Competitor analysis

Competitor Analysis
Dr. Gopal Thapa
Tribhuvan University

Competitor Analysis
 Competitive analysis is the assessment of the
strengths and weaknesses of competing firms
 A competitor is a firm in the market selling a
product which is perceived as substitute by buyers
 Competitor analysis is the processing of
analyzing information about competitors and their
products in order to build up a picture of where
their strengths and weaknesses lie.
 - Dictionary of Marketing
7/13/2020 Copy right reserved 2

Competitor Analysis
 Competitor analysis is second phase of external
analysis.
 The analysis should focus on the identification of
threats, opportunities, or strategic uncertainties
created by emerging or potential competitor
moves, weaknesses or strengths.
 Competitor analysis starts with identifying current
and potential competitors.
 There are two different ways of identifying current
competitors.

Competitor Analysis
 The first examines the perspective of the customer
who must take choices among competitors.
 This approach groups competitors according to the
degree they compete for a buyer’s choice.
 The second approach attempts to place
competitors in strategic groups on the basis of
their competitive strategy.

Industry Concept of Competition
 An industry is a group of firms that offers a
product or class of products that are close
substitutes for each other.
 Industries are classified as follows:
 Number of sellers and degree of differentiation
 Entry, mobility and exit barriers
 Cost structure
 Degree of vertical integration
 Degree of globalization

Number of sellers and degree of
differentiation
 Pure monopoly – regulated and unregulated
monopoly
 Oligopoly – pure oligopoly (a few companies
produce same commodity), differentiated
oligopoly (a few companies produce partially
differentiated product)
 Monopolistic competition: Many Competitors
offer differentiated product
 Pure competition – many competitors offer
undifferentiated product

Entry, mobility and exit barriers
 Entry barrier: high capital requirement,
economies of scale, patent and licensing
requirement, scarce location, raw material or
distributor and reputation requirement
 Mobility barrier: shifting to more profitable
segments
 Exit barrier: legal or moral obligation to
consumers, creditors, and employees, government
restrictions, low asset salvage value, lack of
alternative opportunities, high vertical integration,
emotional barriers7/13/2020 Copy right reserved 7

Cost structure
 Certain cost burden that shapes much of its
strategic conduct such as heavy manufacturing and
raw material cost, heavy distribution and
marketing cost.

Degree of vertical integration
 Vertical integration often lowers cost and the firm
gains a large share of value-added stream.

Degree of globalization
 Some industries are highly local ;
 others are global.
 Companies in global industries need to compete
on a global basis if they are to achieve economies
of scale and keep up with the latest advances in
technology.

Market Concept of Competition
 Using the market approach, competitors are
companies that satisfy the same customer need.
 For example, a customer who buys word
processing software really want “writing ability” –
a need that can be satisfied by pencils, pens, or
typewriter.
 The market concept of competition reveals a
broader set of actual and potential competitors.

Competitor Analysis
 Helps to avoid surprises
 Helps to gain competitive advantages
 Helps to plan better

Market Position of Competitors
Market Leader – The firm in an industry with
the largest market share.
Market Challenger – A runner up firm that is
fighting hard to increase its market share in and
industry.
Market Follower - A runner-up firm that wants
to hold its share in an industry with out rocking
the boat.
Market Nicher – A firm that serves small
segments that the other firms in an industry
overlook or ignore.7/13/2020 Copy right reserved 13

Hypothetical Market Structure
Market
Leader
40%
Market
Challenger
30%
Market
Follower
20%
Market
Nicher
10%

Market-Leader
 Most industries contain an acknowledged market
leader
 The leader has the largest market share in the
relevant product market
 Usually leads the other firms in:
• Price changes
• New product introduction
• Distribution coverage
• Promotion spending

Market-Leader
 The leader may or may not be admired or
respected
 But other firms concede its dominance
 Competitors focus on the leader as a company to
challenge, imitate or avoid.

Market Leaders
Company Product Company Product
Wall-mart retailing Coca-cola Soft drinks
General
motors
Autos Gillette Razor
blades
IBM Computers Visa Credit card
Micro soft Software Surva
Nepal
Cigarettes

Market-Leader Strategies
 They can find ways to expand total demand.
 They can protect their current market share
through good offensive and defensive actions.
 They can try to expand their market share
further, even if market size remains constant.

Expanding the Total Demand
(Market)
 New users
 New uses
 More uses

New Users
 A company can search new users among three
groups:
 Those who might use it but do not – market
penetration strategy
 Those who have never used it – new market
segment strategy
 Those who live elsewhere – geographical
expansion strategy

New Uses
 Marketers can expand markets by
discovering and promoting new uses for the
product.
 Use of computer for:
 Desk top publishing
 Entertainment
 Communication
 Use of Dettol for :
 Antiseptic
 Anti dandruff

More Usage
 Market leaders can encourage more usage by
increasing the level or quantity of consumption or
increasing the frequency of consumption.
 Eg. Glucose twice a day,
 Dabur honey twice a day etc.

Market Defense Strategy
 Position defense
 Flank defense
 Preemptive defense
 Counteroffensive defense
 Mobile defense
 Contraction defense

Expanding Market Share
 Market leaders can improve their profitability by
increasing their market share. In many markets,
small market share increases mean very large sales
increases.
 For example: in US digital camera market, one
percent increase in market share is worth $60
million, in soft drinks $340 million.


Expanding Market Share
 Generally, profitability rises with the increasing
market share. Thus, many companies have sought
expanded market shares to improve profitability.
 Gaining increased share in the served market,
however, does not automatically produce higher
profit – especially for labor-intensive service
companies that may not experience many
economies of scale.

Market Challenger Strategies
 Attack to market leader
 Attack to own size firms
 Attack to small size firms

(Broad Strategies)
 Frontal Attack
 Flank Attack
 Encirclement Attack
 By pass Attack
 Guerrilla Attack

(Specific Strategies)
 Price cuts
 Cheaper products
 Prestige products
 Product innovation
 Better service
 Distribution innovation
 Aggressive promotion

Market Follower Strategies
 Counterfeiter Strategy
 Cloner Strategy
 Imitator Strategy
 Adaptor Strategy

Market Nicher Strategy
 Customer size specialist
 Specific customer specialist
 Geographic specialist
 Product-line specialist
 Job-shop specialist
 End-use specialist

Competitor analysis

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