Lecture-10: Analyzing Competitors and Driving Growth

Part-1: Analyzing Competitors

Three Steps of Competitors Analysis: The competitive analysis strategy can be different from
company to company or project to project. But there are some primary steps we must follow as
analysts.
Profile our top competitor in the market: Profiling our competitors is one of the important steps.
Through this, we can understand our biggest competitors and how they behave in the market.
There are mainly three types of competitors.
I. Head-to-Head Competitor (Direct Competitors)- They sell a similar product to ours and target
the same market as ours.
II. First Tier Competitor (Indirect Competitors)– They sell similar products but don’t have all the
products like ours.
III. Second Tire Competitor (Potential Competitors)- They are competitors who sell subsidiary
products. By identifying and profiling these types of competitors, we gain valuable insights on
our competitors and market landscape to gain a competitive edge.
Narrow the playing field: Identify the companies that fit to be the top 3 three competitors by
looking at their industry, market, and their strategic approach. There are mainly three types of
competitors.
1. Industry competitors – (The industries made with companies that sell similar
products/services.) - Look for companies operating in the same industry or sector as ours.
- Identify competitors that offer similar products or services to ours.
- Consider factors such as market share, reputation, and product/service offerings.
- Evaluate their strengths, weaknesses, opportunities, and threats (SWOT analysis) compared to
ours.
2. Market competitors – (Companies in locations that could cut into your market share.)
- Identify companies that operate in the same geographic locations or target similar customer
segments as ours.
- Analyze their market share, distribution channels, and customer base within these locations.
- Assess how their presence in these markets could potentially impact our market share and
competitive position.
3. Strategic group –
- Identify companies with a similar business model or strategic approach to ours. They are not
identical to your company, but their strategy can attract our customers.
- Look for competitors that target the same customer needs or pursue similar market
opportunities. - Assess their strategies, marketing tactics, and customer engagement approaches.
- Consider how their strategic decisions and initiatives could influence our customers'
preferences and behaviors.
By considering these factors and conducting thorough research and analysis, we can identify the
top three competitors that pose the greatest threat or competition to our business.
Build the competitor profiles: Building competitor profiles is essential for gaining deeper
insights into their strengths, weaknesses, and strategies. Here are some key elements to include
in competitor profiles:
I. Financial Review Reports: Analyze competitors' financial statements, including revenue, profit
margins, and growth trends. Assess their financial stability, liquidity, and investment priorities.
II. Pricing Information: Gather data on competitors' pricing strategies, including pricing tiers,
discounts, and promotions. Compare their pricing with ours to identify competitive advantages or
areas for improvement.
III. Sales Volume: Obtain information on competitors' sales volume and market performance.
Analyze sales trends over time and identify patterns or fluctuations.
IV. Market Share: Estimate competitors' market share within specific markets or segments.
Compare their market share with ours to understand relative positioning and competitive
intensity. V. Market Strategy: Evaluate competitors' overall market strategy, including product
positioning, distribution channels, and marketing tactics. Identify key strengths and weaknesses
in their approach and potential areas of differentiation.
VI. Customer Satisfaction Scores: Gather data on customer satisfaction scores or ratings for
competitors. Analyze customer feedback and reviews to understand competitors' strengths and
weaknesses in customer service and experience. By compiling and analyzing these key elements,
we can develop comprehensive competitor profiles that provide valuable insights for strategic
decision-making and competitive profiling.

What makes a customer choose one solution over another?

Price – cheaper
Service – faster, personalized, convenient
Quality - lasts longer, stylish, tastes better
At most, you can only compete on 2 out of the 3. It is not possible to offer all three.
Core competency that cannot be copied or bought
- Deep domain expertise (hospital systems)
- One amazing hard thing (Google algorithm)
- Authority (existing reputation in market)
- Dream Team (previous startup success; rock star)
- Unique, novel solution or product (disruptive)
- Patent(s) - Ability to scale, operate significantly more efficiently.

The following questions should be asked when you want to perform competitive company
analysis:
• Where located? • # of years in business? • # of employees? • Annual sales? • Major managers
and board members? • Owned or in partnership with other corporations? • Funding?
(source/amount) • Strengths? • Weaknesses? • Product line(s)? • Primary target market(s)? •
Pricing structure(s)? • Marketing activities? • Supply sources? • Strength/weaknesses of sales
literature • Sales/distribution methods • Expanding or cutting back?
Templates for Competitive Product Analysis
Examples of Features • Price • Benefits • Quality • Durability • Image/style • Service •
Warranties • Location • Convenience • Sales/Distribution • Ease of Use • # of features • Type of
features • Wow factor • Size/Weight • Availability • Security • Safety • Endorsements •
Certification.
Examples of completed templates
Examples of Portraying Competitive Analysis for Investors
Part-2: Defensive and Offensive Strategies for Driving Growth
Competitive Strategies for Market Leader: A market leader has the largest market share and
usually leads in price changes, new-product introductions, distribution coverage, and
promotional intensity. Some historical market leaders are Microsoft (computer software),
Gatorade (sports drinks), Best Buy (retail electronics), McDonald’s (fast food), Blue Cross Blue
Shield (health insurance), and Visa (credit cards).
To stay number one, the firm must first find ways to expand total market demand. Second, it
must protect its current share through good defensive and offensive actions. Third, it should
increase market share, even if market size remains constant. Let’s look at each strategy.
Expanding Total Market Demand
New Customers: Every product class has the potential to attract buyers who are unaware of the
product or are resisting it because of price or lack of certain features. A company can search for
new users among three groups: those who might use it but do not (market penetration strategy),
those who have never used it (new-market segment strategy), or those who live elsewhere
(geographical-expansion strategy).
More Usage: Marketers can try to increase the amount, level, or frequency of consumption. They
can sometimes boost the amount through packaging or product redesign. Larger package sizes
increase the amount of product consumers use at one time. Consumers use more impulse
products such as soft drinks and snacks when the product is made more available.
Increasing frequency of consumption, on the other hand, requires either (1) identifying additional
opportunities to use the brand in the same basic way or (2) identifying completely new and
different ways to use the brand.
Additional Opportunities to Use the Brand: A marketing program can communicate the
appropriateness and advantages of using the brand. Another opportunity arises when consumers’
perceptions of their usage differs from reality. Consumers may fail to replace a short-lived
product when they should because they overestimate how long it stays fresh. One strategy is to
tie the act of replacing the product to a holiday, event, or time of year. Another might be to
provide consumers with better information about when they first used the product or need to
replace it, or (2) the current level of product performance.
New Ways to Use the Brand: The second approach to increasing frequency of consumption is to
identify completely new and different applications. Food product companies have long
advertised recipes that use their branded products in different ways. After discovering that some
consumers used Arm & Hammer baking soda as a refrigerator deodorant, the company launched
a heavy promotion campaign focusing on this use and succeeded in getting half the homes in the
United States to adopt it.
Protecting Market Share
Proactive Marketing: In satisfying customer needs, we can draw a distinction between
responsive marketing, anticipative marketing, and creative marketing. A responsive marketer
finds a stated need and fills it. An anticipative marketer looks ahead to needs customers may
have in the near future. A creative marketer discovers solutions customers did not ask for but to
which they enthusiastically respond. Creative marketers are proactive market-driving firms, not
just marketdriven ones.8 Many companies assume their job is just to adapt to customer needs.
They are reactive mostly because they are overly faithful to the customer-orientation paradigm
and fall victim to the “tyranny of the served market.” Successful companies instead proactively
shape the market to their own interests. Instead of trying to be the best player, they change the
rules of the game.9 A company needs two proactive skills: (1) responsive anticipation to see the
writing on the wall, as when IBM changed from a hardware producer to a service business and
(2) creative anticipation to devise innovative solutions.
Defensive Marketing: Even when it does not launch offensives, the market leader must not
leave any major flanks exposed. The aim of defensive strategy is to reduce the probability of
attack, divert attacks to less-threatened areas, and lessen their intensity. Speed of response can
make an important difference to profit. A dominant firm can use the six defense strategies:

Position Defense: Position defense means occupying the most desirable market space in
consumers’ minds, making the brand almost impregnable
Flank Defense: The market leader should erect outposts to protect a weak front or support a
possible counterattack.
Preemptive Defense: A more aggressive maneuver is to attack first, perhaps with guerrilla action
across the market—hitting one competitor here, another there—and keeping everyone off
balance. Another is to achieve broad market development that signals competitors not to attack.
Counteroffensive Defense: In a counteroffensive, the market leader can meet the attacker
frontally and hit its flank or launch a pincer movement so it will have to pull back to defend
itself. Another common form of counteroffensive is the exercise of economic or political clout.
The leader may try to crush a competitor by subsidizing lower prices for the vulnerable product
with revenue from its more profitable products, or it may prematurely announce a product
upgrade to prevent customers from buying the competitor’s product. Or the leader may lobby
legislators to take political action to inhibit the competition.
Mobile Defense: In mobile defense, the leader stretches its domain over new territories through
market broadening and market diversification. Market broadening shifts the company’s focus
from the current product to the underlying generic need.
Contraction Defense: Sometimes large companies can no longer defend all their territory. In
planned contraction (also called strategic withdrawal), they give up weaker markets and reassign
resources to stronger ones.

Market-Challenger Strategies: Many market challengers have gained ground or even

overtaken the leader. Toyota today produces more cars than General Motors, Lowe’s is putting
pressure on Home Depot, and AMD has been chipping away at Intel’s market share.
Defining The Strategic Objective and Opponent(S): A market challenger must first define its
strategic objective, usually to increase market share. The challenger must decide whom to attack:
It can attack the market leader: This is a high-risk but potentially high-payoff strategy and
makes good sense if the leader is not serving the market well. This strategy often has the added
benefit of distancing the firm from other challengers.
It can attack firms its own size that are not doing the job and are underfinanced.: These firms
have aging products, are charging excessive prices, or are not satisfying customers in other ways.
It can attack small local and regional firms: Several major banks grew to their present size by
gobbling up smaller regional banks, or “guppies.
Choosing A General Attack Strategy: We can distinguish five: frontal, flank, encirclement,
bypass, and guerilla attacks.
Frontal Attack: In a pure frontal attack, the attacker matches its opponent’s product, advertising,
price, and distribution. The principle of force says the side with the greater resources will win. A
modified frontal attack, such as cutting price, can work if the market leader doesn’t retaliate, and
if the competitor convinces the market its product is equal to the leader’s.
Flank Attack: A flanking strategy is another name for identifying shifts that are causing gaps to
develop, then rushing to fill the gaps. Flanking is particularly attractive to a challenger with
fewer resources and can be more likely to succeed than frontal attacks. In a geographic attack,
the challenger spots areas where the opponent is underperforming
Encirclement Attack: Encirclement attempts to capture a wide slice of territory by launching a
grand offensive on several fronts. It makes sense when the challenger commands superior
resources.
Bypass Attack: Bypassing the enemy altogether to attack easier markets instead offers three lines
of approach: diversifying into unrelated products, diversifying into new geographical markets,
and leapfrogging into new technologies.
Guerrilla Attacks: Guerrilla attacks consist of small, intermittent attacks, conventional and
unconventional, including selective price cuts, intense promotional blitzes, and occasional legal
action, to harass the opponent and eventually secure permanent footholds.
Market-Follower Strategies: Many companies prefer to follow rather than challenge the market
leader. Patterns of “conscious parallelism” are common in capital-intensive, homogeneous-
product industries such as steel, fertilizers, and chemicals. The opportunities for product
differentiation and image differentiation are low, service quality is comparable, and price
sensitivity runs high. The mood in these industries is against short-run grabs for market share,
because that only provokes retaliation. Instead, most firms present similar offers to buyers,
usually by copying the leader. Market shares show high stability. Market follower has four broad
strategies:
Counterfeiter—The counterfeiter duplicates the leader’s product and packages and sells it on the
black market or through disreputable dealers. Music firms, Apple, and Rolex have been plagued
by the counterfeiter problem, especially in Asia.
Cloner—The cloner emulates the leader’s products, name, and packaging, with slight variations.
For example, Ralcorp Holdings sells imitations of name-brand cereals in look-alike boxes.
Imitator—The imitator copies some things from the leader but differentiates on packaging,
advertising, pricing, or location. The leader doesn’t mind as long as the imitator doesn’t attack
aggressively. Fernandez Pujals grew up in Fort Lauderdale, Florida, and took Domino’s home
delivery idea to Spain, where he borrowed $80,000 to open his first store in Madrid. His
Telepizza chain now operates almost 1,050 stores in Europe and Latin America.
Adapter—The adapter takes the leader’s products and adapts or improves them. The adapter may
choose to sell to different markets, but often it grows into a future challenger, as many Japanese
firms have done after improving products developed elsewhere.
Market-Nicher Strategies: Market-Nicher mainly serves underserved or unserved market
segments. They need to be specialists in different sectors of marketing. They are given below: