing with GBPosters in terms of specific and high quality products. I also believe that the possibility of interaction with poster supplier (here: emerging artist) can make each transaction unique.
Providing potential buyers with useful information about products on offer (event posters) makes them more accessible.
- Wikipedia, Competitor analysis, available online, accessed on 13th March 2011.
- Micheal E. Porter, Competitive Strategy. Techniques for Analysing Industries and Competitors, Published New York : Free Press, 2004, p. 47.
- Ibidem, p. 47.
- Ibidem, p. 49-50.
- Ibidem, p. 48.
- Ibidem, p. 48.
- Ibidem, p. 50-51.
- Ibidem, p. 58-59.
- Ibidem, p. 63.
- Ibidem, p. 63.
- Philip Kotler, Kevin Lane Keller, Marketing Management, Published London : Persons Education Ltd., 2009, p. 339-340.
- Ibidem, p. 340.
- Robert M. Grant, Contemporary Strategy Analysis, Published Oxford : Blackwell Publishing Ltd., 2008, p. 107.
- Philip Kotler, Kevin Lane Keller, op. cit., p. 340-341.