Competitor analysis

At the end of this module the learning outcomes are: - Importance of understanding competition - Approaches to competitor analysis - Identifying competitors likely response

Competitor analysis
Suggested Readings Strategic Marketing Management by Wilson & Gilligan (chapter 4) Strategic Marketing by: David Cravens (chapter 7)

Competitor analysis
Importance - Provides an understanding of your competitive advantage / disadvantage relative to your competitors position. - Insights into competitors strategies - Developing future strategies to sustain/establish advantages over your competitors.

Competitor analysis
Porter's approach to competitive structure analysis Nature and intensity of competition within any industry is determined by the interaction of five key forces: 1. The threat of new entrants 2. Power of buyers 3. Threat of substitutes 4. Extent of competitive rivalry 5. Power of suppliers

Competitor analysis
1. Threat of new entrants - Depends on barriers to entry - How heavy is the capital investment Intel's huge investment into research - Strong brand image to overcome 1. Coke 2. Investment required to build brands - Cost incurred to create distribution channels 1. Hindustan Levers huge investments in distribution 2. very strong in rural areas - Present and potential competitors

Competitor analysis
2.Power of buyers - Is likely to be higher if: 1. There are large number of suppliers 2. Alternative sources of supply 3. Threat of backward integration Example Reliance Industries 1. Started as textiles company 2. Makes raw materials to produce textiles 3. Vertically integrated 4. Bargains on price for huge quantities it picks up.

Competitor analysis
3. Threat of substitutes - Will be more prevalent if: 1. Customers perceive other offers to perform the same function as ours 2. Substitute products offer higher value for money 3. Substitute products earn higher profits - Scooters vs. Motorcycles Hero Honda sales at the expense of Bajaj - Onion vs. ready to make paste Dabur Hommade - Tomato vs. tomato puree - Vanaspati vs. edible oils

Competitor analysis
4. Extent of competitive rivalry Intensity of rivalry will be greater if: - Competitors are of equal size and are seeking dominance - High fixed costs provoke price wars to maintain capacity. E.g: Airlines industry - New addition of capacity have created excess capacity Hotel industry Automobile industry - Product homogenity necessitates activity to maintain share. Coke vs. Pepsi

Competitor analysis
5.Power of suppliers Is likely to be higher if: - There are few suppliers - Cost of switching from one supplier to another is high E.g: Intel Suppliers are likely to integrate forward Kirloskar compressors into airconditioners. Reliance entry into petroleum products retailing

Competitor analysis
Against whom are we competing - Looks straight forward - Is not usually the case E.g: Bajaj Auto 1.Underestimation of LML 2.Undermining the strengths of Hero Honda - Gestetner underestimation of Xerox - Extinction of British and U.S television companies by Japanese - Sharp attack by Symphony aesthetic coolers over traditional coolers

Competitor analysis
Competition happens at four levels 1.Companies offering only similar products - Kitkat vs Perk - Nescafe vs. Bru 2.Companies consisting of all companies operating in the same category - Cadbury's Eclairs vs. Nestle Kitkat - Canada Dry vs. Pepsi Cola

Competitor analysis
Competition at four levels(Contd.,) 3. Competitor consists of all companies manufacturing or supplying products which deliver the same service - Airlines vs. Railways - Second hand cars vs. scooters vs Tata Nano 4. Competition consists of all companies competing for the same spending power - Dishwasher Vs Microwave oven - Designer jewellery vs Ritu Beri's fabrics - Debeers vs Nokia mobile phones