Competitive Analysis.

Here, we introduce the topic and focus

on competitive information sources.

Upon completing this lecture, you'll

become familiar with the following,

competitive information, meaning gathering information for use

in competitive analysis; competitive analysis, where

we apply different models to analyze competitive situations;

and competitive actions, where we

decide on very defensive and offensive tactics.

What kind of benefits do we get from competitive analysis?

Well, we're with many clients and have

seen different types of benefits from working with them.

First, we can detect new entrants

coming in and out of the market and prepare for their arrival.

Second, we can keep abreast of the latest developments

to avoid surprises.

Third, we can predict what competitors

will do based on their past behavior and market situation.

Next, competitive analysis is like an early warning system

that gives us time for corrective action,

such as adjusting prices based on the competitive threat.

Fifth, part of competitive analysis

is understanding how your customers perceive you.

Sometimes, they can surprise you with the organizations

they view as competitors.

And six, we can apply the lessons

learned from other companies, such as Nokia's failure

to keep track of competitors in the smartphone market

and avoid problems.

The competitive analysis process entails

three steps, information, where we

gather competitive intelligence; analysis,

where we seek to understand the intelligence;

and action, where we decide what to do.

We cover each of these areas in the remaining slides

in this module.

We start the discussion with information.

We state at least six useful sources.

The first source is the website of the competitor,

such as dermagist.com, if we were studying

anti-wrinkle cream companies.

We can use websites to learn about their products,

their management, and so forth.

The second source is financial analysts,

such as Dun & Bradstreet, Morgan Stanley, and others,

which is especially useful for private equity firms,

because those firms typically do not publicly

report their financial information,

unlike public firms.

The third source is industry analysts,

such as Forrester, IDC, Nielsen, and others,

which cover the industry and the players in it.

The fourth source is trade publication,

often run by dot orgs, which represent the industry.

They can provide an unbiased view

on the industry and its happenings.

The fifth source is web traffic management tools,

such as those from Alexa and Compete,

which we'll cover in the next slides.

The six source in this short list

is those dealing with social media.

Social media information can be timely but can often be wrong.

So use this information with caution.

In today's online world, information

on web traffic to competitors' sites

can prove useful to assess the role

that the websites play in competitive strategy

and the effectiveness of that strategy.

Using web traffic analysis tools,

such as Alexa and Compete, marketers

can access various website details

such as search volume, audience demographics, and so on.

For example, we can represent anti-wrinkle cream

manufacturer, Dermagist.

We can enter the word Dermagist into the Alexa engine

to find out data for our own company.

We can repeat the process with the website uniform resource

locators, or URLs, for our Dermagist,

such as competitors like LifeCell Skin and 7 Minute

Lift.

Similar to Alexa, Compete allows us to assess website traffic.

Unlike Alexa, it can accommodate multiple websites at once,

making website traffic analysis faster.

Alexa and Compete and many other online tools

offer limited functionality for free

and require ongoing payments to upgrade to pro accounts

offering more functionality.

Google offers two helpful tools to assess

the competitive landscape, as well

as overall trends over time.

The first tool is Google Alerts.

To use Google Alerts, we enter our topic of interest

and the type of data desired, such as news, blogs, video, et

cetera.

We select how often we wish to receive alerts, provide

our email address, and click on the Create Alert button.

Google will now deliver alerts relevant to the topic entered.

In our case, we enter the topic Dermagist

to see what the world is saying about our company.

Google also offers its Google Trends tool.

To use the tool, we enter the category name

in the search box.

In this case, the category is wrinkle cream.

After entering the terms and hitting Explore,

Google gives us an event timeline,

a list of significant events relating to the term,

and the primary regions and languages

associated with the term.

When used regularly, Google Trends

can help us keep abreast of significant developments

in the category.

To recap the previous slides, we have

covered five types of competitive information

sources.

Company websites can provide us with

company-specific information, such as details on products

and the management team.

Financial analysts can provide detailed financial data.

Industry analysts often cover the industry

in general and market leading firms in particular.

Web traffic analysis is useful to see

how traffic varies over time, for example,

after the introduction of a major new product

by a competitor.

And social media analysis can show

what social media channels are saying about our competitors.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

1.2

This lecture covers analyzing competitive information.

We can divide the market into two types-- direct

and indirect competitors.

Direct competitors offer similar products and services

into our market.

Indirect competitors also offer similar products,

but they can be intended for different markets, i.e.

customers.

Principal competitors are a subset of direct competitors.

They represent the companies on which to focus our efforts.

We decide on which companies to focus on

by using the three criteria on the next slide.

We apply three criteria to determine

which companies will make it to the level

of principal competitors.

In this section, we consider the example of companies

manufacturing lawn mowers for the consumer market.

The first criterion is that of time horizon.

Most companies consider a planning cycle of one

year, so we're less focused on companies

that might be three to five years away from producing

competitive product.

For example, companies producing electric lawnmowers

are still plagued with range and power problems that are not

likely to be solved in the coming year, making

them not very essential to include as primary competitors.

The second criterion is the stage and the product life

cycle.

We tend to include, as principal competitors,

companies with products in the same stage as our own products.

For example, Lawnbotts manufactures robotic lawnmowers

for consumer use.

We would not generally include them as primary competitors

because such products are still in the infancy stage

and will have a long way to go before they'll

become a threat to established law mower brands.

In the third criterion, we tend to be

more likely to consider indirect competitors if we

see rapid technological change, such as that for smartphones.

In our lawnmower example, the basic law mower design

hasn't changed much since 1920, making

us less likely to look outside of our closest competitors.

Now that we've identified our principal competitors,

we'll apply multiple models to analyze

the information we have gathered thus

far against those competitors.

We briefly review for relevant models in the coming slides.

Except for the SWOT analysis, the models

have been already covered in detail in earlier sections

so we provide only a summary of each and this section.

We start with the PESTLE analysis,

where we investigate the political, economic, social,

technological, legal, and environmental situations

for the market, seeking to identify potential trends.

We consider the example of household blenders.

For political forces, we examine government effects

on the market, such as proposed tariff reductions

on Chinese imports which could increase the threat level

of Chinese small appliances.

For economic forces, we consider the effect

of economic conditions such as the reduction in purchases

during the recession that began in 2008.

For social forces, we examine the impact of social trends,

such as BlendTec and other innovative companies taking

advantage of the power of social media.

For technological forces, we consider technological advances

in the field such as Waring and Cuisinart

introducing electronic controls for its blenders.

For legal forces, we examine legislation affecting

the use of products, such as Kansas forbidding the use

of blenders in some situations.

For environmental forces, we examine environmental concerns

such as the Environmental Protection Agency, or EPA,

promoting the recycling of small appliances and other goods.

We continue with the Porter 5 Forces analysis,

named after Professor Michael Porter of Harvard University.

In the 5 Forces Analysis, we study five key forces

that can shape markets and predict future conditions.

The first force is that of new entrants,

such as the flood of new manufacturing

companies entering the appliance market, which

can drive down profits.

The second force is the intensity

of rivalry between the top two to three companies

in the industry.

In our case, the market is fragmented

with no clear dominant winner so rivalry effects

are only moderate.

The third force is pressure from substitute products, which

tend to drive down profits.

In the case of blenders, few effective substitutes exists.

Spoons, whisks, and other such products

are little match for blenders.

The fourth force is the bargaining power of buyers.

Thanks to the information and availability

of the internet and the deep recession starting in 2008,

buyers now dictate prices for nearly every consumer good.

The final force is the bargaining power of suppliers.

Due to the glut of manufacturers in the industry,

no one supplier controls a large share,

and thus little supplier bargaining power exists.

We cover perceptual maps in the market segmentation area,

so we'll cover them only briefly here.

This slide shows a typical perceptual map,

in this case for household blenders

at the common price point of about $50.

The map is laid out with the axes of effective power

and feature richness.

The math is based on actual data gathered by consumer magazine

Consumer Reports.

We can see in the map that the survey respondents' perception

of KitchenAid is in close proximity to that

of Black & Decker, which means that respondents

see little differentiation between the two.

The lack of differentiation can mean

that respondents are unwilling to pay much more for one

or the other because they see the two brands as pretty much

identical.

By comparison, Cuisinart stands alone

in the feature rich low power quadrant,

making it a good choice for the market

segment of amateur foodies.

The final tool in the arsenal is the familiar SWOT analysis,

starting with the strengths, weaknesses, opportunities,

and threats of the principal competitors.

One problem most SWOTs have is that marketers simply

list all the strengths they can think of for their own company.

That's a haphazard approach which

could lead to overlooking key strengths and weaknesses.

We recommend instead listing all of the key functions

of the organization as shown in this slide.

For example, we examine leadership, finance, strategy,

and so forth.

In our case of consumer blenders,

we start with a company named Jarden,

which makes the Oster and Sunbeam blenders, as well

as other familiar consumer products, such as Mr. Coffee.

Next, we identify short-term and long-term opportunities

and threats.

For example, Jarden can develop social media campaigns

to promote their products to consumers.

We repeat the SWOT process for all the principal competitors.

As part of the SWOT process, we want

to identify areas of core competency for competitors.

The areas can be any of the typical ones listed

on company organization charts, such as the one shown

in the diagram.

This slide shows an example of different kinds

of strengths for each organizational function shown

in the org chart.

For development, social gaming company Zynga

holds great skill in engaging online audiences using

their development expertise.

For finance, search giant Google has ample cash assets,

allowing it to purchase virtually any company it

finds a threat, which is a formidable advantage.

For human resources, diversified manufacturing company General

Electric grooms its management talent

using its well known internal programs.

For information technology, insurance company Allstate

leverages IT for improved risk management

in its insurance policies.

For operations, fast food company

McDonald's ensures that its famous fries

taste the same all over the world because

of its insistence on strict adherence

to operational guidelines given to its franchisees.

For sales, industrial supply company Graingers

provides consulting to business users

to help them select the products they seek.

For service, department store Nordstrom

delivers on reputation for excellent service.

1.3 competitive strategies

After analyzing the competitive data, it's time to take action.

We can select between defensive and offensive actions,

based on our situation.

In this lecture, we cover both scenarios,

starting with defensive actions.

In defensive actions, we defend ourselves

against competitive threats.

We cover defenses against common competitive attacks here.

Starting at the top, bypass attacks

are those where competitors develop products and services

that bypass or ignore the current thinking of the market.

For example, Nintendo faced Microsoft and Sony

in video game console competition.

Instead of trying to out-graphic the graphics-intensive

competition, Nintendo bypassed the competition

with this focus on the user interface, which we now

know as Wii, as well as the Wii controller.

To defend against a bypass attack,

companies should expand market opportunities into new areas.

In the second type of attack, called encirclement,

companies attack competitors by encircling them

with superior forces and assets.

For example, Bank of America employed encirclement strategy

to attack competitors by emphasizing

its vast number of automated teller machines, or ATMs.

In flank attacks, competitors attack weak areas

of companies in the market.

For example, HP known for its server product line,

could execute a flank attack against networking hardware

company Cisco.

To cover flank attacks, companies

should address their weaknesses knowing that competitors

will exploit them.

In frontal attacks, companies meet competitors head on,

fighting against their primary strength.

And that's exactly what happened when desktop software giant

Microsoft competed against Google by launching its Bing

search engine.

To counter frontal attacks, companies

should consider diversification to avoid risk of exposure

to any one area.

In guerrilla attacks, competitors strike at random.

For example, some smaller companies

attack competitors by posting misleading comments

on the competitors' social media channels.

To defend against guerrilla attacks,

companies must constantly be on their guard,

vigilantly monitoring operations to stop

guerrilla attacks before they get a chance to do great harm.

We can predict what type of attacks

our competitors will make by examining where their core

competencies lie.

The chart in the slide shows some typical examples.

If companies have great expertise

in development, finance, or marketing and sales,

as Nintendo did, they are fairly likely to execute a bypass

attack.

If companies have competencies in finance and operations,

such as those of Bank of America,

we can predict an encirclement attack will occur.

If companies are strong in development and marketing,

they'll likely use them as part of flank attack.

When companies are really strong in finance and sales,

they have the ability to execute a frontal attack.

And when companies have strength in human resources,

whether they have hundreds or thousands of personnel

at their disposal, we can predict a guerrilla attack.

We're not limited to defensive positions only.

We can also take offensive positions.

In general, the most common ways are

to enter a new market segment as automaker Skoda did,

to execute a new go-to-market approach as Lenovo did

with different channels for different segments,

or to create differentiating functionality as hotel operator

Westin did with its Heavenly line of mattresses, pillows,

and bed sheets.

Go-to-market strategies can be a powerful method

of taking offensive action.

We show several examples on this slide.

For example, we can bundle different products and services

together to tailor our offerings to different segments

as automaker General Motors did.

We can offer our products and services

through multiple distribution channels

as Nike does, selling its products virtually everywhere.

We can structure our products and services

to permit interval ownership to reduce overall ownership

costs as flight operator NetJets does with its business jets.

We can also offer leases instead of demanding payment upfront

as Ford does with its leasing plans.

Some cellular service providers offer

prepaid plans, such as Virgin Mobile,

allowing customers lower prices by having customers pay

before the services are used.

Last but not least, we can offer rental of our products

and lieu of outright ownership as apparel renting company Rent

the Runway does with its haute couture line of clothing.

In this module, we identified several sources

of competitive information.

We recommended that marketers test out each source

to find their own set of go-to sources

for competitive intelligence.

We also showed how one can apply that competitive intelligence

toward a competitor by understanding the market better

using PESTLE, Porter, and other analyses.

We closed the module by showing how

to decide on specific defensive or offensive competitive

actions.