Steps in Analyzing Competitors

There are six major steps in analyzing the firm’s competitors. The steps are shown in the figure 1

Figure 1 : Major Steps in Analyzing Competitors

1 step - Identifying the company’s competitors

The first answer the marketer seeks in analysis of competitors is

Who are our competitors?

This involves using of both an industry and market-based analysis. From the industry point of view the companies might see themselves as being in the oil industry, the pharmaceutical industry or the beverage industry. A company must understand the competitive patterns in its industry if it hopes to be an effective “player” in that industry. For example Coca-Cola might see its competition as Pepsi, Dr Pepper, 7-Up and other soft-drink manufacturers. From market point of view they define competitors as companies that are trying to satisfy the same customer need or serve the same customer group. The customer will choose weather to buy ice tea, fruit juice, bottles water, or many other fluids.

2 step - Determining the competitors’ objectives

Having identified the main competitors, marketing management now asks:

What does each competitor seek in the market place?

What drives each competitor’s behavior?

The marketer might at first assume that all competitors will want to maximize their profits, but companies differ in their emphasis they put on short-term versus long-term profit. And some competitors might be oriented toward “satisfying” rather than “maximizing” profits. Each competitor has a mix of objectives, each with differing importance. The company wants to know the relative importance that a competitor places on current profitability, market share growth, cash flow, technological leadership, and other goals. A company also must monitor its competitor’s objectives for various product\market segments.

3 step - Identifying the competitors’ strategies

In most industries the competitors can be sorted into groups that pursue different strategies.

Strategic group - is a group of firms in an industry following the same or a similar strategy in a given target market.

For example, in the major appliance industry, General Electrics, Whirlpool, and Maytag all belong to the same strategic group. If a company enters this group, the members of that group become its key competitors, and the company can succeed only if it develops some strategic advantages over these competitors.

The company needs to look at all of the dimensions that identify strategic groups within the industry. It needs to know each competitor’s product quality, features, and mix; customer services; pricing policy; distribution coverage; sales force strategy; and advertising and sales promotion programs. And it must study the details of each competitor’s R&D, manufacturing, purchasing, financial, and other strategies.

4 step - Assessing competitors’ strengths and weakness

Marketers should answer the critical question:

What can our competitors do?

Firstly, companies can gather data on each competitor’s goal, strategies, and performance over the last few years. Companies normally learn about their competitor’s strengths and weaknesses through secondary data, personal experience, and hearsay. They also can conduct primary marketing research with customers, suppliers, and dealers. Recently, a growing number of companies have turned to benchmarking.

Benchmarking - is the process of comparing the company’s products and processes to those of competitors or leading firms in other industries to find ways to improve quality and performance.

5 step - Estimating the competitors’ reactions

Next, the company wants to know:

What will our competitors do?

A competitor’s objectives, strategies, and strengths and weaknesses go along way toward explaining its likely action, as well as its likely reactions to company moves such as price cuts, promotion increases, or new-product introduction. Each competitor reacts differently. Some do not react quickly or strongly to a competitor’s move. They may feel their customers are loyal; they may be slow in noticing the move; they may lack of funds to react. Some competitors react only to certain types of moves and not to others. Other competitors react swiftly and strongly to any action.

Date: 2015-01-12; view: 883