Competiton Analysis - Week 4

This week was the first week without Cohen’s book and although I was missing new Drucker information, his work can still be applied to other aspects of the class as well as Lehmann’s book.

This week was all about competitor analysis, the dangers of it, how to write it, advantages and mapping your competition. To start competitive analysis is research done to discover exactly who the competitors are in the market and their strengths and weaknesses (Lombardo - Foreign and Domestic Business Competition: Definition and Regulations). In other words, this can be where a company finds out what is lacking in their companies product. It leaves room for another company to innovate and offer the customer something that another company cannot. For instance, in class there was a discussion about the Apple iPhone. Apple discovered and made popular a phone with components of other companies that are used everyday. So a PDA, mp3 player/iPod, maybe a video game system and cell phone were all devices that were carried separately and made by various companies. What Apple did was innovate. They were able to see that all of these devices were used on a daily basis and the customer needed an easier way, more compact way to travel with all of them. Differentiation, or a way of spotlighting the differences between competitors, stores or products, is exactly what Apple did. The difference was of value and noticeable to the consumer because there was so much contained in one device, which made it easier for the customer.

 

In the Dangers of Competitor Analysis article, another important point was brought up. There can only be so much emphasis on researching ones competition before you are running in circles. It’s the companies or competitors that you cannot track that are the more important to know about and those are the competitors that don’t exist yet. Just like CCC Information Systems, a company can explode on to the market and surpass even the greatest brands. This takes me back to something said in class. IBM did not even see Apple as a big competitor and now look what has happened. With the innovation of the iPhone and other products, Apple has become a force on the market. Lehmann has also stated that this research of competitors can be seen as a defensive move, in order to sustain the company and make sure valuable information does not fall into the wrong hands (93). Figure 4.1 shows the system for gathering this defensive data (Lehmann 95).

Secondary sources are generally less expensive and easier to obtain than primary data and often cover most of the important questions we need to ask about competitors. This information can be found any where from the Internet to local newspapers to consultants (Lehmann 96). Primary data can be seen as gathering information right from the source such as employees, suppliers, investment bankers, etc.

“At the product level, a marketing strategy can be thought of in terms of three major components: target market selection, core strategy (i.e., positioning and differential advantage), and implementation (i.e., supporting marketing mix)” (Lehmann 112). This is just as important as assessing competitors strategy, both can be easily determined by examining three sources of information: product sales literature, the company’s own sales force, and trade advertising (Lehmann
116).

Included in this is the important task is to assess the technological strategies of the major competitors. This can be done using the following framework of six criteria (Maidique and Patch, 1978):

1. Technology selection or specialization.

2. Level of competence.

3. Sources of capability: internal versus external.

4. R&D investment level.

5. Competitive timing: initiate versus respond.

6. R&D organization and policies. (Lehmann 118)

 

Mapping your competition is also an important task to see where your products compare to others. In order to draw a position map a company must first define the market or cast a wide net of the consumers needs. Next the price should be chosen and the primary benefit determined. This will show where the product compares to other products. For example, if there is a similar product on the market that is of a higher price but lesser value, they have less to offer than your product. Lastly, plot positions and draw the expected-price line. As we can see in the plot below (D’Aveni 114), the iPhone has the highest price but at the same time has the most to offer the consumer. Apple has stayed ahead in markets such as the MP3-player market since October 2001 by giving customers more functionality and additional storage capacity at even lower prices. That has made it tough for competitors like Sony, Dell, and Creative to gain toeholds (D’Aveni 115).

I also found out how to do this in Pharmasim. When I enter the simulation and go to the Tradeoffs tab there is a map of consumers’ perceptions in terms of symptoms relief, price, and value. The plot can show whether or not competitors provide relief and it can also show potential market opportunities or areas that are not being satisfied by a competitor.

A similar way to map your competition is in Figure 2.2 below (Lehmann 34). This shows the general proximity in terms of levels of certain products of competition and how they measure next to each other. Unlike the plot, these products may not be in the same market but they still compete for the customers business. At the same time, the narrowest perspective one can take of competition is
called product form. “These products typically pursue the same market segment, and their features therefore have similar values. As Figure 2.2 shows, from Diet Coke’s perspective, a narrow view of competition would include only diet colas, such as Diet-Rite and Diet Pepsi. These brands appeal to similar consumers: those seeking a cola taste with low calories” (Lehmann 35). This, like the mapping plot, is a narrow view of competition. The second level of Figure 2.2 has similar features of the first level or known as the product category that is thought of as the industry. The third level is deemed generic competition defined as consisting of those products and services fulfilling the same customer need (Lehmann 36).

I thought it was interesting in class when we were talking about established brands such as Coca-Cola and Heinz. They have gained popularity because of their coveted taste. However, if there was a product that was cheaper and of the same quality they would still be the popular brand. As I listened to this, I was thinking how I have specific brands of hair spray and running shoes, and sports equipment, etc that I consistently buy and will always buy because they are brands that I trust. I know that they work so I don’t need to try something else.