UNDERSTANDING MARKET

Competitor Analysis

Session 4
Components of Market Framework
Market Definition & Dynamics
The Customers & Their buying
Behavior
The Competitors & Their activities in
the Market
Companys Position in the Matrix
 Hypercompetitive Market
Rising Customer Expectations
Rapid Technological Changes
Falling Entry Barriers in Industries
Large Corporations in addition to
Smalls are driving Change
through Innovative Offerings
 Who are your Competitors?
Firms face a wide range of
competition
Be careful to avoid competitor
myopia
Methods of identifying competitors:
Industry point-of-view
Market point-of-view
Competitor maps can help
 Why Competitive Analysis?
Neutralize competitors strength
Help potential customers to
realistically evaluate your services
against your competitors
Take opportunities where competitors
are weak
Be confident to yourself
Think!

Why are some industries more

profitable than others?

Why are some companies within

same industry more profitable
than others?
 How Can We Be Different?
1. Innovation
2. Branding
3. Strategic Assets (Example: Govt. Monopoly)
4. Effective & Efficient People
Employees,

Customers,

Suppliers
 Competitive Advantage
When a company sustains profits that exceed
the average profit of the Industry, the company
is said to possess Competitive Advantage.

Two basic types of Competitive Advantage

Cost Advantage
Differentiation Advantage
Resources: Specific assets (Patent, Proprietary know-how, Brand equity)
Capabilities: Abilities of the company to use these Resources effectively,
Together forms the Distinctive Competencies that enables
innovation, efficiency, quality and customer responsiveness;

all of which can be leveraged to create

Cost Advantage (lower cost structure) or
Resources
Differentiation Advantage (differentiated product)
to create value for organization.
Cost Advantage
Distinctive
OR Value Chain
Competencies
Differentiation Advantage

Capabilities
Figure: A Model of Competitive Advantage
Sustainable Competitive Advantage!
Sustainable Competitive Advantage is almost non-existent in the
field of Financial Services:
Product Innovation
Imitation costs a third less than innovation
Imitation is a third quicker than innovation
Services can not be patented

Production
New processes are even harder to protect than new products
Prospectus
Defected Employees
Marketing
Rival
reaction by adjusting marketing mix
Moves & countermoves frequently cancel out
Sustainable Competitive Advantage
Benefits of Size
Scale Economics
Experience Effects
Scope Economics (Inter-related market)

Access Advantage (Resources or Customers)

Know-how
Inputs
Markets (Reputations, Relationship)

Competitive Options (Rivals may locked in current position)

PublicPolicy
Defense (Example: High Past Investment)
Response Lags (May not prepared to make specific move)
 Speed as Strategy
The way firms takes advantage of transitory
opportunities makes a real difference in how
consistently it wins
Financial institutions do not worry much about
what the rivals do.
But the Execution Style matters:
Just Get it Right!
They:
Empower their employees
Manage & ensure the best use of their resources
Ensures customer satisfaction
Porters 5-Forces Model

Supplier Power

Barriers to Entry Rivalry Threat of Substitutes

Degree of Rivalry
Buyer Power

Figure: Element of Industry Structure

(Porters 5 Forces, by Michael Porter)
 Degree of Rivalry
Measured by Industry Concentration (CR: % of market
share held by 4 largest firms, as an example)
Low CR refers Fragmented Market (more competitive market)
High CR refers Monopolistic Market (less competitive
market)
The possible competitive moves a firm may take in
pursuing advantage over the rivals might be:
Changing Prices
Improving Product Differentiation
Creatively using Channels of Distributions
 Threat of Substitutes
Substitute Products are products in other
industries.
Increased substitutes makes Demand more
elastic as customers have more alternatives
available now.
Some major determinants of Substitution Threat:
Relative Price Performance of Substitutes
Switching Costs
Buyers Inclination to Substitute
Buyer Power

Buyers are powerful if:

They are concentrated,

They buy a significant part of output
 Supplier Power

Suppliers are powerful if:

They are concentrated,

They supply a significant part of input,
Many substitutes are available
 Barriers to Entry
Entry of new firms in the industry.
Barriers can be created to enhance firms
competitive advantage, by either:
Government
Patent or Proprietary Knowledge
Asset specificity (large & industry-specific)

And Easy to Exit

An industry is Easy to Enter Low Exit Costs
Common Technology Salable Assets
Little Brand Franchise Independent business
Access to Distribution Channel
 Competitive Strategy
Assess Your Current Position (SWOT)
Identify Key Success Factors (KSF)-where to be
good at
Know your Competitive Position (relative to
your competitors)
Check Market Attractiveness (is it growing or not)
Consider and Adjust the Environment (Economic,
Social, Political, Technological)
Develop Strategic Market Portfolio for you.
 A. Current Position Assessment
Key Strategic Issues:
Key Strengths
Key Weaknesses
Key Market Opportunities Cross-impact Matrix
Key Market Threats
External
Internal Communication Factors Opportunities Threats
Management Cohesion Internal
(O) (T)
Factors
Strengths SO Strategies* ST Strategies
(S) ------------------------- ------------------------
Big Growing Fast
Market Demand Many Competitors

OW Strategies WT Strategies *
Weaknesses -------------------------- -------------------------
(W) Blockbusters Simple Technology
Less-skilled People High-tech Need
 And Check, if:
Existing Plan deal adequately with all issues
Changes in Short-term Strategy
Changes in Long-term Strategy
Necessary Communication Program
Improve Cohesion in top-management
Any Unit needs priority based reinforcement
B. Relative Competitive Position

C2
Relative to your 3 Largest Competitors C1
YOU
C3

Strength or weakness
Indicators Low High Total
1 5
Relative Market Share
Relative Profitability
Relative Product/Service Quality
Relative Price
Relative Capital Intensity
 Market Attractiveness
Market
size,
growth, delivery process, customers, buying
decision process
Product/Service
degree of differentiation, capital intensity, value added
Competitive Condition
relativemarket share, changes in # of competitors,
price, cost
Political & legal Factors
Environment
Economic Factors
PEST Analysis Social Factors
Technological Factors
 Environmental Scan

Internal Analysis External Analysis

Strengths Weaknesses

Microenvironment Macroenvironment

PEST Analysis
Opportunities Threats

SWOT
Relative Attractiveness in Served Market

Strength or weakness
Indicators Low High Total
1 5
Size
Growth Rate (past & present)
Capital Intensity
Customer Concentration
Market Fit
C. Strategic Market Portfolio Development
Relative Competitive Position
Strong (Mkt Share) Weak
High
Stars Question Marks
Market Attractiveness

A Selected Few Rest Divest

(Growth Rate)

Cash Cows Dogs Liquidate

Low
BCG Growth-Share Matrix, 1970
Strategic Market Portfolio Development
Competitive Position
Strong Weak
High
Grow/ Grow/ Harvest/
Balanced Penetrate Restructure/
Rebuild

Defend/ Selectively Withdraw

Invest Invest/ Gracefully/
Segment Seek Niches

Withdraw Exit Fast/

Harvest Use as attack
Gracefully
Low Business

GE -McKinsey Matrix
Typical Portfolio
Competitive Position
Strong Weak
High

Low
 Marketing Research
Marketing research is the process of planning,
collecting and analyzing data relevant to a
marketing decision.
Much can be learned about consumers through
marketing research by
Collecting, recording, and analyzing data important in
marketing goods and services
Communicating results to management

Must be done prior and after the sale

 Marketing Research Process

1. Define the Marketing Problem

2. Choose a Method of Research
(survey, observation, experiment)
3. Collect the Data
(primary data, secondary data)
4. Analyze the Data
5. Make Recommendations to Management