SCHOOL OF BUSINESS & ECONOMICS BACHELOR OF BUSINESS MANAGEMENT (BBM) BUSINESS POLICY AND STRATEGY COURSE CODE: BBM

472 COURSE FACILITATOR: DR. MUGAMBI GROUP 4 COMPETITOR ANALYSIS NO 1. 2. 3. 4. 5. 6. GROUP MEMBERS ADM NO ROLE SIGN ARTHUR AZIZ BBM/2799/10 Researcher G/Leader ANNASTASIA MULWA BBM/2670/10 Researcher - Compiler ALI BULLE OSMAN BBM/2844/10 Researcher SALOME N. OBUYA BBM/2781/10 Researcher LINDA MORAA BBM/2780/10 Researcher DENRICK MWANIKI BBM/2838/10 Researcher

PRESENTED TO MOI UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF A BACHELORS DEGREE IN BUSINESS MANAGEMENT FEBRUARY, 2012 Question Strategy Management Process: Competitor Analysis Abstract This paper outlines the meaning competitor analysis, components of competitor an alysis and questions that a strategy manager should as to find out the position of their competitors and strategies to use to be able to gain a competitive adv antage. In formulating business strategy, managers must consider the strategies of the f irm s competitors. While in highly fragmented commodity industries the moves of any single competitor may be less important, in concentrated industries competit or analysis becomes a vital part of strategic planning. Competitor analysis has two primary activities, obtaining information about impo rtant competitors, and using that information to predict competitor behavior. The goal of competitor analysis is to understand, with which competitors to comp ete, competitors strategies and planned actions, how competitors might react to a firm s actions and how to influence competitor behavior to the firm s own adv antage. Casual nowledge about competitors usually is insufficient in competitor analysi s. Rather, competitors should be analyzed systematically; using organized compet itor intelligence-gathering to compile a wide array of information so that well informed strategy decisions can be made. Industry and competitive analysis (ICA) is a part of any strategy development in firms and other organizations. It contains a very practical set of methods to q uic ly obtain a good grasp of an industry, be it pharmaceuticals, information an d communication technology, aluminum, or even the beer industry. The purpose of ICA is to understand factors that impact on the performance of the industry, and

as well the performance of firms within the industry. Firms in an industry can be categorized in so called strategic groups based on the strategies they are purs uing. Each strategic group is associated with a certain level of performance, an d the firms membership in such groups can be used to predict their moves within t he industry. Moreover, managers use ICA to allocate resources, reach strategic g oals such as mar et share or profitability, and help their firms improve their p osition within the industry. .

Table of Contents Item Page No. Question 1 Abstract 2 Table of contents 3 1.0 Introduction 4 2.0 Competitor Profiling 5 3.0 Components of Competitor Analysis 10 4.0 Competitive Strategy 12 5.0 Competitor Position Analysis 15 6.0 Customer Analysis 17 7.0 Criticisms of Competitor Analysis 19 8.0 Conclusion 20 References 22 1.0 Introduction Competitor analysis in mar eting and strategic management is an assessment of th e strengths and wea nesses of current and potential competitors. This analysis p rovides both an offensive and defensive strategic context to identify opportunit ies and threats. Profiling coalesces all of the relevant sources of competitor a nalysis into one framewor in the support of efficient and effective strategy fo rmulation, implementation, monitoring and adjustment. Competitor analysis is an essential component of corporate strategy. It is argue d that most firms do not conduct this type of analysis systematically enough. In stead, many enterprises operate on what is called informal impressions, conjectur es, and intuition gained through the tidbits of information about competitors ev ery manager continually receives. As a result, traditional environmental scanning places many firms at ris of dangerous competitive blindspots due to a lac of robust competitor analysis. Competitive analysis is the practice of analyzing the competitive environment in which your business operates (or wishes to operate), including strengths and we a nesses of the businesses with which you compete, strengths and wea nesses of y our own company, demographics and desires of mar etplace customers, strategies t hat can improve your position in the mar etplace, impediments that prevent you f

rom entering new mar ets, and barriers that you can erect to prevent others from eroding your own place in the mar et. Michael Porter in Porters Five Forces Model has assumed that the competitive envi ronment within an industry depends on five forces- Threat of new potential entra nts, Threat of substitute product/services, bargaining power of suppliers, barga ining power of buyers, Rivalry among current competitors. These five forces shou ld be used as a conceptual bac ground for identifying an organizations competitiv e strengths and wea nesses and threats to and opportunities for the organization from its competitive environment. The main objectives of doing competitor analysis can be summarized as follows: To study the mar et; To predict and forecast organizations demand and supply; To formulate strategy; To increase the mar et share; To study the mar et trend and pattern; To develop strategy for organizational growth; When the organization is planning for the diversification and expansion plan; To study forthcoming trends in the industry; Understanding the current strategy strengths and wea nesses of a competitor can suggest opportunities and threats that will merit a response; Insight into future competitor strategies may help in predicting upcoming threat s and opportunities. Competitors should be analyzed along various dimensions such as their size, grow th and profitability, reputation, objectives, culture, cost structure, strengths and wea nesses, business strategies, exit barriers, 2.0 Competitor Profiling The strategic rationale of competitor profiling is powerfully simple. Superior nowledge of rivals offers a legitimate source of competitive advantage. The raw material of competitive advantage consists of offering superior customer value i n the firms chosen mar et. The definitive characteristic of customer value is the adjective, superior. Customer value is defined relative to rival offerings ma i ng competitor nowledge an intrinsic component of corporate strategy. Profiling facilitates this strategic objective in three important ways. First, profiling c an reveal strategic wea nesses in rivals that the firm may exploit. Second, the proactive stance of competitor profiling will allow the firm to anticipate the s trategic response of their rivals to the firms planned strategies, the strategies of other competing firms, and changes in the environment. Third, this proactive nowledge will give the firms strategic agility. Offensive strategy can be impl emented more quic ly in order to exploit opportunities and capitalize on strengt hs. Similarly, defensive strategy can be employed more deftly in order to counte r the threat of rival firms from exploiting the firms own wea nesses. Clearly, those firms practicing systematic and advanced competitor profiling hav e a significant advantage. As such, a comprehensive profiling capability is rapi dly becoming a core competence required for successful competition. An appropria te analogy is to consider this advantage as a in to having a good idea of the ne xt move that your opponent in a chess match will ma e. By staying one move ahead , chec mate is one step closer. Indeed, as in chess, a good offense is the best defense in the game of business as well. A common technique is to create detailed profiles on each of your major competit ors. These profiles give an in-depth description of the competitor s bac ground,

finances, products, mar ets, facilities, personnel, and strategies. This involv es: Bac ground o location of offices, plants, and online presences o history - ey personalities, dates, events, and trends o ownership, corporate governance, and organizational structure Financials o P-E ratios, dividend policy, and profitability o various financial ratios, liquidity, and cash flow o Profit growth profile; method of growth (organic or acquisitive) Products o products offered, depth and breadth of product line, and product portfol io balance o new products developed, new product success rate, and R&D strengths o brands, strength of brand portfolio, brand loyalty and brand awareness o patents and licenses o quality control conformance o reverse engineering Mar eting o segments served, mar et shares, customer base, growth rate, and customer loyalty o promotional mix, promotional budgets, advertising themes, ad agency used , sales force success rate, online promotional strategy o distribution channels used (direct & indirect), exclusivity agreements, alliances, and geographical coverage o pricing, discounts, and allowances Facilities o plant capacity, capacity utilization rate, age of plant, plant efficienc y, capital investment o location, shipping logistics, and product mix by plant Personnel o number of employees, ey employees, and s ill sets o strength of management, and management style o compensation, benefits, and employee morale & retention rates Corporate and mar eting strategies o objectives, mission statement, growth plans, acquisitions, and divestitu res o mar eting strategies Information from an analysis of the competitor s objectives, assumptions, strate gy, and capabilities can be compiled into a response profile of possible moves t hat might be made by the competitor. This profile includes both potential offens ive and defensive moves. The specific moves and their expected strength can be e stimated using information gleaned from the analysis. The result of the competitor analysis should be an improved ability to predict t he competitor s behavior and even to influence that behavior to the firm s advan tage. 2.1 Media Scanning Scanning competitor s ads can reveal much about what that competitor believes ab out mar eting and their target mar et. Changes in a competitor s advertising mes sage can reveal new product offerings, new production processes, a new branding strategy, a new positioning strategy, a new segmentation strategy, line extensio ns and contractions, problems with previous positions, insights from recent mar eting or product research, a new strategic direction, a new source of sustainabl e competitive advantage, or value migrations within the industry. It might also indicate a new pricing strategy such as penetration, price discrimination, price s imming, product bundling, joint product pricing, discounts, or loss leaders. It may also indicate a new promotion strategy such as push, pull, balanced, shor t term sales generation, long term image creation, informational, comparative, a ffective, reminder, new creative objectives, new unique selling proposition, new creative concepts, appeals, tone, and themes, or a new advertising agency. It m

ight also indicate a new distribution strategy, new distribution partners, more extensive distribution, more intensive distribution, a change in geographical fo cus, or exclusive distribution. Little of this intelligence is definitive: addit ional information is needed before conclusions should be drawn. A competitor s media strategy reveals budget allocation, segmentation and target ing strategy, and selectivity and focus. From a tactical perspective, it can als o be used to help a manager implement his own media plan. By nowing the competi tor s media buy, media selection, frequency, reach, continuity, schedules, and f lights, the manager can arrange his own media plan so that they do not coincide. Other sources of corporate intelligence include trade shows, patent filings, mut ual customers, annual reports, and trade associations 3.0 Components of Competitor Analysis A central aspect of strategy formulation is perceptive competitor analysis. Ther e are four diagnostic components to a competitor analysis: future goals, current strategy, assumptions, and capabilities. Michael Porter presented a framewor f or analyzing competitors. This framewor is based on the following four ey aspe cts of a competitor: Competitor s future goals and objectives Competitor s assumptions Competitor s strategy Competitor s capabilities Objectives and assumptions are what drive the competitor, and strategy and capab ilities are what the competitor is doing or is capable of doing. These component s can be depicted as shown in the following diagram:Competitor Analysis Components What drives the competitor What the competitor is doing or is capable of doing Objectives

Strategy

Competitor Response Profile

Assumptions Resources & Capabilities

3.1 Future Goals As can be seen, two factors must be analyzed to determine what drivers the compe titor. First, its future goals must be identified. A nowledge of goals will all ow predictions about whether or not each competitor is satisfied with its positi on and financial results, and how li ely that competitor is to change strategy. Knowledge of a competitor s objectives facilitates a better prediction of the co mpetitor s reaction to different competitive moves. For example, a competitor th at is focused on reaching short-term financial goals might not be willing to spe nd much money responding to a competitive attac . Rather, such a competitor migh t favor focusing on the products that hold positions that better can be defended . On the other hand, a company that has no short term profitability objectives m ight be willing to participate in destructive price competition in which neither firm earns a profit. Competitor objectives may be financial or other types The following diagnostic questions help to determine a competitor s present and future goals: What have the competitors major goals been in the relatively recent past? Have these goals been achieved? What strategies has the competitor employed in the relatively recent past? Have these strategies been successful? The competitor s organizational structure provides clues as to which functions o f the company are deemed to be the more important. For example, those functions that report directly to the chief executive officer are li ely to be given prior ity over those that report to a senior vice president. Other aspects of the competitor that serve as indicators of its objectives inclu de ris tolerance, management incentives, bac grounds of the executives, composi tion of the board of directors, legal or contractual restrictions, and any addit ional corporate-level goals that may influence the competing business unit. Whether the competitor is meeting its objectives provides an indication of how l i ely it is to change its strategy

3.2

Assumptions

The second crucial component in competitors analysis is identifying each competi tors assumptions. These fall into two major categories: The competitor s assumptions about itself The competitors assumptions about the industry and the other companies in it. Answers to the following questions help identify a competitor s assumption: 1. What does the competitor appear to believe about its relative position in cost, product quality, technological sophistication, and other ey aspects o f its business - based on its public statements, claims of management and sales force, and other indications? What does it see as its strengths and wea nesses? Are these accurate? 2. Does the competitor have strong historical or emotional identification w ith particular products or with particular functional policies, such as an appro ach to product design, desire for product quality, manufacturing location, selli ng approach, distribution arrangements, and so on, which will be strongly held t o? 3. Are there cultural, regional, or national differences that will affect t he way in which competitors perceive and assign significance to events? 4. Are there organizational values or canons which have been strongly insti tutionalized and will affect the way events are viewed? Are there some policies

that the company s founder believed in strongly that may still linger? 5. What does the competitor appear to believe about future demand for the p roduct and about the significance of industry trends? Will it be hesitant to add capacity because of unfounded uncertainties about demand, or li ely overbuild f or the opposite reasons? Is it prone to misestimate the importance of particular trends? Does it believe the industry is concentrating, for example, when it may not be? 6. What does the competitor appear to believe about the goals and capabilit ies of its competitors? Will it over- or underestimate any of them? 7. Does the competitor seem to believe in industry?

Answers to the following questions provide a historical basis for loo ing at wha t are a competitor s goal and assumptions: 1. What is the competitor s current financial performance and mar et share, compared to that of the relatively recent past? 2. What has been the competitors history in the mar etplace over time? Where has it failed or been beaten, and thus perhaps not li ely to tread again? 3. In what areas has the competitor starred or succeeded as a company? In n ew product introductions? Innovative mar eting techniques? Others? 4. How has the competitor reacted to particular strategic moves or industry events in the past? Rationally? Emotionally? Slowly? Quic ly? What approaches h ave been employed? To what sorts of events has the competitor reacted poorly, an d why? The assumptions that a competitor s managers hold about their firm and their ind ustry help to define the moves that they will consider. For example, if in the p ast the industry introduced a new type of product that failed, the industry exec utives may assume that there is no mar et for the product. Such assumptions are not always accurate and if incorrect may present opportunities. For example, new entrants may have the opportunity to introduce a product similar to a previousl y unsuccessful one without retaliation because incumbent firms may not ta e thei r threat seriously. A competitor s assumptions may be based on a number of factors, including any of the following: beliefs about its competitive position past experience with a product regional factors industry trends rules of thumb A thorough competitor analysis also would include assumptions that a competitor ma es about its own competitors, and whether that assessment is accurate. 3.3 Current Strategy The third component of competitor analysis is developing statements of the curre nt strategy of each competitor. The two main sources of information about a comp etitor s strategy is what the competitor says and what it does. What a competito r is saying about its strategy is revealed in: annual shareholder reports 10K reports interviews with analysts statements by managers press releases However, this stated strategy often differs from what the competitor actually is doing. What the competitor is doing is evident in where its cash flow is direct ed, such as in the following tangible actions: hiring activity Research and Development projects capital investments promotional campaigns

4.0 Competitive Strategy When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage. A competitive advantage is an advantage over competitors gained by offering cons umers greater value, either by means of lower prices or by providing greater ben efits and service that justifies higher prices. Michael Porter suggested four "generic" business strategies that could be adopte d in order to gain competitive advantage. The four strategies relate to the exte nt to which the scope of a businesses activities are narrow versus broad and th e extent to which a business see s to differentiate its products. According to the Competitive Advantage model of Porter, a competitive strategy t a es offensive or defensive action to create a defendable position in an industr y, in order to cope successfully with competitive forces and generate a superior return on investment. According to Michael Porter, the basis of above-average p erformance within an industry is sustainable competitive advantage. The four strategies are summarized in the figure below:The generic competitive strategies form a business tool which helps strategists understand how the position of a company within its industry can be directly rel ated to the strategy it employs. The strategy employed can then be analysed to u nderstand where a company s competitive advantage lies, with a view to maintaini ng it. Porter identified the two main types of competitive advantage as cost adv

strategic partnerships mergers and acquisitions 3.4 Capabilities A realistic appraisal of each competitor s capabilities - its strengths and wea nesses- is the final diagnostic step in competitor analysis. Its strengths and w ea nesses will determine its ability to initiate or react to strategic moves and to deals with environmental or industry events that occur. Identifying strength s and wea nesses is described in more detail in next chapter. A realistic appraisal of each competitor s capabilities - its strengths and wea nesses- is the final diagnostic step in competitor analysis. Its strengths and w ea nesses will determine its ability to initiate or react to strategic moves and to deals with environmental or industry events that occur. After the competitor s future goals, assumptions, current strategies, and capabi lities are analyzed, a competitor response profile is developed. This profile, d esigned to indicate how a competitor is li ely to respond in its competitive env ironment, is based on the answers to four questions:1. Is the competitor satisfied with its current position? 2. What li ely moves or strategy shifts will the competitor ma e? 3. Where is the competitor vulnerable? 4. What will provo e the greatest and most effective retaliation by the com petitor? A competitor s capabilities can be analyzed according to its strengths and wea n esses in various functional areas, as is done in a SWOT analysis. The competitor s strengths define its capabilities. The analysis can be ta en further to evalu ate the competitor s ability to increase its capabilities in certain areas. A fi nancial analysis can be performed to reveal its sustainable growth rate. Finally, since the competitive environment is dynamic, the competitor s ability to react swiftly to change should be evaluated. Some firms have heavy momentum a nd may continue for many years in the same direction before adapting. Others are able to mobilize and adapt very quic ly. Factors that slow a company down inclu de low cash reserves, large investments in fixed assets, and an organizational s tructure that hinders quic action. A competitor analysis should include the more important existing competitors as well as potential competitors such as those firms that might enter the industry, for example, by extending their present strategy or by vertically integrating.

antage and differentiation. In developing and maintaining their competitive adva ntage, companies have the option to adopt one of the three generic strategies: c ost leadership, differentiation or focus. The horizontal axis across the top of the graph shows the type of competitive advantage the company has, whilst the ve rtical axis relates to the scope of the competition, either broad and company-wi de or narrow and limited to a mar et segment. The strategies are explained as follows:The differentiation and cost leadership strategies see competitive advantage in a broad range of mar et or industry segments. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow mar et or industry. Strategy - Differentiation This strategy involves selecting one or more criteria used by buyers in a mar et - and then positioning the business uniquely to meet those criteria. This strat egy is usually associated with charging a premium price for the product - often to reflect the higher production costs and extra value-added features provided f or the consumer. Differentiation is about charging a premium price that more tha n covers the additional production costs, and about giving customers clear reaso ns to prefer the product over other, less differentiated products. Examples include Coca-Cola, which differentiates by building a solid brand, or S ony, which differentiates on quality or reliability of products. Customers react to this strategy by paying more for a perceived greater reliability or quality or by returning to a trusted brand. It relies heavily on mar eting or advertisin g to maintain the brand identity and raises the barrier to competitors entering the mar et. Strategy - Cost Leadership With this strategy, the objective is to become the lowest-cost producer in the i ndustry. Many (perhaps all) mar et segments in the industry are supplied with th e emphasis placed minimizing costs. If the achieved selling price can at least e qual (or near)the average for the mar et, then the lowest-cost producer will (in theory) enjoy the best profits. This strategy is usually associated with largescale businesses offering "standard" products with relatively little differentia tion that are perfectly acceptable to the majority of customers. Occasionally, a low-cost leader will also discount its product to maximize sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its mar et share. A good example of cost leadership strategy is employed by supermar et chains on everyday necessity goods. By using this strategy, mar eting the product becomes less important. Benefits include raising barriers for competitors to enter the m ar et and easing the effect of fixed-cost rises across the industry. Strategy - Differentiation Focus In the differentiation focus strategy, a business aims to differentiate within j ust one or a small number of target mar et segments. The special customer needs of the segment mean that there are opportunities to provide products that are cl early different from competitors who may be targeting a broader group of custome rs. The important issue for any business adopting this strategy is to ensure tha t customers really do have different needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products ar e not meeting those needs and wants. This strategy is employed where a unique attribute of a product or service is hi ghlighted relative to similar alternatives presented by the competition. It allo ws a higher price to be charged or a greater ability to command customer loyalty . Differentiation strategy is used where the company sees its ey product compet encies as a more profitable advantage than simple cost leadership.. Examples of Differentiation Focus: any successful niche retailers; (e.g. The Per fume Shop); or specialist holiday operator (e.g. Carrier).

Strategy - Cost Focus Here a business see s a lower-cost advantage in just on or a small number of mar et segments. The product will be basic - perhaps a similar product to the highe r-priced and featured mar et leader, but acceptable to sufficient consumers. This strategy is aimed at a specific target consumer group, for example cultural , economic, political, geographical or age-related groups. The strategy employs either cost focus (3A) or differentiation focus (3B) within its target audience, and in this sense it is a narrower application of one of the aforementioned str ategies. Benefits include the increase in brand loyalty developed as customers p erceive the company to be a specialist. Examples of Cost Focus: Many smaller retailers featuring own-label or discounted label products. Porter identified that one combination of the strategies is possible: combining mar et segmentation with differentiation. However, in general, other combination s are not possible due to a conflict between cost reduction and value-added diff erentiation. Therefore, a company should retain one overall main strategy to mai ntain its long term competitive advantage.

5.0 Competitor Position Analysis This involves analyzing the competitors position and determines whether they are satisfied with their competitive position. Understanding the competitive position of your products and services is vital to increasing and maintaining mar et share. Researching the mar et to understand y our current position and to support planned strategies together with feedbac of the impact on existing and new distribution channels and sales volumes will put you in a stronger position to ensure delivery of your overall business strategy . When determining your companys product positioning one should consider the follow ing: Does your companys product offering address the high end of the mar et according t these two ey attributes? Does your companys product offering address the low end of the mar et according to these two ey attributes? Does your companys product offering address the whole mar et? Does your companys product offering only address a clearly identified sub-segment of the mar et? Competitor position analysis documents the organizations competitive advantages and disadvantages and includes:a summarization of the strengths and wea nesses of the organization s products a nd services, a comparison of the organization s performance with that of its competitors, a list of the major drivers in the mar et place, an analysis of the future direction of the organization s industry These ey factors are given weights with most dominant getting highest weight, r ated and then multiplied to get weighted rating which gives the most competitive . A comparison is made with own organization to find the position and then stra tegies are created to improve the organizations position. Benchmar ing is used to ascertain how well you are doing against the competition . Are there areas that you can learn from the competition? Are there ideas in ma r ets outside your own that would be worth bringing into your mar et to give you a competitive advantage? Your competitors can be a source for information about the general mar et. Their advertising and mar eting is telling you something about the messages and appro aches that they thin are applicable to your mar et. If they have done their res earch, you can learn from their approaches and help implementing your strategy. 6.0 Customer Analysis Over the years, the entity to slowly move on top of the business chains have bee n the customers. It is first the customer, the profits and then the individual f unctions and departments of the organization. We cannot under estimate the impor

tance of customer analysis. Yet several organizations miss this important point. The easiest way to increase profits and do better business is to do customer ana lysis. If you ta e any strategy plan, mar eting plan, or mar et research, you will find that the first question as ed is Who is your target customer. Thus to determine y our target, you need to now your customers. There are several basic questions to be as ed of demography to analyze a custome r. Some of these questions are:Customer demographic profile: One of the reasons customer relationship managemen t systems which is database of customers that helps organizations manage custome r relationships in an organized and efficient manner, have become advanced over time is by performing customer analysis. At the clic of a button you can now what is the age of the customers, what is their location and what their gender i s. Thus if you want to promote itchen equipments, you will do a banner advertisi ng or paper insert in the location which has the best buying record in your store. Thus analyzing customer demography is a priority of customer relationship manag ement programs. Customer buying behavior: What do the customers buy from us? What factors are ma ing them buy our products? What products do they buy from competition? Which co mpetitor is on the top of their minds? How did that competitor bring about such a good brand recall? Which is the feature demanded most by your customers? What are the needs wants and demands of the customer? Lots of questions which in the end explain to you how you should organize your business. Forecasting buying habits and lifestyle preferences is a process of data mining and analysis. This information consists of many aspects li e credit card purchas es, magazine subscriptions, loyalty card membership, surveys, and voter registra tion. Using these categories, profiles can be created for any organizations most profitable customers. When many of these potential customers are aggregated in a single area it indicates a fertile location for the business to situate. Using a drive time analysis, it is also possible to predict how far a given customer w ill drive to a particular location. Combining these sources of information, a do llar value can be placed on each household within a trade area detailing the li elihood that household will be worth to a company. Through customer analytics, c ompanies can ma e decisions with confidence because every decision is based on f acts and objective data. New vs returning customers : One of the most important analysis for your organi zation which depicts your quantitative success is the new vs returning customers matrix. If your customers dont return to your business, you have got a problem i n your hand my friend. Thus over here the above two points will be on to help yo u the most. This is the final straw in the customer analysis profile as it helps you decide what is the affect of the above two points on your customer and whet her or not they are inducing action. If they are, then which programs are to be followed and which are to be discarded. By continuing to improve customer prediction techniques it will become a necessi ty rather than a convenient commodity for businesses to use customer analytics. With this valuable information there is an opportunity to fine-tune retail opera tions and store manager decisions. Rapid decision ma ing will increase in speed and effectiveness in the future as tools and information become more easily acce ssible. The possibilities are still emerging, but applications in political race s, jury selection, and developing clinical trial communities are areas that cust omer analytics could be used in the future. 6.1 Uses of customer analysis 1. Identifying WHO your best customer is Customer analysis can help you id entify who your customer is and thereby improve the segmentation targeting and p ositioning process. Remember 80% of your business will come from 20% of your cu stomers. It is important you now who those customers can be. 2. Planning out retention plans for your new customers New customers are i mportant but so are returning customers. Thus customer analysis can help convert your first time customers to returning customers

3. Inducing further buying from your existing customers Cross selling, imp ulse purchases are some of the methods which increase purchasing by your existin g customers. Example if you now customers who have bought jogging equipment, y ou can cross promote other jogging related fashion to them. 4. Improving customer service Once you now who your customer is, you can now what ind of services they will demand. Thus customer analysis will also hel p in service deliverability. 5. Effective campaign planning The demography and purchasing habits of your customers will help you with planning a highly effective campaign thereby impro ving your target. 6. Increasing mar et share What if while doing customer analysis you recogn ize a set of customers that havent been targeted by you? At the same time, you al so establish procedures better then the competitors. The effect Increase in mar et share. 7. Increasing overall profitability Businesses are established for profits. And overall profitability as well as well being of the organization increases o nce its customers are satisfied. And customer satisfaction will happen only thro ugh customer analysis. Thus customer analysis is a process to be carried out by small, medium as well a s large businesses from time to time. The better customer analysis you do, the m ore you are in touch with your customers and hence achieving your strategy plans . 7.0 Criticisms of Competitor Analysis While the practice of competitive analysis is generally recognized as an importa nt component of long-term business success, some voices do offer cautions about flawed competitive analysis practices. They note that competitive analyses that are incomplete or based on incorrect data can lead businesses to construct fault y business strategies. Analysts have also pointed out that traditional competiti ve analysis has become more complex and potentially time-consuming, since so man y businesses offer diversified products and services. Still others contend that excessive preoccupation with eeping pace with the strategies, products, and ser vices of other competitors can result in atrophy in internal originality of prod uction and design. Other observers, meanwhile, argue that judging your company s performance strict ly on the basis of how the company is performing against chief competitors can r etard a business s profitability and lead to a false sense of security. Finally, some experts contend that preoccupation with competitive analysis too o ften leads companies to spend too little time loo ing ahead. "Effective strategy formulation and implementation relies on concepts li e uniqueness, differentiat ion and standing out in a very, very crowded mar etplace. Ineffective strategy f ormulation and implementation relies on concepts li e imitation, caution and ble nding in with the rest of the pac . 8.0 Conclusion Competitor analysis begins with identifying present as well as potential competi tors. It portrays an essential appendage to conduct an industry analysis. An ind ustry analysis gives information regarding probable sources of competition (incl uding all the possible strategic actions and reactions and effects on profitabil ity for all the organizations competing in the industry). However, a well-though t competitor analysis permits an organization to concentrate on those organizati ons with which it will be in direct competition, and it is especially important when an organization faces a few potential competitors. Before managers can begin to formulate an effective strategy, they must ma e a c ritical examination of the firms environment. Analyzing the organization s industry is the second major aspect of assessing th e firm s strategic situation. An industry structure analysis identifies the majo r forces affecting competition in an industry and determines the strengths and w ea nesses of the business relative to the industry. The purpose of the customer analysis is to improve the allocation of scarce mar

eting and technical resources, to reappraise the company s competitive position with different customer groups and to ensure that ey relationships are managed effectively. References Barney, J. (1996). Gaining and Sustaining Competitive Advantage. Addison-Wesley, Reading MA Craig, F., & Babette, B. (2007). Business and Competitive Analysis: Effective Ap plication of New and Classic Methods: FT Press. Craig, F., & Babette, B.(2003). Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition: Prentice Hall. Estelle, M. (1999). Demystifying Competitive Intelligence Ivey Business Journal Gordon, I. (1989). Beat the Competition: How to Use Competitive Intelligence to Develop Winning Business Strategies. Oxford, UK: Basil Blac well Publishers. Porter, M. (2008). The Competitive Forces that shape Strategy. USA: Harvard Busi ness Review. Porter, M. (1981). The Contribution of Industrial Organization to Strategic Mana gement, Academy of Management Review, USA: Harvard Business Review. t