Page 61 - E2 Integrated Workbook STUDENT 2018
P. 61
Competitor analysis
Key concepts in competitor analysis
1.1 Definition
CIMA defines competitor analysis as: ‘Identification and
quantification of the relative strengths and weaknesses (compared
with competitors or potential competitors), which could be of
significance in the development of a successful competitive
strategy.’
1.2 The role of competitor analysis
According to Wilson and Gilligan (1997) competitor analysis has three roles:
to help management understand their competitive advantages and
disadvantages relative to competitors
to generate insights into competitors’ past, present and potential strategies
to give an informed basis for developing future strategies to sustain or establish
advantages over competitors.
1.3 Why is competitor analysis important?
The actions of competitors will impact on the profits of a business. This may include:
price cuts
launching of new products
aggressive expansion of production and sales which reduces the firm’s market
share
upgrading of their product's features which customers then expect
This will have implications for management’s choice of strategy. A suitable strategy is
one which yields satisfactory financial returns after taking into account the potential
responses of competitors.
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