Competition Analysis

Why Competition? It indicates the health of the industry spurs new product development. induces market leaders to enhance efficiency of their existing products, introduce their new variants & even enter new product markets. always induces firms to revise their product portfolios as also to revisit their product markets. understand changing needs, expectations and perceptions of different market segments. motivates firms to make their products feature rich and 3.1 versatile

Development of New Intermediation processes and new roles of Channel members

Information technology to streamline their operations and also to connect better to their target markets, enabling disintermediation and thus providing firms opportunity to serve their customers in a much better manner. Competition helps enlarge distribution base in any industry by bringing in new players. Makes products and services reach customer much more conveniently. It also benefits customers as these new intermediaries innovate / customize the offer. They are able to strengthen the fit between customer needs and companys products, thus 3.2 creating a loyal customer.

Innovation
Competition shortens product life cycles. Forecasting products or brand death and preempting competition through new products is extremely critical. Equally critical are innovations in other elements of marketing mix and processes.

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Market Development
By enlarging product mix, depth of distribution and reduced prices, competition drives firm to look for opportunities in new markets. development of rural markets in India in the last decade largely because competition in urban markets got intensified. Customer now benefits from new products, customised
offers, lower prices and better payment options.

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Factors contributing to enhanced inter firm rivalry

Motivation to reduce Costs
Competition motivates firms to reexamine their cost structures and eliminate inefficiencies in the marketing system. Competition is a great leveler so far as product prices are concerned. Competitors create a disequilibrium in the market through the price route. This is especially true in product groups where the demand is principally price sensitive. Competition forces market leader to revisit his cost structure and reduce price so as to remain competitive in the market place. Prices do soften as competition 3.5 hots up in any product/ market.

 Low Barriers
Low entry and exit barriers in a market, is one of the key factors driving competition. Barriers to entry and exit in any market are: Government Policy : - Restrictive government policies .
Protection of local industry against dumping or unfair foreign competition is often the excuse. These policies result in inefficiencies which impact consumer prices as firms are assured of demand. These policies never enable a firms to emerge competitive.

Costs: is another barrier. Can be sunk costs or operational

costs. Can prevent potential competition in any market and hence create an imperfect market conditions. Also a long gestation period in a project can reduce the intensity of inter firm rivalry in any market. High tariffs and taxation lead to higher costs. 3.6

 Presence of strong Brands: Strong brands indicate

strong competitor, who has the potential to retaliate in an effective manner. this can be overcome through acquisition of such brands. Strong brand implies high brand equity. Created through perceived equity in consumers mind, distribution equity and through high degree of consumer loyalty.

Customer: strong nationalist feelings or pride in ones

own country prevents customers from using or adopting foreign brands. Customer preferences can also be a deterrent or a facilitator to competition. Homogenisation of consumer tastes and prefernces is the basis of Global Brands.

Technology: When technology differences are large and

infrastructure in the market does not exist to make it user friendly. Will hold valid if the companies have made it simple to the customer to use technology products .

Lack of Credible Competition : A credible

competitor is one who is believed by the customer.
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Stages of Competition
The Opportunity Stage Resources & Competencies Stage Today firms compete on knowledge because scope of differentiation on the basis of product features and services is minimized today. Competition for Existing Market Stage Forces driving/Shaping Competition Technological change affects firm not only within a particular industry but its effects cut across different sectors. Impact of changing Demography & Cultural Values This also impact the market structure and in turn competition. Demographic shifts affect the demand for product and service. Regulation and Market Opportunity A firm needs to win at each stage of competition & also understand the forces impacting competition.
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Forms of Competition
Competition to any product or firm can be in any form. At the general level, this could be either direct or indirect, i.e. substitutes. New Age competition levels

Innovative Solutions to Customers problems: New entrants have come out with innovative products and solutions which are cost effective, more efficient and convenient to be used.
To make innovation succeed, firms need to consider the following guidelines:

a) Innovation should be perceived by customers as meaningful and helping them in their daily lives.
b) It should be simple and not too cumbersome requiring extensive learnings. Customers generally do not like spending too much time learning the features of innovative products on how to use it; c) As far as possible innovation should be connected to existing need of the customers.
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Forms of Competition
Launch a price war by offering identical product at a lower price than the industry leader In a country like India, where price sensitivity is high, lowering of prices always help expand the market and win over market leaders customers. However, for this form of competition to succeed the customer should: a) Perceive new firms product to be identical to existing market leaders product. b) Perceive price difference to be substantial to switch preferences; c) Be able to compare the two products and if lowering price has led to a deletion of features on existing product then this tradeoff should be offset by low price benefit; d) Perceive price benefit as more important than relationship. 3.10

Forms of Competition
Switch Channels of Distribution
Developing new channels of distribution help reaching out to the target market and displace market leaders.

Service based competition

HDFC Bank is today Indias best bank essentially because customers perceive its service to be better than its competitors.

Experience Based Competition

Barista has revolutionized the experience of coffee drinking in India much the same way as Starbucks did in USA. A typical Barista outlet is bright, cozy & comfortable where the customer gets the choice of foam coffee
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Framework for competitor Analysis

Competitors Strengths and Weaknesses analysis
is important for an assessment, given the industry structure and key factors of success what is the extent to which the competitor possesses them. On a ten point-scale, it is necessary to assess the strength of the competitors muscle on all the key factors of success in the industry. to identify a weakness in the strength of competitors. According to Michael Porter, analysis needs to consider competitors aspirations, self-image, strategy and assumptions it has about itself and industry. Raises fundamental questions relating to competitors satisfaction with his existing position. If satisfied, more likely to protect his position. But if not, more likely to be an aggressor. May attack to improve position.Attack or defend model is determined by competitors satisfaction level.
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The Components of a Competitor Analysis

What Drives the Competitor:
FUTURE GOALS At all levels of management and in multiple dimensions

What the Competitor is Doing and Can Do:

CURRENT STRATEGY How the business is currently competing

COMPETITOR'S RESPONSE PROFILE Is the Competitor satisfied with its current position? What likely moves or strategy shifts will the competitor make? Where is the competitor vulnerable? What will provoke the greatest and most effective retaliation by the competitor.

ASSUMPTIONS Held about itself and the industry

CAPABILITIES Both strengths weaknesses

and

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Customers Perception of Competitors

The real test of the strength of the competitor is how well he and his products are perceived by the target customers. What is important is to assess customers perception on the quality of service provided by the competitors. This quality of service can be measured on the following five parameters: Reliability Responsiveness Empathy Assurance Tangible
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 How well Entrenched In a Segment

The market share of any competitor is to be measured in the served market.
The relative brand power of the product in its served markets.

Gaps Left By Competitors Competitor Profile Analysis

Framework suggested by Sammon, Kurland & Spitlanic takes into consideration the financial structure, perceived strengths & weaknesses, the strength of possible retaliation and overall performance of competitor against that of the others in the industry. Assumption in this framework: Any moves of a firm are a function of its past, current situation and perceived future. The past is an indicator of firms growth over a period of time and also its competencies. Does indicate firms relative strength in the market and the industry. The firms image in the market is one such strength. One method to assess corporate image is customer and distribution audit as also peer firm audit, another is to look for tangible evidences that give an 3.15 indicator of culture and values of the competitor firms.

 Business reports on major competitors also provide a good input on firms background, image, culture and financial performance. Balance sheets can give information on financial and non-financial parameters. Another approach :assess its perceived fit with customer needs and expectations. Equally important is to assess the gap between an ideal offer and competition offer. Much the same way one can assess industry as a whole. This analysis shows an overall weakness or strength of the firm and the industry and hence gives a direction to the new entrant. Statistical tools like cluster analysis, Anova and perceptual mapping can be used here to understand relative position of different firms on key customer decision parameters

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Competitor Profile Analysis

Background/History Major events, acquisitions, divestitures, mergers overseas

investments Industry reputation Corporate Culture: Past, Present, Continuity II Business/product Mix Five-year segment analysis: sales/profits/investments Major products: market share/market growth III IV Major corporate objectives /strategies Recent Trends/ Business Developments

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V Financial Analysis : Five-year comparison with industry/Business norm Sales growth Profit growth Return on asset Asset turnover Operating margin Net margin Return on equity Debt ratio VI. Strategic Assessment Strengths/Weaknesses: functional and operational Strategic direction/management assumptions Expected performance/responsive capability Implication to Company Z and Company Y (your company)

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