Competitor Analysis Flashcards
What is the Objective of Competitor Analysis (CA)?
To thoroughly understand each Rival’s:
- Available strategies;
- Available responses to a Rival’s strategies; and
- Available responses to wider environmental changes.
And all the attending implications thereof.
Porter, Competitive Strategy — P. 79.
A Firm performing CA on itself can identify the conclusions Competitors will likely draw about it, information it can use to predict their behavior when planning moves.
What are the Diagnostic Components of Competitor Analysis?
- Future Goals: Is it satisfied with its current position?
- Present Strategy: What is it doing, and how will this likely change?
- Present Capabilities: What can it do, and what are its strengths and weaknesses?
- Present Assumptions: What does it believe about the Industry and its place therein?
To understand Present Strategy, see Decks 2 & 3.
Porter, Competitive Strategy — P. 80.
Goals and Assumptions, although harder to assess, largely foreshadow how Competitors will behave in the future, whereas Strategy and Capabilities largely quantify their potential and probability of success.
Who should be considered a ‘Competitor’ for Competitor Analysis?
All significant existing Competitors and well-placed potential Competitors, namely those who:
- Can easily overcome Entry Barriers;
- Can realise large synergies by being in the Industry;
- Can forward or backward integrate into the Industry.
Porter, Competitive Strategy — P. 82.
Appraising the nature and likelihood of M&As must feature when defining the scope of your analysis.
What is the Utility of understanding a Competitor’s Future Goals?
It predicts:
- The nature of its current strategy;
- The likelihood of its adherence thereto; and
- The ferocity of any reactions to Rivals or wider changes.
This ultimately allows the Firm to avoid conflict.
Porter, Competitive Strategy — P. 83.
Diagnosis of goals should also be at all levels of management, from executive to unitary, since the goals of higher levels play a part in, but do not fully determine, the goals lower down.
Which Questions elucidate a Competitor’s Future Goals?
- What is its attitude toward Risk?
- What is the Board’s composition?
- What are the profiles of its managers?
- What are its control and incentive systems?
- Does it hold values that may influence its Goals?
- What are its legal, social, political, and regulatory limitations?
- What are its accounting system and conventions?
- How are its powers and responsibilities allocated?
- What are its stated and unstated financial objectives?
- To what degree is management unanimous about its direction?
Porter, Competitive Strategy — P. 83-85.
If a Competitor is a Subsidiary, which additional Questions elucidate its Future Goals?
- What are the Parent’s Goals?
- Why was it originally acquired?
- What performance does its Parent expect?
- What is the Parent’s present performance?
- What are the Parent’s diversification plans?
- Is the Parent likely to impose a Generic Strategy on it?
- What is its economic relationship to other Subsidiaries?
- What strategic importance does it have for the Parent in the context of its Portfolio Strategy?
Porter, Competitive Strategy — P. 85-88.
Note that all questions asked about the Competitor’s Future Goals should be asked about its Parent.
Which Questions elucidate how a Subsidiary fits into its Parent’s Portoflio Strategy?
- Which Subsidiaries have the most leverage?
- How does the Parent classify its Subsidiaries?
- Which Subsidiaries are candidates for divestment?
- Which Subsidiaries are the habitual sources of stability?
- Which Subsidiaries represent defensive moves to protect other Subsidiaries?
- Which Subsidiaries are fittest for investment and market share expansion?
A Subsidiary with leverage is also known as a ‘Cash Cow’.
Porter, Competitive Strategy — P. 89.
Analysing the protfolio a Subsidiary belongs to provides important clues on what its objectives will likely be.
What is the Utility of understanding a Competitor’s Assumptions?
- It predicts the Rival’s general behaviour; and
- Identifies biases and blind spots in its perception of itself and the Industry.
Porter, Competitive Strategy — P. 91.
Which Questions elucidate a Competitor’s Assumptions?
- Does it strongly identify with particular canons?
- What does it seem to believe about its position in the Industry?
- Does it strongly identify with particular products, tactics, or strategies?
- Do cultural, regional, or national differences influence its outlook?
- What does it seem to believe about its Rivals’ Goals and Capabilities?
- How has it previously reacted to particular moves or Industry events?
- How does its current performance and market share compare to the recent past?
- Does it seem to believe in the Industry’s conventional wisdoms, or is it a maverick?
- What does it seem to believe about future demand for its Product and the significance of prevailing trends?
- What are its historical victories and defeats in the Industry, and which strategies and managerial styles influenced those outcomes?
For each question, you must also ask whether the answer is accurate.
Porter, Competitive Strategy — P. 91-96.
What is the Utility of understanding a Competitor’s Capabilities?
It predicts its ability to initiate or react to moves and to cope with environmental changes.
Porter, Competitive Strategy — P. 96.
‘Capabilities’ is a proxy for strengths and weaknesses, and can be measured by analysing the Rival’s position vis-à-vis the Five Forces and the Wheel.
What is the Structure of a Competitor Profile?
It is divided between Offensive and Defensive Capabilities.
Porter, Competitive Strategy — P. 102.
In a Competitor Profile, what is the Main Question addressed in ‘Offensive Capabilities’?
Based on its Goals, Assumptions, and Capabilities:
- What are its likeliest strategic moves; and
- What are their expected strength?
Porter, Competitive Strategy — P. 102.
In a Competitor Profile, what is the Main Question addressed in ‘Defensive Capabilities’?
Which strategic moves or Industry events:
- Leave it vulnerable;
- Such that it may be forced to retaliate; and
- How can such retaliation be neutralised?
Porter, Competitive Strategy — P. 104.
If a Firm is bound to provoke a Rival into Retaliation, what is the best Battleground upon which to do so?
The market segment or strategic dimension the Rival is least prepared, least enthusiastic, or most uncomfortable to contest.
Porter, Competitive Strategy — P. 105.
A particularly potent tactic is creating mixed motives or conflicting objectives for a Rival through your moves.
Which Questions allow us to forecast Industry Conditions using Competitor Analysis?
- Are Firms’ strategies converging and likely to clash?
- What are the implications of each probability materialising?
- Are Firms’ growth rates sustainable relative to the Industry rate, or will a gap arise that draws Entrants?
Porter, Competitive Strategy — P. 106.
