Competitor Analysis

It

can be defined as a set of activities which examines the comparative position of competing enterprises within a given strategic sector.

Competitor analysis seeks to:

Provide

an understanding of your competitive advantage/disadvantage relative to your competitor's positions: Help in generating insights into competitors strategies-past, present and potential; Give an informed basis for developing future strategies to sustain/establish advantages over your competitors.

Attitudinal Barriers to undertaking competitor analysis

Complacency It cant happen here. I dont want to hear it. We have the information already. Preconceived assumption.

Necessity of competitors analysis

To survive To handle slow growth To cope with change. To exploit opportunities. To uncover key factors. To reinforce intuition. To improve the quality of decision. To stay competitive. To avoid surprises.

PORTERS APPROACH
The

first determinant of a firms profitability is the attractiveness of the industry in which it operates. The second determinant is competition.

Porter suggested five key forces

Nature

and intensity of competition within any industry is determined by the interaction of five key forces.

Five key forces

The

threat of new entrants. The power of buyers. The threat of substitutes. The extent of competitive rivalry. The power of suppliers.

Potential entrants

Threat of entry depends on the extent of barriers to entry. Is the potential customer base sufficient to support new operations? How heavy is the capital investment requirement in the industry? Is the finance available? Is there a strong image to overcome? How costly will be access to distribution channels? What operating cost advantage might existing competitors hold? Is there a governmental/legislative protection afforded to existing organization? How vigorously existing operators will react against new entry attempts?

Buyer power is likely to be high if

There

is concentration of buyers. There are alternative sources of supply. Buyers have access to useful information and tend to shop around. There is threat of backward integration if the buyer does not obtain satisfactory supplies and prices.

Supplier power is likely to be high

There

is concentration of suppliers. The cost of switching from one supplier are high. The suppliers are likely to integrate forward if they do not obtain the price/profits they seek. The organization has little countervailing power.

substitutes products/services will be more prevalent if

Customers

perceive other offers to perform the same function as ours. Substitute products offer higher value for money. Substitutes products earn higher profits.

Intensity of rivalry will be greater if:

Competitors are of equal size and are seeking dominance. High fixed costs provoke price wars to maintain capacity. Product homogeneity necessitates activity to maintain share. New influxes of capacity have created excess capacity.

High exit barriers like legal constraint; high costs; on transferable plant exists.

Strategic group
Porter

suggests that the firms that pursue a particular strategy aimed at the same market or market segment make up a strategic group

Porters three generic competitive strategies

Overall

cost leadership. Differentiation Focus