For the planning of effective marketing strategies, the organization should know about all the relevant aspects of its competitors by conducting competitive analysis. By doing so, the organization is able to point out the potential indicators that can be responsible for competitive advantage & disadvantage. You can get a competitive advantage over your rivals if you know how proceed from the very start to till end. You need to know how to analyze their weaknesses, what are their positive points. Then you will be able to analyze them properly. It will allow you to come with good strategic plan.
How to do a Competitive Analysis
- Identification of Competitors:
Competitors are those organizations that are manufactured & selling similar kinds of products to the similar customers at similar prices. Competitors can take the following forms.
- Similar class of products manufacturing organizations
- Similar services providing organizations
- Organizations competing for common consumer dollars
The competitive myopia is a big problem in competitive analysis in which only one group of competitors is analyzed. The competitors should be identified from the market perspective or industry perspective. One useful method of pointing out of competitors is to prepare maps of the actions taken by the customers in the acquisition & utilization of the products.
- Assessment of the Competitors:
The objectives of the competition are important to ascertain. The organization conducting the competitive analysis should know the factors that are focused by its competitors like
- Current Profitability
- Cash Flow
- Market Share Growth
- Service Leadership
- Technological Leadership
- Other Goals
The degree of competition between the two organizations depends on the degree of similarity between their relative marketing strategies. The strategic group must be pointed out. Strategic group includes those organizations of the industry, which are adopting similar strategies in the same market area.
- Rivalry exists between competitors mostly
- The correct strategic group should be identified by examining all the dimensions.
The weaknesses & strengths are also properly assessed in the competitive analysis. The products & process of the organizations are compared with the products & processes of the competitors so that the best ways are pointed out for the improvement in the quality & performance. This process is generally called benchmarking. It is clear that the response of every competitor varies according to the same situation so the organization should also consider the possible reactions of its competitors.
- Selecting of Competitors for Attacking & Avoidance:
The organization conducting competitive analysis should develop a proper process for the selection of the competitors that would be attacked & avoided by the organization. The attack may be made on weak or strong competitors. Weak competitors are easy to successfully attack, but they are not much profitable. On the other hand the successful attack on the strong competitors leads into a high rate of return for the organization. For this purpose, a useful technique should be used by the organization which is called customer value analysis for the assessment of the strengths & weaknesses of the competitors. The main objective of customer value analysis is to determine the benefits that are valued by the customers & how the different offerings of the organizations are ranked on the basis of their relative value by the customers.
Following are the important steps of the process of customer value analysis.
- Identification of significant attributed that are valued by the customers along with the importance given to that these attributes
- The assessment of the performance of the organization & its competitors on these identified attributes.
The distant and closed competitors can be targeted. There are many benefits associated with the competition. These benefits are as follows.
The total demand of certain products is enhanced through competition.
- The costs of product & market development are shared through competition. Also new technologies are legitimized through competition.
- The products are more differentiated from the competitors.
- The less attractive segments of the market are served through the existence of competition.
- The antitrust risk is reduced through competition and the bargaining power versus regulators or labor is improved.
The competitors are not always beneficial for the organization. Different kinds of threats & opportunities can be provided by “bad” or “good” competitors. The bad competitors do not follow the rules of the industry in competition, whereas good competitors follow these rules.
- Development of Competitive Intelligence System:
An effective competitive strategy should be designed by the organization after conducting a successful competitive analysis. There is no single strategy which can be regarded as the best one for all the organizations. Therefore, a system called, competitive intelligence system is designed to cover this important issue. Following are some of the useful activities that are performed by the competitive intelligence system.
- The useful competitive information is identified through competitive intelligence system along with the potential sources of getting that information.
- The main sources of the competitive information are the field of market & the data published in annual reports etc.
- The validity & reliability of the collected information is checked by the system.
- The verified competitive information is then interpreted & organized in a useful manner.
- When the managers require certain key information on competitors, competitive intelligence system quickly provides the relevant information.
- The decision making process of the management is assisted through the support of the competitive intelligence system.
By following this step by step process I’m sure you may easily come in a position to analyze your competitors correctly, and then you may come with right plan. Today the success of business a lot depends to know how to do a competitive analysis.