For the planning of effective marketing strategies, the organization should know about all the relevant aspects of its competitors by conducting a 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 to proceed from the very start to till the end. You need to know how to analyze their weaknesses, and what are their positive points. Then you will be able to analyze them properly. Hence it will allow you to come up with a good strategic plan.
How to do a Competitive Analysis?
Identification of Competitors
Competitors are those organizations that are manufactured and sell similar kinds of products to similar customers at similar prices. So competitors can take the following forms.
- A similar class of products manufacturing organizations
- Similar services providing organizations
- Organizations competing for common consumer dollars
Competitive myopia is a big problem in competitive analysis in which only one group of competitors is analyzed. Therefore the competitors should be identified from the market perspective or industry perspective. One useful method of pointing out competitors is to prepare maps of the actions taken by the customers in the acquisition. As well as in the utilization of the products.
Assessment of the Competitors
The objectives of the competition are important to ascertain. So the organization conducting the competitive analysis should know the factors. Basically, that is focused on their 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. Therefore the strategic group must be pointed out. A strategic group includes those organizations in 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 and strengths are also properly assessed in the competitive analysis. Moreover, the products and processes of the organizations are compared with the products and processes of the competitors. So that the best ways are pointed out for the improvement in the quality and performance. This process is generally called benchmarking. Hence 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 and Avoidance
The organization conducting competitive analysis should develop a proper process for the selection of the competitors. Actually, that would be attacked and avoided by the organization. Hence the attack may be made on weak or strong competitors. Weak competitors are easy to successfully attack. However, they are not much profitable.
On the other hand, a successful attack on strong competitors leads to 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. In order to do an assessment of the strengths and weaknesses of the competitors.
The main objective of customer value analysis is to determine the benefits that are valued by the customers. In addition 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 attributes that are valued by the customers. Along with the importance given to that these attributes
- The assessment of the performance of the organization. Also 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.
Benefits Associated with the Competition
The total demand for certain products is enhanced through competition.
- The costs of product and market development are shared through competition. Also, new technologies are legitimized through competition.
- So the products are more differentiated from the competitors.
- Although 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 and opportunities can be provided by “bad” or “good” competitors. Therefore the bad competitors do not follow the rules of the industry 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 that can be regarded as the best one for all organizations. Therefore, a system called, a 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 a competitive intelligence system and the potential sources of getting that information.
- The main sources of competitive information are the field of market & the data published in annual reports etc.
- The validity and reliability of the collected information are 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, the 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 up with the right plan. Today the success of a business depends a lot on knowing how to do a competitive analysis.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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