Competition

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Competition Varun Rai Kapoor Saurabh Chhabra Global Strategic Management MIB 2009-11

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COMPETITOR ANALYSIS Competitor analysis in strategic management is an assessment of the strengths and weaknesses of current and potential competitors Provides both an offensive and defensive strategic context through which to identify opportunities and threats Competitor profiling coalesces all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment

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COMPETITOR ANALYSIS FRAMEWORK What drives the Competitor What the Competitor is Doing Competitor Response Profile OBJECTIVES STRATEGY ASSUMPTIONS RESOURCES & CAPABALITIES

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What problem will you solve? What need/desire does your product address? How will your product make their lives better, easier, happier? Know what your customers are currently doing: Going to the competition Using another solution Nothing Know how satisfied they are with existing options. How hard will it be to get them to change what they’re currently doing? Keeping Ahead of my Competition

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Who Is My Competition? Competition = everybody who’s after the same consumer dollar you are. Direct Competitors Indirect Competitors Possible New Entrants

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How Stiff Is the Competition? Analyze your competition. Look for marketplace gaps you can fill. Develop a competitive matrix.

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Creating a Competitive Advantage Tangible Items Intellectual property rights Exclusive license

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Creating a Competitive Advantage Intangible Items Superior Product/Brand Quality Selection Availability Operational Excellence Innovation Leadership Intimate Customer Relationships/Experiences Cost Advantage

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SWOT Factors affecting an organization can usually be classified as: Internal factors Strengths ( S ) Weaknesses ( W ) External factors Opportunities ( O ) Threats ( T ) Factors affecting an organization can usually be classified as: Internal factors Strengths ( S ) Weaknesses ( W ) External factors Opportunities ( O ) Threats ( T ) Strengths Opportunities Weaknesses Threats

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SWOT: internal factors Strengths Positive tangible and intangible attributes, internal to an organization. They are within the organization’s control Weaknesses Factors that are within an organization’s control that detract from its ability to attain the core goal. In which areas might the organization improve?

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SWOT: external factors Opportunities External attractive factors that represent the reason for an organization to exist and develop. What opportunities exist in the environment which will propel the organization? Identify them by their “time frames” Threats External factors, beyond an organization’s control, which could place the organization’s mission or operation at risk. The organization may benefit by having contingency plans to address them should they occur Classify them by their “seriousness” and “probability of occurrence”

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For the external factors Must plan for Minimum resources if any Maintain flexibility in plan Forget it High Low High Low Probability of occurrence Seriousness of Impact

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PORTER 5 FORCES MODEL BARGAINING POWER OF CUSTOMERS THREATS OF SUBSTITUTES PRODUCTS BARGAINING POWER OF SUPPLIERS THREATS OF NEW ENTRANTS COMPETITIVE RIVALRY WITHIN INDUSTRY

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COMPETITOR ARRAY Define your industry - Scope and Nature of the industry Determine who your competitors are Determine who your customers are and what benefits they expect Determine what the key success factors are in your industry Rank the key success factors by giving each one a weighting – The sum of all the weightings must add up to one. Rate each competitor on each of the key success factors Multiply each cell in the matrix by the factor weighting. Can best be displayed on a two dimensional matrix – competitors along the top and key success factors down the side.

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Key Industries Success Factors Weighting Competitor 1 Ranking Competitor 1 Weightage Competitor 2 Ranking Competitor 2 Weightage Extensive Distribution 0.4 6 2.4 3 1.2 Customer Focus 0.3 4 1.2 5 1.5 Economies of Scale 0.2 3 0.6 3 0.6 Product Innovation 0.1 7 0.7 4 0.4 Total 1 20 4.9 15 3.7

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COMPETITER PROFILING Superior knowledge of rivals offers a legitimate source of competitive advantage. Raw material of competitive advantage consists of offering superior customer value in the firm’s chosen market. Facilitates strategic objective in three important ways Reveals strategic weaknesses in rivals that the firm may exploit Proactive stance of competitor profiling will allow the firm to anticipate the strategic response Proactive knowledge will give the firms strategic agility Offensive strategy can be implemented more quickly in order to exploit opportunities and capitalize on strengths. Similarly, defensive strategy can be employed more deftly in order to counter the threat of rival firms from exploiting the firm’s own weaknesses.

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PROFILING Profiles give an in-depth description of the competitor's background, finances, products, markets, facilities, personnel, and strategies. Background Location of offices, plants, and online presences History - key personalities, dates, events, and trends Ownership, corporate governance, and organizational structure Financials P-E ratios, dividend policy, and profitability Various financial ratios, liquidity, and cash flow Profit growth profile; method of growth (organic or acquisitive) Products Products offered, depth and breadth of product line, product portfolio balance new product success rate, R&D strengths brands, brand loyalty and brand awareness Patents and licenses Quality control conformance Reverse engineering

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Marketing Segments served, market shares, customer base customer loyalty Promotional mix, promotional budgets, advertising themes, sales force success rate, online promotional strategy Distribution channels used (direct & indirect), exclusivity agreements, and geographical coverage, pricing, discounts, and allowances Facilities Plant capacity, capacity utilization rate, age of plant, plant efficiency, capital investment, location, shipping logistics, and product mix by plant Personnel Number of employees, key employees, skill sets strength of management, and management style compensation, benefits, employee morale & retention rates Corporate and marketing strategies Objectives, mission statement, growth plans, acquisitions, and divestitures marketing strategies

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New Competitors Most common sources of new competitors are Companies competing in a related product/market Companies using related technologies Companies already targeting your prime market segment but with unrelated products Companies from other geographical areas and with similar products New start-up companies organized by former employees and/or managers of existing companies High profit margins in the industry Unmet demand (insufficient supply) in the industry No major barriers to entry Future growth potential Competitive rivalry is not intense Gaining a competitive advantage over existing firms is feasible

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COMPETITIVE ANALYSIS: COMPONENT OF INNOVATION ASSESSMENT

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Thank You