Definition : A broad definition of competitive intelligence is the action of defining, gathering, analyzing, and distributing intelligence about products,

customers, competitors and any aspect of the environment needed to support executives and managers in making strategic decisions for an organization Need of competitive analysis The competitive analysis is a statement of the business strategy and how it relates to the competition. The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market, strategies that will provide you with a distinct advantage, the barriers that can be developed in order to prevent competition from entering your market, and any weaknesses that can be exploited within the product development cycle. The performance of a company within a market is directly related to the possession of key assets and skills. Therefore, an analysis of strong performers should reveal the causes behind such a successful track record. This analysis, in conjunction with an examination of unsuccessful companies and the reasons behind their failure, should provide a good idea of just what key assets and skills are needed to be successful within a given industry and market segment. Competitor analysis identifies the strengths and weaknesses of competing products or services before starting work on prototypes. A 10 minute tour of each of 4 to 10 of the most popular competing products showing how typical tasks are achieved is presented to a half day meeting of stakeholders. The competitive advantages of each product are discussed, and a short summary of the market position is generated at the end of the meeting. Alternative methods are market surveys or lab tests of competitor products Benefits

To discover the strengths and weaknesses of competing products or services, to develop a list of issues that need to be addressed in order to compete effectively to gain consensus among a group of project stakeholders.

Some businesses think it is best to get on with their own plans and ignore the competition. Others become obsessed with tracking the actions of competitors (often using underhand or illegal methods). Many businesses are happy simply to track the competition, copying their moves and reacting to changes. Competitor analysis has several important roles in strategic planning: To help management understand their competitive advantages/disadvantages relative to competitors To generate understanding of competitors past, present (and most importantly) future strategies To provide an informed basis to develop strategies to achieve competitive advantage in the future To help forecast the returns that may be made from future investments (e.g. how will competitors respond to a new product or pricing strategy?

Scope: Competitive scope can have a powerful effect on competitive advantage, because it shapes the configuration and economics of the value chain. There are four dimensions of scope that affect the value chain: 1. Segment Scope is the product varieties produced and buyer types served. For example, in the personal computer industry there are two primary types of users--home and business. Home users have a lower need for performance but a much greater need for training, service and user-friendliness. If the big dog on the block serves both, you might be able to gain an advantage by focusing on a single user type. By doing so, you might be able to satisfy the needs of the target customer better than the generalist. 2. Degree of Integration is the extent to which activities are performed in-house instead of by independent firms. For example, you may deliver your products using your own trucks and employees, or you may use a contract carrier such as UPS. Your choice may have a great impact to the cost and quality of your product or service. A firm might

use one or the other as a strategic means to differentiate itself from a competitor. 3. Geographic Scope is the range of communities, regions, or countries in which a firm competes with a coordinated strategy. Geographic interrelationships can enhance competitive advantage if sharing or coordinating value activities lowers costs or enhances differentiation. For example, a bookstore might differentiate itself by researching and stocking foreign titles, winning sales locally as well as across a larger geographic area. 4. Industry Scope is the range of related industries in which the firm competes with a coordinated strategy. Similar in concept to geographic interrelationships, synergies can be derived from integrating value activities across industries. For example, a landscape company may operate a retail nursery and an installation company, which increases total volume and increases inventory turnover and utilization of the storage and greenhouse assets. Another example might be Starbucks selling coffee but also selling music CDs, or Disney extending from animated movies to theme parks and retail stores.

Limitation : While the practice of competitive analysis is generally recognized as an important component of longterm business success, some voices do offer cautions about flawed competitive analysis practices. They note that competitive analyses that are incomplete or based on incorrect data can lead businesses to construct faulty business strategies. Analysts have also pointed out that traditional competitive analysis has become more complex and potentially time-consuming, since so many businesses offer diversified products and services. Still others contend that excessive preoccupation with keeping pace with the strategies, products, and services of other competitors can result in atrophy in internal originality of production and design. Other observers, meanwhile, argue that judging your company's performance strictly on the basis of how you are performing against chief competitors can retard your business's profitability and lead to a false sense of security. "As long as we appear to be doing better than someone else, we can feel that we must be doing well, so we don't need to change," wrote James R. Lucas in Fatal Illusions. "These

illusions can begin when we compare ourselves with our own past performance or with the performance of other organizations. The companies we're comparing ourselves to may all be performing at lower levels than the market requires. They may all be doing it wrong. Since every organization is unique, another company's solutions may not apply to us. If we've grown at an annual rate of 15 percent compared with an industry average of 5 percent, we may be wildly successfulunless a new competitor from an unexpected direction or unrelated industry finds a way to deliver our service at 60 percent of our cost." Finally, some experts contend that preoccupation with competitive analysis too often leads companies to spend too little time looking ahead. "Effective strategy formulation and implementation relies on concepts like uniqueness, differentiation and standing out in a very, very crowded marketplace. Ineffective strategy formulation and implementation relies on concepts like imitation, caution and blending in with the rest of the pack. Competitive analysis does a great job in fostering the latter," wrote Oren Harari in Management Review. "I have no problems in performing a quick, occasional scan of what today's competitors are doing. That is just plain prudent management. The problem is that executives can easily wind up sinking big resources and becoming hypnotized into tracking the movements of today's solutions for yesterday's customers." Harari contended that "traditional competitor analysis is often shortsighted in depth, range, and possibility.If you'res pending a lot of valuable time tracking your competitors' movements, you're not only running in circles, but you're probably paying too much attention to the wrong guys. It's the folks that you can't trackthe ones that don't exist yet either as competitors, or even as companieswho are your real problems. That's because they're not worrying about tracking you. They're moving ahead with new offerings, redefining and reinventing the marketplace as they go along." References: http://www.referenceforbusiness.com/small/Bo-Co/CompetitiveAnalysis.html#ixzz1TE8wCmNr Aaker, David A. Developing Business Strategies. 2d ed. John Wiley and Sons, 1988.

Abrams, Rhonda M. The Successful Business Plan: Secrets and Strategies. Rev. ed. Oasis Press, 1993. Clark, Ian. "Corporate Human Resources and 'Bottom Line' Financial Performance." Personnel Review. July 1999. Harari, Oren. "The Hypnotic Danger of Competitive Analysis." Management Review. August 1994. Lucas, James R. Fatal Illusions. Amacom, 1997. Read more: Competitive Analysis - advantage, disadvantages, cost, Elements of competitive analysis http://www.referenceforbusiness.com/small/Bo-Co/CompetitiveAnalysis.html#ixzz1TE9EdjVN