Mmi v competitor analysis

1. A Business Strategy
Where to Compete
The product-market investment decision
How to Compete
Value Assets & Function area
proposition competencies strategies and programs
Figure 1.1
A Business Strategy

2. Competitor Analysis
“They came in groups, they measured, they
sketched and they tape recorded everything
they could. Their questions were precise.
They were surprised how open the
Americans were.”

3. That was an account of Japanese efforts at
competitor analysis in the 1960s in the U.S
automobile industry. By the 1970s they were able to
penetrate the US market successfully.
Similarly, they studied the design approaches of
European manufacturers, especially their design
approaches
“ The best and fastest way to learn a sport is to watch
and imitate a champion.” ( Bruce Henderson,
Founder of BCG)

4. In contrast …..
The Americans were late in even recognizing
the competitive threat from Japan and never
did well at analyzing Japanese firms or the
new strategic imperatives created by the
revised competitive environment

5. Clearly….
One big reason why the Japanese were able to
succeed was that they were much better than
US firms at doing competitor analysis.

6. An Indian Fairy tale
In 1969, Karsanbhai Patel, a chemist at the
Gujarat Government's Department of Mining
and Geology manufactures phosphate free
Synthetic Detergent Powder, and starts selling it
locally. The new yellow powder is priced at Rs.
3.50 per kg, at a time when HLL’s Surf is priced
at Rs 15.

7. Soon, there is a huge demand for Nirma in
Ruppur (Gujarat), Patel’s hometown. He starts
packing the formulation in a 10x10ft room in his
house. Patel names the powder as Nirma, after
his daughter Nirupama.

8. • Patel is able to sell about 15-20 packets a day
on his way to the office on bicycle, some 15
km away.
• By 1985, Nirma washing powder has become
one of the most popular, household
detergents in many parts of the country.

9. Nirma is the lowest- priced branded washing powder
available in grocery stores. The middle-class housewife
is happy as she can now choose a lower-priced washing
powder against Surf, which is beyond her budget.
Nirma also has an impact on upper-middle-class and
higher income families, who choose Nirma for washing
their inexpensive clothes.

10. Starting as a one-product one-man outfit in 1969,
Nirma becomes a Rs 17 billion company within three
decades.
The company has multi-locational manufacturing
facilities, and a broad product portfolio under an
umbrella brand – Nirma. The company's mission : to
provide, "Better Products, Better Value, Better Living"
contributes a great deal to its success.
Nirma successfully counters competition from HLL and
carves a niche for itself in the lower-end of the
detergents and toilet soap market.

11. The belated response….
Hindustan Lever Limited (HLL)1 reacts in a way
typical of many multinational companies. Senior
executives are dismissive of the new product:
"That is not our market", "We need not be
concerned." But very soon, Nirma's success in
the detergents market convinces HLL that it
really needed to take a closer look at the low-
income market.

12. The Giant awakens…
Around 1984, HLL decides to take a fresh look at
the market. In order to counter attack Nirma,
HLL launches Sunlight (yellow), Wheel (green)
and Rin (blue) detergent powders for different
market segments.
This strategy of segmenting the market helps
HLL win back part of its lost market.

13. The goal of competitor analysis
To gain insights that will influence the product –
market investment decision or the effort to obtain or
maintain a Sustainable Competitive Advantage( SCA)
Focus should be on the identification of threats,
opportunities, or strategic uncertainties created by
emerging or potential competitor moves,
weaknesses ,or strengths

14. Competitor Analysis
Commences with identifying current and potential
competitors.
2 Approaches for this :
a) Competitors are grouped according to the degree they
compete for a buyer’s choice. The perspectives of customers
who must make choices among competitors are examined.
b) Competitors are placed into strategic groups on the basis of
their competitive strength.

15. After identifying competitors
The focus is on understanding them and their
strategies. An analysis of the strengths and
weaknesses of each competitor or strategic
group is then done.

16. Structure for Competitor Analysis
Who are the competitors ?
Against whom do we usually compete? Who are our most
intense competitors? Less intense but still serious
competitors? Makers of substitute products?
Can these competitors be grouped into strategic groups on the
basis of their assets, competencies and /or strategies?
Who are the potential competitive entrants? What are their
barriers to entry? Is there anything that can be done to
discourage them?

17. Evaluating the Competitors
What are their objectives and strategies? Their level of
commitment ?
Their exit barriers?
What is their cost structure ? Do they have a cost advantage or
disadvantage?
What is their image and positioning strategy?
Which are the most successful /unsuccessful competitors over
time?
Why?

18. What are the strengths and weaknesses of each competitor or strategic
group?
What leverage points could competitors exploit to enter the market or become
more serious competitors ?
Evaluate the competitors with respect to their assets and competencies.
Generate a competitor strength grid.

19. Identifying Competitors
In most instances primary competitors are obvious
Coke with Pepsi and other colas brands and private
labels
Citibank with Chase and Bank Of America and other
major banks
NBC with ABC ,CBS and Fox

20. Businesses that compete most directly will often
use the same business model and the same
assumptions about customers.
Usually focusing on price is the winning factor,
with a resulting erosion of profitability.

21. Business Models are eroding
Owing to :
Changing customer priorities
Indirect competitors becoming strategically
relevant.

22. Colas, Banks, TV networks are no longer as dominant as
they were
Coffee is bought and consumed differently. ( eg Costa,
Starbucks)
Coke ignored emerging submarkets in water, iced tea,
fruit – based drinks while focusing on Pepsi. Hence
missed opportunity and has had to follow an expensive
and difficult catch – up strategy.

23. While major television networks struggle
against each other ESPN, CNN have
flourished.
Nintendo, the Internet, Home Shopping are
competing for the leisure time of viewers.

24. With banks focusing on competing banks
Mutual funds, insurers, brokers have cut
into their traditional markets.
Thus, Competitive analysis will benefit from
extending the perspective beyond the obvious
direct competitors.
By taking indirect competitors into its purview
the strategic horizon is expanded

25. In the real world the customer is never
restricted to a firm’s direct competitors but is
always poised to consider other options.

26. 2 approaches to identifying
competitors
Customer Choices : If not this product, what? If price
of this brand increases what would you use?
Product - use Associations : Specific – use contexts or
applications. List use situations and applications .How
appropriate each product is for each use context?
Eg. If Pepsi is appropriate for snack occasions it would
compete primarily with products similarly perceived.
This would also hold true in the case of several distinct
applications.

27. Identifying competitors - Strategic groups
A group of companies following the same strategy in a
given target market is called a strategic group.
A strategic group is a group of firms that :
Over time pursue similar competitive strategies
Have similar characteristics ( eg, size, aggressiveness)
Have similar assets and competencies

28. Potential competitors
Market entrants who might engage in :
Market expansion ( Come into new territory)
Product expansion ( eg. From shoes to apparel to the
same customers)
Backward integration ( A soup company making its own
cans)

29. Forward integration ( Opening up retail stores for one’s
products)
The export of assets and competencies ( A current small
competitor with critical strategic weaknesses bought up by a
company with muscle may pose a threat)
Retaliatory or defensive strategies (Firms that are threatened by
a potential or actual move in the market might retaliate).

30. Understanding Competitors
Competitor actions are influenced by 8
elements :
•Financial performance : Size, growth and
profitability
•Image and positioning strategy
•Competitor Objectives and Commitment

31. • Current and past strategies
• Competitor Organization and Culture
• Cost Structure
• Exit Barriers
• Assessing Strengths and Weaknesses

32. 32
Understanding the
Competitors
Objectives and
Commitment
Image and
Positioning
Size, Growth
& Profitability
Current and
Past Strategies
Strengths and
Weaknesses
Cost Structure
Exit Barrriers Organization
and Culture
Competitor
Actions
Figure 4.3

33. Competitor Strengths and
weaknesses
These are based on the existence or absence of
assets.
For identifying competitor strengths and
weaknesses it is necessary to identify the assets
and competencies that are relevant to the
industry.

34. 5 questions to ask
Why are successful businesses successful and why are
unsuccessful businesses unsuccessful?
What are the key customer motivations?
What are the large cost components?
What are the industry mobility barriers?
Which components of the value chain can create
competitive advantage?

35. Obtaining Information on Competitors

36. Value Chain
The Value Chain is a useful tool to identify
significant value-added components.
Developed by Michael Porter it consists of two
types of value – creating activities and should be
considered in assessing a competitor.

37. The Value Chain
Firm Infrastructure
Human Resource Management
Procurement
Technology Development
&
Source: Reprinted with permission  1985 Michael Porter
Figure 4.5
Support
Activities
Primary Activities
Procurement
Inbound
Logistics
Operations Outbound
Logistics
Marketing
Sales
Service
Human Resource Management
Firm Infrastructure

38. Primary Value Activities
• Inbound Logistics
• Operations
• Outbound Logistics
• Marketing and Sales
• Service

39. Primary Value Activities
Inbound Logistics : Material Handling and
Warehousing
Operations : Transforming inputs into
the final product
Outbound Logistics: Order processing and
distribution

40. Marketing and Sales : Communication,
pricing and channel management
Service : Installation, Repair and parts

41. Secondary Value Activities
Procurement : Procedures and Information System
Technology development : Improving the product and
processes/system
Human Resource Management : Hiring, Training and
Compensation
Firm Infrastructure : General management, Finance,
Accounting, Govt. Relations ,Quality Management

42. Question to consider
Which components of the value chain can
create most competitive advantage for a
competitor either in terms of customer
benefits or reduced cost?

43. Checklist of Competitive Strengths
and Weaknesses
• Innovation (Sony,3 M)
• Manufacturing ( L&T)
• Finance ( Reliance, Tatas, Birlas)
• Management ( GE, Sony, Disney)
• Marketing (HUL, ITC, Gatorade, Dell, BOA)
• Customer Base ( Cellular phone cos.)

44. Innovation
• Technical product or service superiority
• New product capability
• R &D
• Technologies
• Patents

45. Manufacturing
• Cost structure
• Flexible production operations
• Equipment
• Access to raw materials
• Vertical integration
• Workforce attitude and motivation
• Capacity

46. Finance Access to capital
• From operations
• From net short term assets
• Ability to use debt and equity financing
• Parent’s willingness to finance

47. Management
• Quality of Top and Middle Management
• Knowledge of business
• Culture
• Strategic Goals and Plans
• Entrepreneurial thrust
• Planning / Operation System
• Loyalty/Turnover
• Quality of Strategic decision making

48. Marketing
• Product Quality reputation
• Product characteristics/Differentiation
• Brand name recognition
• Breadth of the product line –systems
capability
• Customer Orientation
• Segmentation/Focus

49. • Distribution
• Retailer relationship
• Advertising/Promotion skills
• Sales Force
• Customer Service/ Product support

50. Customer Base
• Size and loyalty
• Market share
• Growth of segments served

51. Technologies in the Value Chain
INBOUND
LOGISTICS
OPERATIONS OUTBOUND
LOGISTICS
MARKETING
AND SALES
SERVICE
PROCUREMENT
TECHNOLOGY
DEVELOPMENT
HUMAN
RESOURCE
MANAGEMENT
FIRM
INFRASTRUCTURE
Information System Technology
Planning and Budgeting Technology
Office Technology
Training Technology
Motivation Research
Information Technology
Product Technology
Computer-Aided Design
Pilot Plant Technology
•Diagnostic and
Testing Technology
•Communications
Technology
•Information
Technology
•Transportation
Technology
•Material Handling
Technology
•Storage and
Preservation
Technology
•Communication
System Technology
•Testing Technology
•Information
Technology
Information Systems Technology
Communication System Technology
Transportation System Technology
Software Development Tools
Information Systems Technology
•Basic Process
Technology
•Materials
Technology
•Machine Tools
Technology
•Materials Handling
Technology
•Packaging
Technology
•Testing Technology
•I/nformation Tech.
•Transportation
Technology
•Material Handling
Technology
•Packaging
Technology
•Communications
Technology
•Information
Technology
•Multi-Media
Technology
•Communication
Technology
•Information
Technology
Figure 3-8
Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from
COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright
© 1985 by Michael E. Porter., p. 167.

52. Competitive Strength Grid
• Identify relevant assets and competencies.
• Scale your firm and the major competitors or strategic
groups of competitors on those assets and
competencies
• An SCA is almost always based on having a position
superior to that of the target competitors in one or more
asset or competence area that is relevant to the industry
and strategy employed.
• A competency that all competitors have will not be the
basis for an SCA.

53. Class Exercise
You are a new company entering the car market in
India. Your Group project team will now work on drawing
a competitive grid giving weightage to each chosen
Factor ( Key and secondary ) for your selected segment
and present the grid in the next class.
Use your own knowledge, perceptions, plus the net for this
exercise.
Use 2 slides to explain the strong features of your car and
where you have positioned it in your chosen segment and
why.

54. External Analysis - 2. The Competition
America Japanese European
Cadillac
(GM)
Lincoln
(Ford)
Lexus
(Toyota)
Acura
(Honda)
Infiniti
(Nissan)
Benz Volvo BMW Audi
Assets and
Skills
Keys for Success
New product
capacity
2 3 5 3 4 3 1 2 1
Product quality 1 2 5 3 4 5 3 2 2
Cost Structure 3 5 4 3 4 1 1 1 2
Product
differentiation
2 2 3 2 3 5 4 5 4
Deal satisfaction 1 3 5 4 5 4 2 2 1
Market Share 5 5 2 2 2 3 1 1 1
Secondary
Importance
Flexible production 3 4 5 4 5 1 1 1 1
Financial capability 3 5 4 2 3 2 1 3 1
Quality of
management
5 5 3 3 2 3 2 3 1
Sales
force/distribution
5 5 3 3 3 4 2 3 1
Brand name
recognition
5 4 3 3 3 4 1 3 1
Advertising/promotio
n
5 5 3 2 2 3 1 3 1
Quality of service 3 3 5 4 5 1 2 1 1
Growth of target
segment
3 3 5 5 5 2 1 2 1
Legend
Strong 5
Above Average 4
Average 3
Less Than Average 2
Weak 1
Competitive Strength Grid
gl

55. Segmentation based on body
length and price
r Segment
Distinguishing
feature of the cars in
this segment
Car model belonging
to the segment
A Cars priced below
Rs. 3.5 Lakh
Alto, Spark, Nano,
Eon
A1 Hatchback priced
lower than Rs. 6
Lakh
Santro, Indica, Beat
A2 Hatchback priced
between Rs. 6 to 7.5
Lakh
Ritz, i10, i20, Swift,
Figo
B1 Vans Versa, Omni
B2 MUV/MPV Sumo, Innova
C1 Sedan models priced
below Rs. 8 Lakh
Indigo, Fiesta, Sunny
C2 Sedan models priced
between Rs. 8 to 9.5
Lakh
Verna, Manza, Linea
D1 Premium Sedan
models priced below
Rs. 15 Lakh
Fluence, Corolla
D2 Luxury Sedan
models priced below
Rs. 25 Lakh
Sonata, Camry,
Kizashi
SUV SUV Vitara, CRV