Competitor Analysis.

Competitor Analysis

Competitive Analysis

The application of competitor analysis in marketing and strategic management is meant to assess strengths and weaknesses of existing and potential market competition. The results of the competitor analysis identify opportunities and threats and inform strategic response. Lean and agile strategies begin with profiling of competitor valuation in a single framework to ensure the most effective and efficient execution (i.e. implementation, monitoring and adjustment) of a competition strategy.

An essential element in robust corporate strategy, competitor analysis moves beyond traditional environmental scanning, toward better risk mitigation models. The four (4) main components to competitor analysis ensure precision in business modeling of a strategy:

1. Competitor array

The array is graphically illustrated in a two dimensional matrix (Competitors: key success factors):

• Define the sector – nature and scope of industry
• Determine competitors
• Determine customer benefits & expectations
• Determine key industry specific success factors
• Rank key success factors in weighted evaluated (Sum=1)
• Rate each competitor on each key success factor

Sum = Multiply each cell in the matrix by weighted factor

2. Competitor profiling

Knowledge of rivals in a market segment provides credible insight into competitive advantage.  Our competitor analysis software allows us to gain the information needed to succeed online. Customer value is a lead priority in building a composite of competitor advantage. Customer value is defined by the elements that make competitor knowledge strong. Profiling exploits these insights toward creating strategic objectives in competition strategy in three (3) ways:

1. Profiling reveals strategic weaknesses in competition.

2. Proactive decision making toward competitor profiling enables needed strategic response within planned strategies, prediction of competing strategies, and changes in the business environment.

3. Proactive knowledge enhances strategic agility so that an adequate offensive strategy can be implemented to capitalize on opportunities and strengths. Alternately, a defensive strategy can be deployed in order to counter threats from misappropriation of weaknesses.

These three profiling measures are systematic best practices to conducting advanced competitor analysis. Competitor profiling offers significant advantage in that the proposed SEO strategies will draw upon sector knowledge to create more competent decisions. Insight into the inner workings of a major competitor is imperative to forging offensive and defensive strategies that profit.

Once a profile has been generated on a competitor’s background, finances, products, markets, facilities, personnel, and strategies, a company can maximize its own potential to not only meet but exceed competitor performance:

• Background – the history of establishment, location of headquarters, manufacturing plants or other structural supply chain elements, online presence, and operational values (i.e. ownership, corporate governance principals and policies and organizational structure).

• Financials- cash flow, dividend policy, financial ratios, liquidity, P-E ratios, profitability,profit growth profile and model of growth (i.e. acquisition or organic)

• Products – research and development of new products, lifecycle of items on a product line, and product portfolio balance and other factors attributing to new product success rate. The strength of a brand portfolio has much to do with brand loyalty and brand awareness. Patents and licenses, quality control conformance and reverse engineering are also covered here.

• Marketing – consumer and product segments. Market shares, growth rate, and channel marketing. The latter promotes customer loyalty by way of marketing campaign promotion of a mix of advertising forces. Budget may include ad agency fees and sales force. Practices in online promotional strategies and other traditional distribution channels of direct and indirect advertising include legal and pricing details to campaign implementation (i.e. exclusivity agreements, geographical coverage, discounts, and allowances).

• Facilities- plant, property and equipment. Competitor costs analyzed for capacity utilization rate, efficiency, capital investment, product manufactured, location and shipping logistics.

• Personnel – human capital assets, talent, management style, and human resource management components (i.e. compensation, benefits, and employee morale and retention rates). Other sources of competitive advantage found in corporate and marketing recruitment, growth plans, acquisitions, and divestitures.

3. Media scanning

Identity management of a company often entails scanning of competitor advertising for comparative analytics. Competitor ads reveal much about the target market in correspondence to return on investment on products and their marketing cost. Notable changes in competitor advertising may indicate new product offerings, production processes, branding strategy, positioning strategy, segmentation strategy. Problems arising from production expansion or contraction, shrinking segmentation also add insights to the current situation and strategic direction of a competitor. By analyzing both competitor and company, new source of sustainable competitive advantage emerge that may never have been considered.

Market based changes responsive to environmental transformation in the global economy may also be present in a competitor analysis. New pricing strategies to increase penetration or control price discrimination, such as price skimming, discounts, product bundling or joint product pricing are generally signals that a company is mitigating risk of product loss leaders. Price does more work than other factors in marketing as well, as on-demand advertising allows companies to executive promotion strategies on a true ‘push-pull’ basis.

Financial ROI on competitor’s media strategy includes review of budget allocations, segmentation and target strategy. How much a competitor spends on media can be dealt with from a tactical position, so it is important for a manager conducting a competition analysis on this element of the competitor’s media plan to illustrate the numbers behind the buy, selection, frequency, continuity, and reach of media to determine how much of real cash flow has been spent. Some media assets may not be part of the cash flow statement, such as pro bono publication of government, trade show legal (i.e. patent filings) and trade association sources.

4. New competitors

The potential entrance of new competitors with substitute products or services is always a threat. Search for new competitors in: companies competing in a related product segment or market, using related technologies, targeting the same market segment with unrelated products, or from other geographical areas with similar products. A dearth of new start-ups generally indicates that a sub-sector has higher profit margins, there is unmet demand in the industry, there are no major barriers to entry and that future growth potential is not threatened by intense rivalry. Given this circumstance, there is exceptional feasibility that a start-up will gain competitive advantage over existing firms.