Competitors analysis (Lynch 2018)
In any analysis of competitors and their relationship to the organisation, it is useful to analyse
some immediate and close competitors: this is often called competitor profiling. The purpose
is to identify the competitive advantages (and disadvantages) of the organisation against its
competitors.
What are the sustainable competitive advantages of our competitors?
Sustainable competitive advantage is an advantage over competitors that cannot easily be
imitated. Broad surveys of competitive forces are useful in strategy analysis. But it is normal to
select one or two companies for more detailed examination to identify the competitive
advantage of our company against one or two rivals. The reason is that sustainable
competitive advantage becomes more precise and meaningful when we make a specific
analysis of our competitors. Some rival companies will have competitive advantages that make
them formidable opponents; for example, wellrespected brand names like Coca-Cola and
Volkswagen, specialist technologies such as laser printer production at the Japanese company
Canon, and unique locations of hotels and restaurants, such as those owned by McDonald’s.
We return to the topics of competitive advantage and strategic resources in Chapter 4. We
focus in this section on analysing the competitive advantages of our competitors in the
strategic environment.
Competitor profiling
As a starting point, it is useful to undertake competitor profiling – that is, the basic analysis of a
leading competitor, covering its objectives, resources, market strength and current strategies.
In many markets, there will be more than one competitor and it will not be possible to analyse
them all. It will be necessary to make a choice – usually the one or two that represent the most
direct threat. In public service organisations where the competition may be for resources
rather than for customers , the same principle can be adopted, with the choice being made
among the agencies competing for funds. In small businesses, the need to understand
competitors is just as great, although here it may be more difficult to identify which company
will pose the most direct threat; a typical competitor may be selected in these circumstances.
Once the choice has been made, the following aspects of the competitor’s organisation need
to be explored:
• Objectives. If the competitor is seeking sales growth or market share growth, this may
involve an aggressive stance in the market place. If the company is seeking profit growth, it
may choose to achieve this by investing in new plant or by some other means that might take
time to implement. If this is the case, there will be less of an immediate impact on others in
the market place, but newplant may mean lower costs and a longer-term impact on prices.
Company annual reports and press statements may be helpful here in defining what the
competitor says it wants to do. These need to be treated with some caution, however, since
the company may be bluffing or using some other competitive technique.
Resources. The scale and size of the company’s resources are an important indicator of its
competitive threat – perhaps it has superior or inferior technology, perhaps over-manning at
its plants, perhaps financial problems. Chapter 4 will provide a more detailed checklist in terms
of competitive advantage.
Past record of performance. Although this may be a poor guide to the future, it is direct
evidence that is publicly available through financial statements and stockbrokers’ reports.
Current products and services. Many companies buy competing products or services for the
sole purpose of tearing them apart. They analyse customers, quality, performance, after-sales
service, promotional material and some will even interview former employees – unethical
perhaps, but it does happen.
Links with other organisations. Joint members, alliances and other forms of co-operation may
deliver significant competitive advantage.
Present strategies. Attitudes to subjects such as innovation, leading customers, finance and
investment, human resource management, market share, cost reduction, product range,
pricing and branding all deserve investigation.
Competitor profiling is time-consuming but vital to the development of strategic management.
Some larger companies employ whole departments whose sole task is to monitor leading
competitors. Small businesses also often have an acute awareness of their competitors,
although this may be derived more informally at trade meetings, social occasions, exhibitions
and so on. In strategic management, it is vital to gain a ‘feel’ for competitors.