Competitor Analysis

Competitor analysis represents a necessary adjunct to performing an industry analysis. An industry analysis provides information regarding potential sources of competition (including the possible strategic actions and reactions and effects on profitability for all companies competing in an industry). However, a structured competitor analysis enables a company to focus its attention on those companies with which it will directly compete, and is especially important when a company faces a few powerful competitors.

Competitor analysis is interested ultimately in developing a profile on how competitors might be expected to react in response to a company’s strategic moves.

A major concern too many managers are the methods that are used to gather data on competitors; a process generally referred to as competitor intelligence. The managerial challenge is to ensure that all data and information related to competitors is gathered both legally and ethically This is important because many employees may feel pressure to rely on techniques that are questionable from an ethical perspective to gather information that may be valuable to their company, especially if they perceive value to their own careers from successfully obtaining such information.

It seems obvious that information that is either publicly available (annual reports, regulatory filings, brochures, advertising and promotional materials) or is obtained by attending trade shows and conventions can be used without ethical or legal implications. However, information obtained illegally (as a result of activities such as theft, blackmail, or eavesdropping) cannot, or, at least, should not, be used as its use is unethical as well as illegal.

Most companies now have websites which provide a lot of information for the benefit of its customers, but one information is available for everyone, including the competitors.

Another indication of the importance of competitive intelligence is the emergence of “Webspying service” companies, also known as corporate intelligence companies. Dow Chemical hired one such company to determine (through studying competitor Websites) whether competitors had developed, or were in the process of developing, a particular clay/plastic composite product.

Companies need to be careful when posting information on their Websites and treat each item as carefully as though they were preparing to publish it in their annual reports. Companies should also verify information posted about their company on other companies’ Websites.

Still some estimate that only 1015 percent of all businesses have formal competitor intelligence gathering processes in place. And some of the companies that assess competitors’ current assumptions and capabilities fail to analyze their future objectives, yielding incomplete insights.

Some Questions to Ask in Assessing the Technological Environment

• What are the technologies (both manufacturing and information technologies) used by the company?
• Which technologies are utilized in the company’s business? Products? Components and ports?
• How critical is each technology to each of these products and businesses?
• Which of these external technologies might become critical and why? Will they remain available outside the company?
• What has been the investment in the product and in the process side of these technologies? For the company and for its competitors? Design? Production? Implementation and service?
• What are the other applications of the company’s technologies? In which applications does the company currently participate and why? In which does the company does not participate and why?
• How attractive is each of these applications as an investment opportunity in terms of its market growth, its potential for profit improvement, and/or its potential for increasing technological leadership? Underlying growth characteristics? Evolution of customer needs and requirements? Current and emerging market segments; segment growth rates? Competitive positioning and likely strategies of key competitors?
• How critical are the company’s technologies to each of these applications?
• What other technologies are critical to the external applications?
• Which technological investments should be curtailed or eliminated?
• What additional technologies will be required in order to achieve the current corporate business objectives?
• What are the implications of the technology and business portfolios for corporate strategy?
• What are the major competitors’ strengths?
• What are the major competitors’ weaknesses?
• What are the major competitors’ objectives and strategies?
• How will the major competitors most likely respond to current economic, social, cultural, demographic, geographic, political, governmental, technological, and competitive trends affecting our industry?
• How vulnerable are the major competitors to our alternative company strategies?
• How vulnerable are our alternative strategies to successful counterattack by our major competitors?
• How are our products or services positioned relative to major competitors?
• To what extent are new companies entering and old companies leaving this industry?
• What key factors have resulted in our present competitive position in this industry?
• How have the sales and profit rankings of major competitors in the industry changed over recent years? Why have these rankings changed that way?
• What is the nature of supplier and distributor relationships in this industry?
• To what extent could substitute products or services be a threat to competitors in this industry?