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Competitor analysis
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Competitor analysis in marketing and strategic management is an assessment of the

strengths and weaknesses of current and potential competitors. This analysis 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.[1]

Given that competitor analysis is an essential component of corporate strategy, it is argued

that most firms do not conduct this type of analysis systematically enough. Instead, many
enterprises operate on what is called “informal impressions, conjectures, and intuition gained
through the tidbits of information about competitors every manager continually receives.” As
a result, traditional environmental scanning places many firms at risk of dangerous
competitive blindspots due to a lack of robust competitor analysis.[2]

Contents
[hide]

 1 Competitor array
 2 Competitor profiling
 3 Media scanning
 4 New competitors
 5 See also
 6 References

[edit] Competitor array

One common and useful technique is constructing a competitor array. The steps include:

 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.

This can best be displayed on a two dimensional matrix - competitors along the top and key
success factors down the side. An example of a competitor array follows:[3]

Key Industry Competitor Competitor Competitor Competitor

Weighting
Success Factors #1 rating #1 weighted #2 rating #2 weighted
1 - Extensive distribution .4 6 2.4 3 1.2
2 - Customer focus .3 4 1.2 5 1.5
3 - Economies of scale .2 3 .6 3 .6
4 - Product innovation .1 7 .7 4 .4
Totals 1.0 20 4.9 15 3.7

In this example competitor #1 is rated higher than competitor #2 on product innovation

ability (7 out of 10, compared to 4 out of 10) and distribution networks (6 out of 10), but
competitor #2 is rated higher on customer focus (5 out of 10). Overall, competitor #1 is rated
slightly higher than competitor #2 (20 out of 40 compared to 15 out of 40). When the success
factors are weighted according to their importance, competitor #1 gets a far better rating (4.9
compared to 3.7).

Two additional columns can be added. In one column you can rate your own company on
each of the key success factors (try to be objective and honest). In another column you can
list benchmarks. They are the ideal standards of comparisons on each of the factors. They
reflect the workings of a company using all the industry's best practices.

[edit] Competitor profiling

The strategic rationale of competitor profiling is powerfully simple. Superior knowledge of
rivals offers a legitimate source of competitive advantage. The raw material of competitive
advantage consists of offering superior customer value in the firm’s chosen market. The
definitive characteristic of customer value is the adjective, superior. Customer value is
defined relative to rival offerings making competitor knowledge an intrinsic component of
corporate strategy. Profiling facilitates this strategic objective in three important ways. First,
profiling can reveal strategic weaknesses in rivals that the firm may exploit. Second, the
proactive stance of competitor profiling will allow the firm to anticipate the strategic
response of their rivals to the firm’s planned strategies, the strategies of other competing
firms, and changes in the environment. Third, this 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.
[2]

Clearly, those firms practicing systematic and advanced competitor profiling have a
significant advantage. As such, a comprehensive profiling capability is rapidly becoming a
core competence required for successful competition. An appropriate analogy is to consider
this advantage as akin to having a good idea of the next move that your opponent in a chess
match will make. By staying one move ahead, checkmate is one step closer. Indeed, as in
chess, a good offense is the best defense in the game of business as well.[2]

A common technique is to create detailed profiles on each of your major competitors. These
profiles give an in-depth description of the competitor's background, finances, products,
markets, facilities, personnel, and strategies. This involves:

 Background
o location of offices, plants, and online presences
o history - key 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 portfolio
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
 Marketing
o segments served, market 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 efficiency, capital
investment
o location, shipping logistics, and product mix by plant
 Personnel
o number of employees, key employees, and skill sets
o strength of management, and management style
o compensation, benefits, and employee morale & retention rates
 Corporate and marketing strategies
 o objectives, mission statement, growth plans, acquisitions, and divestitures
o marketing strategies

[edit] Media scanning

Scanning competitor's ads can reveal much about what that competitor believes about
marketing and their target market. Changes in a competitor's advertising message can reveal
new product offerings, new production processes, a new branding strategy, a new positioning
strategy, a new segmentation strategy, line extensions and contractions, problems with
previous positions, insights from recent marketing or product research, a new strategic
direction, a new source of sustainable competitive advantage, or value migrations within the
industry. It might also indicate a new pricing strategy such as penetration, price
discrimination, price skimming, product bundling, joint product pricing, discounts, or loss
leaders. It may also indicate a new promotion strategy such as push, pull, balanced, short
term sales generation, long term image creation, informational, comparative, affective,
reminder, new creative objectives, new unique selling proposition, new creative concepts,
appeals, tone, and themes, or a new advertising agency. It might also indicate a new
distribution strategy, new distribution partners, more extensive distribution, more intensive
distribution, a change in geographical focus, or exclusive distribution. Little of this
intelligence is definitive: additional information is needed before conclusions should be
drawn.

A competitor's media strategy reveals budget allocation, segmentation and targeting strategy,
and selectivity and focus. From a tactical perspective, it can also be used to help a manager
implement his own media plan. By knowing the competitor's media buy, media selection,
frequency, reach, continuity, schedules, and flights, the manager can arrange his own media
plan so that they do not coincide.

Other sources of corporate intelligence include trade shows, patent filings, mutual customers,
annual reports, and trade associations.

Some firms hire competitor intelligence professionals to obtain this information. The Society
of Competitive Intelligence Professionals [1] maintains a listing of individuals who provide
these services.

[edit] New competitors

In addition to analyzing current competitors, it is necessary to estimate future competitive
threats. The 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

The entrance of new competitors is likely when:

 There are high profit margins in the industry
 There is unmet demand (insufficient supply) in the industry
 There are no major barriers to entry
 There is future growth potential
 Competitive rivalry is not intense
 Gaining a competitive advantage over existing firms is feasible