CHAPTER THREE

STRATEGIC COMPETITIVE
ANALYSIS

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 3.0 Brief Introduction:

Todays companies face their toughest competition ever.

Companies must move from a product-and-selling

philosophy to a customer-and-marketing philosophy

Companies must become adept not only in managing

products but also in managing customer relationships in
the face of determined competition 2
 3.1 Pedagogic Objective:

By the end of this chapter, students should be

able examine how
companies analyze their competitors and
develop successful customer value-based strategies
for
building and maintaining profitable customer
relationships.
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 3.2 Learning Objective:

By the end of this chapter students should be able to

Understand the competitor analysis- the process of

identifying, assessing, and selecting key competitors as
well as

Developing competitive marketing strategies that strongly

position the company against competitors and give it the
greatest possible competitive advantage. 4
 3.3 Definition of Terms

Competitor analysis: The process of identifying key

competitors; assessing their objectives, strategies,
strengths and weaknesses, and reaction patterns; and
selecting which competitors to attack or avoid.

Competitive marketing strategies: Strategies that

strongly position the company against competitors and
give the company the strongest possible strategic
advantage. 5
 3.3 Definition of Terms

Customer value analysis: An analysis conducted to

determine what benefits target customers value and how they
rate the relative value of various competitors offers.

Benchmarking: The process of comparing the companys

products and processes to those of competitors or leading firms
in other industries to identify best practices and find ways to
improve quality and performance.
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3.4 STRATEGIC COMPETITIVE ANALYSIS
Creating competitive advantage begins with a thorough
understanding of competitors strategies.
There are 3 steps in analyzing competitors

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3.4.1 Identifying Competitors

To plan effective marketing strategies, the company needs to

find out all about its competitors.

It must constantly compare its marketing strategies, products,

prices, channels, and promotions with those of close
competitors.

In this way, the company can find areas of potential

competitive advantage and disadvantage. 8
 Normally, identifying competitors would seem to be a simple task.

A company can define its competitors as other companies offering

similar products and services to the same customers at similar prices.

Chariot Hotel might see Hotel Sinclaire as a major competitor.

The Catholic University might see PAID-WA as a major

competitor, but not OIC Buea.

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 Companies actually face a much wider range of
competitors

In this regard, the company might define its competitors

as all firms with the same product or class of products.

Thus, the PAID-WA should see itself in competition

with all other institutes of higher learning.
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 More broadly, competitors might include all companies
making products that supply the same service or could act
as substitutes.

In this regard, Chariot Hotel would see itself competing

not only against other hotels but also against anyone who
supplies rooms for weary travelers, guest houses and
summer homes
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 To be successful, Companies must avoid the competitor
myopia.

A company is more likely to be buried by its latent

competitors than its current ones.

For example, it wasnt direct competitors that put an end

to Western Unions telegram business after 161 years; it
was cell phones and the Internet. 12
 Express Union is facing it pretty challenging doing business
in Cameroon now not due to stiff competition from express
exchange and other money transfer agencies

Hidden competitors like MTN and Orange mobile money are

electronic diversion.

killing EU

CAMPOST was and is still losing money not from direct

competitors such as DHL or esico but from electronic
diversion. 13
 Companies can identify their competitors from an
industry point of view.

They 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. 14
 Companies can also identify competitors from a market
point of view.

Here they define competitors as companies that are

trying to satisfy the same customer need or build
relationships with the same customer group.

From this perspective, a competitor must not only come

from the same industry or market. 15
 If a travel agency can succeed to divert advanced level
students from going to University to travel abroad, then
that agency is a competitor to the University.

Thus in general, the market concept of competition

opens the companys eyes to a broader set of actual and
potential competitors.

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3.4.2 Competitors Assessment
Having identified the main competitors, it is important
now to ask:
What are the competitors objectives?
What does each seek in the market place?
What is each competitors strategy?
What are the various competitors strengths and
weaknesses, and how will each react to actions the
company might take?
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3.4.2 Competitors Assessment
Having identified the main competitors, it is important
now to ask:
What are the competitors objectives?
What does each seek in the market place?
What is each competitors strategy?
What are the various competitors strengths and
weaknesses, and how will each react to actions the
company might take?
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3.4.2.1 Determining Competitors Objectives
Each competitor has a mix of objectives, but the interest
of a company is to know the relative importance that a
competitor places on current Objective
profitability,
market share growth,
cash flow,
technological leadership,
service leadership,
and other goals.
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 For example, a company that pursues low-cost leadership will react
much more strongly to a competitors cost-reducing manufacturing
breakthrough than to the same competitors advertising increase.

If it pursues a market expansion objective and finds that competitors

plan new moves into segments now served by the company, it will be a
forewarned and, hopefully, a forearmed strategy will be necessary.

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3.4.2.2 Identifying Competitors Strategies

The more that one firms strategy resembles another firms

strategy, the more the two firms compete.

In most industries, the competitors can be sorted into groups

that pursue different strategies.

For example, in the construction retail industry,

QUIFFEROU and FOKOU belong to the same strategic group. 21
3.4.2.2 Identifying Competitors Strategies

QUIFFEROU and FOKOU;

Each produces a full line of similar products.

They retail a broad line of higher-quality products,

offer a higher level of service,

and charge a moderate price.

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 In contrast, other small retailing construction enterprises
belong to a different strategic group.

They retail a narrower line of medium/low-quality products,

And charge a premium price.

If a company enters a strategic group, the members of

that group become its key competitors.
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 Although competition is most intense within a strategic group, there is
also rivalry among groups.

First, some strategic groups may appeal to overlapping customer

segments.

Second, customers may not see much difference in the offers of different
groups;

Finally, members of one strategic group might expand into new segments.

Thus, TOURISTIC line of classic buses may compete in the premium-quality, with
FINEX VIP line. 24
 3.4.2.3 Assessing Competitors Strengths and Weaknesses

Companies need to carefully assess each competitors strengths and

weaknesses to answer a critical question:
What can our competitors do?

Companies normally learn about their competitors strengths

and weaknesses through secondary data, personal experience,
and word of mouth.

They can also conduct primary marketing research with

customers, suppliers, and dealers. 25
 3.4.2.4 Estimating Competitors Reactions

The next thing the company will have to know will be: What
will our competitors do?

A competitors objectives, strategies, and strengths and

weaknesses go a long way toward explaining its likely actions.

Each competitor has a certain philosophy of doing business, a

certain internal culture and guiding beliefs. 26
 Each competitor reacts differently.

Some do not react quickly or strongly to a competitors move.

Some competitors react only to certain types of moves and

not to others.

Other competitors react swiftly and strongly to any action.

In some industries, competitors live in relative harmony

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 3.4.3 Selecting Competitors to Attack and Avoid
The company can focus on one of several classes of
competitors.

3.4.3.1 Strong or Weak Competitors

Most companies prefer to compete against weak competitors.

This requires fewer resources and less time. But in the

process, the firm may gain little. 28
 3.4.3 Selecting Competitors to Attack and Avoid

3.4.3.2 Close or Distant Competitors

Most companies will compete with close competitors

those that resemble them mostrather than distant
competitors.

Thus, Nike competes more against Adidas than against

Timberland.
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 3.4.3.3 Good or Bad Competitors
The existence of competitors results in several strategic
benefits.
Competitors may share the costs of market and product
development and
help legitimize new technologies.
They may serve less-attractive segments or
lead to more product differentiation.
Finally, competitors may help increase total demand.
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