Competitive Analysis Techniques

JWI 540, Strategy, Week4 Summary, 7/29/12

(I) Strategy is the killer idea, a "big aha", that gives sustainable competitive advantage. 

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Strategy is a winning value proposition, a product or service that customers want more than other options out there. Strategy is all about execution - small companies have an advantage here. Strategy is an approximate course of action that you revisit and redefine according to shifting market conditions.

Strategy has to feel fluid and alive !

Five Key Questions of Strategy are
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What does the competitive landscape - the playing field look like ?
What is competition up to - your rivals ?
What are you up to - what have you done lately ?
What is around the corner - what keeps us up at night ?
What is your winning move ?

Academic Complexity - number crunching & data analysis - takes time and money
Details & Scenarios tie you up in knots.

No academic textbooks or consultants are needed

What you require are:
a team of engaged employees who can dream big, debate intensely, emerge with a dynamic game plan. Then it is time to implement. 

In a small company it is much easier to communicate strategy and ignite a contagious intensity. Small companies like power boats can adjust direction quickly than corporate ocean liners - hire faster, make decisions with fewere bureaucratic hurdles, see their mistakes and fix them faster than hulking competitors

(II)   Robust competition is a good thing
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For society and for individual competitors.
When competition is weak, managers become internally focused on their organization, spending time on things that customers don't care about. Tough competitors keep the pressure on a company to drive down costs and come up with new ways to win and keep customers.

Face the competition - Assess the competitive landscape
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Understand different types of competitors and know what to look for
Compete against a particular rival, spot competitors that you may not know exist

(1) Traditional competitors - These are the ones a firm typically watches and tries to know everything about "what they are having for breakfast (Welch, 2005)". Before I took this class this is about the level of thinking I had about competition.
(2) Latent Competitors - The firm should watch for competitors who could enter its industry from a different part of the value chain; need to be keen about signals such entrants could send before they move in and react defensively as well as offensively as needed to protect customers.
(3) Oblique competitors - They enter the market from an unrelated field, quickly deploying new technology or exploiting emerging consumer preference. They attack with little warning and damage the firm's competitive position. They are hard to predict and compete against. Best move is to recognize and react, never underestimating the capability of competition.


(III) There are several different competitive analyses techniques that managers can use to gain insights into what their competitors are doing or are planning to do. 

 Each of these techniques has its strengths and shortcomings.

(1) "Perceived Value" mapping  - Focus firm's efforts on creating value that the customer wants
(2) "Critical Dimensions" analysis - Identify critical differentiating factors, figure out how competitors provide value and where the firm stands
(3) SWOT - Analyze Strengths, Weaknesses, Opportunities, Threats of the firm and the competitors
(4) Five forces model - Michael Porter's famous framework for evaluating the firm's industry structure according to effects on rivalry, threat to entry, supplier power, buyer power, threat of subsitutes. Sixth force from Complementors exists - these are players who don't compete with the firm but provide complementary products and services.
(5) PESTEL analysis - Tool to analyze market growth or decline, using Political, Economic, Sociocultural, Technological, Environmental, Legal context
(6) Benchmarking -  Quantitative & Qualitative metrics that allow comparison of firm's performance to that of competitors
Planned store openings, same-store sales, plant capacity; intangible assets like IP, employee talent, customer loyalty, reputation
(7) Strategy testing - Look for situations when the strategy will be violated
https://www.mckinseyquarterly.com/How_we_do_it_Strategic_tests_from_four_senior_executives_2712
"Strategic testing from Senior Executives, McKinsey, 2011", gives thought provoking insights
fact check - is strategy rooted in facts? is it unrealistic? is it undifferentiated ? does it drive financial shareholder value ? is the firm getting too excited about a market that is too small in size ? is this "power point engineering" rather than something grounded on facts ? is strategy sustainable ? have you considered why the firm might fail ?
(11) Value Curve - Consolidate competitors into a single value curve (key success factors on X axis; Performance rating on Y axis; join the dots) Visually plot how major firms compete, examine their assumptions and use this to predict their moves.

(IV) Constantly seek competitive intelligence about your rivals
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Learn from a variety of sources and monitor your competitors
Learn about their strategies, their limitations, their investments
Include latent or oblique competitors to the extent you're able to identify them
Understand their motives, anticipate their actions, accurately predict their reactions to your moves.

References
Christensen, C. M. (1997). The innovator’s dilemma. Boston, MA: Harvard Business School Publishing.

 Dr DP