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| A
recent survey of businesses in the USA on their approach to
understanding their competitors identified two categories of
company, eagles and ostriches.
Eagles analyse their rivals, and assume these rivals are
doing the same.
Ostriches, well, they’re just content to focus on their
own affairs.
Few
companies can survive without some basic knowledge of their
competitors, such as the products or services they sell and the
price they sell them at. Yet |
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| relatively
few small and medium sized enterprises invest in a thorough
analysis of their rivals, mainly due to a lack either of resources
or of an appreciation of how this can be carried out.
As awareness of the benefits of gathering this information
grows however, more and more businesses are investigating how to
go about it. |
What
is Competitor Analysis?
Competitor
analysis (‘CA’) is the in-depth study of one or more rivals (or
potential rivals) to gather information on their structure, strategies,
strengths, weaknesses and future directions.
This information is then used to make informed decisions about
everything from marketing tactics to long term business strategies.
| CA
goes beyond the type of research that most companies will already
be engaged in to varying degrees, such as reading trade papers or
obtaining rivals’ sales literature - although the systematic
gathering of information from published sources is an important
element of it.
It involves extracting and piecing together the inside
information your competitors really don’t want |
The most
effective technique is the skilful interviewing of people
connected with the company concerned - without alerting them to
your motives. |
| you
to get your hands on. The most effective technique to achieve this
is the skilful interviewing of people connected with the company
concerned - without alerting them to your motives.
It’s a highly specialised discipline, and while
increasing numbers of very large companies are employing their own
in-house competitor analysis professionals, for the vast majority
of businesses the most practical option is to use specialist
agencies. |
CA
or CI?
Most
of the literature on this topic refers to ‘competitive intelligence’
(‘CI’) - in many ways the terms CI and CA are interchangeable. CA can be viewed as a highly specialised subset of CI, as the
latter covers a broader spectrum of activity to monitor
aspects of a competitive environment including general industry, economic
and regulatory trends.
| Why
bother?
There
are various approaches to gaining and maintaining the edge over
your competitors.
At one level this can mean ensuring that your products and
services are actually better than theirs.
At another it can mean ensuring you are better at marketing
your products/services, even if they are very similar to those of
your rivals. But succeeding in these areas requires you to
actually know how your competitors are operating. Certain basic
information about them - their products/services, list prices and
the features/benefits they are pushing to clients - can be
obtained relatively easily. This at the very least gives you a
starting point for positioning your prices appropriately, and
setting out your selling points.
But it stands to reason that the more you know about your
competitors, the better equipped you are to stay ahead of them.
This is particularly true of the CAD/CAM market, which is a
mature market where innovation is needed to remain competitive.
However, there are difficulties in obtaining inside
information on competitors yourself; for example it is simply not
in the best interests of a potential customer to tell you the
exact price they paid for the product or service of your closest
rival.
Independent, external research is usually more effective in
producing accurate, unbiased responses. |
Case
Study 1
Company
A, the market leader in sales for a type of computer hardware, was
concerned about Company B’s aggressive pursuit of its market
share. They
commissioned an analysis of Company B’s operations in several
European countries, including their distribution models, profit
margins, strategies, strengths and weaknesses.
Numerous
people were ‘interviewed’ in the information gathering
exercise including Company B’s customer service personnel, sales
representatives, senior managers and telephonists.
Their distributors and resellers were also interviewed in
depth.
The
resulting information and recommendations enabled Company A to
reshape its marketing strategy, and re-structure its pricing
matrix to counter Company B’s strengths and target their
perceived weaknesses.
Company A has since started to see an increase in its
market share. |
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If....
....you had access to
information on your main competitors on some or all of the
following areas:
- structure, strategy, motivations
and objectives
- financial and operating
analysis, e.g. return on sales, gross profit margin etc.
- marketing strategy, e.g.
messages and tactics, price flexibility, new services or
products, distribution models used, names of key customers
- market perception, e.g. why
their customers buy from them and their satisfaction levels
i.e. what are your competitors' best practices and key
strengths?
- future directions
....then you would be in a
strong position to:
|
Case
Study 2
A leading telecommunications
manufacturer wanted a better understanding of six of its main
competitors. A
detailed study was carried out that examined the following areas
for each competitor:
- company overview, structure and
strategy
- financial and operating analysis
- current product range
- new product developments
- key service provisions
- pricing structure
- quality issues
- market perceptions
- distribution and sales strategy
- marketing communications
strategy and tactical implementation
- overall strengths and
weaknesses.
With
an accurate assessment of their leading competitors, our client
re-shaped its overall marketing strategy and then implemented
plans aimed specifically to counter competitive strengths and
exploit weaknesses.
The outcome?
Increased revenues and an enhanced market position. |
|
|
How
is it done?
The
straightforward element of CA involves gathering information from publicly
available sources; probing beyond this however needs to be conducted very
carefully to avoid alerting a competitor to your interest and intentions.
Before you decide to invest in any such analysis you should ask
yourself some key questions:
Answering
the question ‘what do we already know?’ is important - if you decide
to bring in an outside specialist you don’t want to pay for information
you already have.
| While
there are additional sources of recorded information that can be
explored (such as commercial databases), speaking to people with
inside knowledge is the most effective way to penetrate beneath
the facade of the competitor.
According to the information you want, these might include
actual employees, ex-employees, industry experts, suppliers,
customers and so on.
Gathering |
Speaking to
people with inside knowledge is the most effective way to
penetrate beneath the facade of the competitor. |
| information
in this way is fraught with difficulties, and requires a creative
mind and lateral thinking to overcome obstacles and avoid
detection.
CA professionals will not give away the tricks of the trade
easily, but skilful interviewers are able to structure their
approach and frame their questions in such a way as to elicit huge
amounts of invaluable information. |
Ethical
questions
CA
should not be confused with espionage; almost all the information needed
can be gathered by examining published sources, interviewing or other
legal, ethical methods. There are certainly grey areas, both between what
could be considered ethical and non-ethical, and legal and illegal - but
the consequences of stepping over the line can be severe in terms of
business reputation and punishment by law.
Not that that prevents some companies from engaging in improper
practices; each year in the USA the FBI investigates hundreds of cases
under the Economic Espionage Act.
The Society of Competitive Intelligence Professionals (SCIP), set
up in the USA but now with a branches in Europe, was established with the
goal of promoting CI as a discipline bound by a strict code of ethics.
So
who’s doing it?
As
disciplines, CI and CA originated in the USA, and most of the new ideas
and supporting technologies are coming from there.
According to SCIP (www.scip.org),
a large proportion of the biggest global companies have
established professional CI operations. However outside the Fortune 500,
many companies still lack a dedicated CI effort, despite the fact
that most managers recognize their success depends on looking ahead
and moving more rapidly than the competition. The industries most
committed to CI, says SCIP, are those that compete in the fastest-changing
environments such as chemicals/pharmaceuticals, communications/telecom and
IT. Traditional manufacturing industries, as well as the retail and
service sectors, are, relatively speaking, just catching on.
The
final word....
No
literature on CI or CA is complete without reference to the words of Sun
Tzu, the great Chinese military strategist of the 5th Century
BC.
His pearls of wisdom on the art of war have been adopted
universally by business people seeking supremacy over competitors.
“If you are ignorant of both your enemy and yourself, then you
are a fool and certain to be defeated in battle.
If you know yourself, but not the enemy, for every battle won, you
will suffer a loss.
If you know your enemy and yourself, you will win every battle.”
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If
you are interested in finding out more about your competitors
either visit
our web site or contact David Eaton on +44 (0)1689 873636.
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