The goals and methods of competitive analysis

Analysis of competitors once every five years? Really? Yes, now in five years entire industries are dying, and new ones are being born. Maybe today, when everything around is changing with cosmic speed, such analyzes are not needed at all? What about benchmarking? Is this also a competitive market analysis? We have the right comments and questions, and we will begin with them.

The feasibility of conducting strategic competitive analysis is not an idle question at all. Many owners and business leaders have been abandoning this kind of marketing research recently. Their arguments are reluctance to spend time and money on something that has no information value and will not make any changes to their business strategy. Of course, this point of view has the right to life and, moreover, is absolutely logical and true. But only in certain cases.

Benchmarking sounds much more modern. But at its core, this is the same competitive analysis, it is simply carried out for a different purpose, which can be formulated as "alignment with the standard, that is, with the best." This type of analysis relates more to the field of strategic management than to marketing. But the methods of competitive analysis are exactly the same.

If you still conduct such marketing research, how often do you do it? And with what depth? And how to identify the main competitors - not everyone can take for analytical comparison? This is the second set of questions that must be answered before starting any work related to the competitors of your company. We start the review with the classic heavyweight in competitive marketing and dot the i in the “old-fashioned” five-year version — Michael Porter’s competitor analysis. At the same time we will deal with his old-fashioned. But before that, we will determine the goals of competitive analysis: these are technologies for identifying significant competitors and forecasts of their market behavior.

Long-Term Porter Analysis

Porter analysis is really carried out no more than once every three to five years. The work style in this case is “piece-wise” - each competitive company is analyzed individually and in stages:

1. Competitor's potential: its strengths and weaknesses.
2. The main driving force of a competitor. What does he need in the market? His goals and motivation.
3. The current strategic position of a competitor and its capabilities in the market in the near future.
4. The competitor's plans for the future in the market and the industry as a whole.
5. Forecast of competitor's actions for the future.

Porter competitive analysis of firms requires a lot of time and effort. This marketing heavyweight is useful in companies and enterprises that use expensive equipment and long technology. Such companies require long investments and do not grow in one or two years. For example, enterprises of the nuclear industry, metallurgical or petrochemical processing plants, the construction of which requires huge financial investments. Often there are cases when such giants do not think about competition at all (they do not even keep such specialists on the staff of marketers), which is a serious strategic mistake. “Big ship - big sailing” is the most accurate definition of the appropriateness of a competitive analysis of a Porter enterprise for industrial heavyweights.

By the way, heavyweights are not only in the "heavy" industries. There are more of these in the consulting field today. The competition among them is serious, and therefore, a preventive analysis of the competitive environment should also be deep and detailed. The difference from the "heavy" companies in the frequency of analysis. The consulting business is much more mobile; competitors cannot do with five-year reviews; annual research is required here at a minimum.

Five forces of competition

Michael Porter has a theory of the five forces of competition. You need to know this theory, it helps marketers and a business leader make the right decision about the appropriateness and depth of the company's competitive analysis here and now. The rule of the five forces of competition:

• The weaker the influence of competitive forces, the more opportunities the company has for high profits in the industry. Conversely, the higher the influence of competitive forces, the higher the likelihood that no company will be able to provide high return on investment.

New players in a competitive market

Beginners are dangerous with their possible new technologies, behavior, standards - you never know what to expect from them. Newcomers in sectors with expensive means of production are less dangerous - they simply are not there or extremely few. Such industries have a high entry threshold. The height of this threshold (and therefore the defense against new players) can be influenced by several mechanisms and methods:

• With large volumes of production, costs per unit of output are significantly lower than with medium or small volumes. Too low return on entry is becoming an insurmountable barrier for beginners.
• The large number of brands and trademarks with wide lines of diverse products within them makes it difficult for a beginner to search for a free new niche.
• The need for long and large investments at the entrance (expensive high-tech equipment) practically blocks the way for beginners in the industry.
• A high level of fixed costs makes minimum or zero profit in the initial stages of production.
• The inaccessibility of the consumer audience is another serious barrier for new entrepreneurs - newcomers.
• The most armor-piercing protection is the participation of the state with the help of strict regulations and requirements for products and shared state ownership of companies. The higher the degree of state participation, the lower the degree of desire for new players to join the market. Beginners always need more room for maneuver, new moves and quick overhauls. Such numbers will not work with the state ...
• We must not forget about the wide “military” opportunities and competitive advantages of existing companies: they can counteract entry into the market in a variety of ways - from advertising pressure to price dumping, in order to maintain market share.

Consumer Power

One of the brightest pages in all modern marketing. Customer power has always been high; today, the degree of consumer influence is rapidly increasing with increasing growth rates.

Such growth makes competition even tougher. Requirements for the quality of the product and in particular the price of this product can negate all the efforts of the company in the form of zero profit. Today's consumer is moody and often manipulated by competing companies. Modern methods of competitive analysis necessarily include a consumer behavioral "page", it is now an indispensable component of marketing.

Power suppliers

The influence of suppliers on the competitive ability of companies is higher than it might seem. First of all, these are prices for raw materials and intermediate resources, which ultimately affect profitability during the implementation of the company's final product. Suppliers have another powerful lever of influence - the quality of raw materials. And of course, the punctuality of its delivery. The dictates of suppliers can be especially pronounced if there are few in the industry. Any competitive analysis of an organization that claims to be effective should include a detailed layout of all suppliers.

Power Substitutes: Not Only Generics

The appearance on the market of substitutes of a very different sense can be a real disaster for both consumers and manufacturers of original products. First of all, their quality and prices are much lower, which deforms the entire competitive picture towards unfair play. Switching consumers to substitute products without explanatory work can lead to the most sad events. This is especially true for the pharmaceutical (production and sale of cheap generics) and the food industry. In the analysis of the competitive environment of the enterprise, it is important not to miss this rather new factor in the development of markets.

Competition among their

Competitive companies behave differently in the market; this is usually one of four behavioral patterns of reaction to rival strategies:

1. A leisurely competitor either does not notice the “movements” of his market rivals at all, or does it leisurely and in a small amount. The nature of this behavior can be anything: from the impenetrable stupidity of marketers (this may well be) to complete confidence in their loyal customers (again, the stupidity of marketers). Or maybe the company’s real state of affairs is so unenviable that there simply are no resources for an adequate response to competitors. The main thing here is to understand the reasons for this slowdown.
2. A discerning competitor is “capricious” and reacts only to selective types of competitive attacks - for example, to an increase in advertising activity, while dumping price reductions are of no interest to him. The reasons for this intelligibility also need to be understood.
3. Lev is very aggressive in the market according to all possible criteria, including in response to any changes in competitive strategies. But with the “lion" it’s easy - you don’t need to rack your brains, guessing the reason for its any passivity, there simply are no such passivities.
4. An unpredictable competitor is the most difficult because you never know what he will throw out at the last moment. Sometimes it is a blow in response to a blow, sometimes a complete disregard. Usually these are small companies that decide when they can afford to "get into a fight" and when not.

There is another method related to modern models of competitive analysis. This is an accurate diagnosis of the prospects and potential of a competitor. To do this, collect the following data:

• Competitor's market share at the moment.
• The percentage of customers who choose this company in response to the question “which company in the industry comes to your mind first,” says consumer knowledge.
• The percentage of customers who will name this company in response to the question “whose products would you buy if you would choose,” says customer loyalty.

This is a very expensive analysis of competitive advantages and potential, but the game is worth the effort, especially when it comes to a formidable market adversary with whom you need to build a long-term competitive strategy. The fact is that in this informational diagnostic triple there is a most important regularity: companies that have a high percentage in the last two paragraphs will definitely increase their share in the first paragraph.

Criteria for evaluating and selecting competitors for analysis

The most accurate way to measure a competitor’s success is to know his net profit. But if this is not possible, you have to tinker. If we talk about a competitive analysis of an enterprise, especially an industrial one, then the criteria for evaluating its competitors will be more traditional:

• company size;
• profitability;
• special characteristics of goods or services, if any;
• customers
• product promotion system.

But if we are dealing with a service company, then we cannot do without additional criteria for analyzing its competitive advantages:

• popularity among buyers;
• Search engine visibility
• advertising activity and evaluation of advertising budgets;
• work with social networks;
• corporate website quality;
• secret spy: call, "test purchase".

It is difficult to overestimate the importance of reliable information about competitors, including the maximum number of characteristics and comparative evaluations, strengths and weaknesses, marketing tools, etc. Significant information about each competitor, without which an effective competitive market analysis is impossible, includes the following elements:

• Strategic goals in the market (capture of new sectors or groups of consumers, increase of market share, entry into the top three, etc.).
• Current market situation (position in the group).
• Availability of strategies for structural changes (expansion, absorption, reduction).
• Financial and technological potentials, strengths and weaknesses;
• Product Portfolio: Its Structure and Change Strategies.

If you do not have special insiders, you are unlikely to know the exact wording of the strategic goals of competitive companies. But you can figure out the goals by answering one of the main questions for each competitor: “What is he looking for in the market?”

Analysis of the strengths and weaknesses of competitors

Each company defines its goals within the framework of strategic planning, taking into account many factors - this is a classic of strategic management. Resources and opportunities are the two main factors that determine the success and implementation of the strategy and the goals set by competitors.

Most often, information about cash flows, sales, profits and production capacities is not direct, but secondary - from rumors, personal experience, etc., it is difficult to regard it as reliable. Improve its quality will help marketing research among suppliers and consumers. Dealers, if any, can also be valuable sources of information.

Preliminary work

First you need to find and select the right competitors for further competitive analysis. Usually there are no more than five such competitors. Sources of information about them are very different, they may be quite enough for a qualitative analysis:

• Customer research - surveys and gathering consumer opinions. This kind of customer information is especially useful for analyzing the strengths and weaknesses of competitors.
• “Mystery shopper” - confidential monitoring of competitive sales of various formats in the person of an outside buyer. The method is informative to identify weaknesses and strengths, especially small details that only a professional eye can see.
• Internet research: a huge layer of information, ranging from corporate sites to professional forums and special collectors of reviews and opinions. Do not forget about network advertising budgets, network contextual advertising and social networks - all this is a real information Klondike, if used correctly.
• If possible, interviews and surveys of experts from your industry and markets in general. If this is not possible, monitor and read more of all possible expert opinions on the Web.
• Some of the most informed people are field sellers. They need not only to be questioned, they must be constantly friends with, asked questions, and asked to follow up on these or those competing neighbors and their sellers. Field information is distinguished by its reliability and, most importantly, efficiency and constant updating.
• Specialized exhibitions, reviews, seminars, conferences. No comment here.

Ten stages of competitive analysis

1. An overview of the overall level of competition in your industry. At this stage, we are talking about the "mobility" of the market, which depends on the number of players in the market, the speed of emergence of new products. In markets with high competition and many players, it is more difficult to find a free niche and qualified employees (they have high salary expectations). In such cases, the risk of losing profits is higher. You need to constantly monitor the general state of the market, taking into account your own past reviews over the past three years. You do not need to trust specialized sites or magazines publishing such reviews, do your own, do not be lazy.
2. Formation of a map of competitors is a very simple and at the same time useful step. The map is built according to two parameters: growth rate (vertical) and market share (horizontal). Many will ask the question: “why build a map when market leaders are already well known?” We will answer: do not be lazy here, too, build. The magic effect of the picture - everything is visible better and in a completely different way, we guarantee. You are sure to find a couple of interesting points for yourself. It is possible that a generally unrecognized leader is driving the market, try it. It is enough to place only five companies. And do not forget to place your company on the map.
3. Competitive analysis of product lines. Rulers are sometimes called portfolios. The main thing is an exhaustive and honest analysis of our and others' products. It can be tests, polls, forums. We pay special attention to key products that provide the highest share of profit or sales. This is an analysis and competition of hits - friends and foes.
4. Price analysis should be carried out with the allocation of three or four classic price segments: economy, medium, high and premium segments.
5. Analysis of distribution and sales of products from competitors. .
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7. Evaluation of advertising and promotion of competitors' products, including advertising budget. It is much easier to find and evaluate information about advertising, if it is distributed on the network. There are a number of sites and programs with which you can find not only numbers, but also statistics on the advertising behavior of competitors. We must not forget about advertising layouts - from them you can find out data on consumer persuasion strategies - valuable “intelligence” information.
8. Creating a portrait of a key consumer in the interiors of your competitors. The parameters have not changed for a long time and correspond to the description of any target group of people: age, gender, income, by what criteria the product selects.
9. Analysis of the technological capabilities of competitors, which include staff competence, IT support capabilities, financial stability, technological “mobility” and so on. At this stage, no information about competitors will be superfluous.
10. For dessert, we have a classic SWOT analysis of competitive advantages with its strengths, weaknesses, threats and advantages. There is no need for a competitive analysis to deploy a detailed version of the SWOT analysis; the light option with one or two main points on four points is enough.

And now benchmarking

It can be called a competitive analysis of the industry. Or marketing intelligence. Or just a comparison with industry best practices. What for? To become better ourselves. This is a very young concept, it was born only at the end of the 20th century and immediately became a very popular tool for strategic management.

“To become better ourselves” is a short and comprehensive goal of any benchmarking. Formally, this is a technology for collecting information about competitors to use their positive experience in their own practice. Does this mean that such marketing research can be carried out in open mode and that competitors will be happy to open doors for you, drink tea with cookies and share all the information? Of course not. Competitors do not need you to use their best practices and gain weight in the form of market share. However, benchmarking is a positive and “smart” phenomenon in modern marketing. It allows you to conduct interesting studies to analyze the competitive environment with unexpected and useful conclusions. These conclusions are no less rigid than in the usual attacking competitive strategies. One of the best examples of competitive analysis in the form of benchmarking is the 2014 study, which was conducted for the largest companies in Kazakhstan (railway companies, gas, uranium, etc.). It was after this that the business transformation began and is still being carried out with success - increasing the portfolio value of all significant Kazakhstani companies.

Finish what we started. Expediency (is it necessary or not?) And the type of competitive analysis (if necessary, which one) are the two main questions that must be answered before proceeding with the study. Perhaps you need benchmarking more. Or perhaps you don’t need any special analysis, but you can get by with an express review of grocery prices and lines. Although this is an analysis ... Good luck to you and smart marketers.