Page 65 - E2 Integrated Workbook STUDENT 2018

Competitor analysis

Porter’s competitor analysis framework

Porter suggested four key aspects.

 Identifying competitor's strategy. This can be identified from what a company
says and does. More often than not what they do will be more important than
what they say.

 Identifying competitor’s objectives. Knowledge of competitors’ objectives is
an essential component of any analysis. Whether they are driven by short-term
cash or profit goals or whether they have the reserves to focus on long-term
objectives will result in them exhibiting significantly differing behaviours.

 Identifying a competitor's assumptions about the industry. A competitor's
decisions are governed by their perceptions and assumptions about industry
structure and the players with whom they compete. These perceptions will often
be driven by the value systems of the senior management.

 Identifying the competitors’ resources and capabilities. Without a rigorous
analysis of the resources that a competitor possesses there can be no realistic
prediction of the seriousness of a possible challenge.

Ideally a company should know as much about its competitors as it knows
about itself.

4.1 Competitor’s response

 The laid-back competitor. This competitor does not respond to competitive
moves.

 The selective competitor. This competitor reacts to attacks on certain markets
but not in others, or certain types of attack (e.g. to price cuts but not to
promotion offensives).

 The tiger competitor. This competitor always responds aggressively to any
threat, in order to send a message to all contenders that it will retaliate.

 The stochastic competitor.. This competitor does not have any predictable
pattern to responses. This type of competitor often does not respond to moves
and then on one occasion decides to retaliate.

Competitors should be continuously monitored for signs of activity and the industry
scanned for the emergence of potential rivals.

59