What is Competitive analysis

Main techniques:

1. PEST analysis
From this site.

Political Factors

The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:

1. How stable is the political environment?
2. Will government policy influence laws that regulate or tax your business?
3. What is the government's position on marketing ethics?
4. What is the government's policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

Economic Factors

Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:

1. Interest rates.
2. The level of inflation Employment level per capita.
3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.

Sociocultural Factors

The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:

1. What is the dominant religion?
2. What are attitudes to foreign products and services?
3. Does language impact upon the diffusion of products onto markets?
4. How much time do consumers have for leisure?
5. What are the roles of men and women within society?
6. How long are the population living? Are the older generations wealthy?
7. Do the population have a strong/weak opinion on green issues?

Technological Factors

Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:

1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?
2. Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?
3. How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?
4. Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

2. SWOT analysis
From this site.

In SWOT, strengths and weaknesses are internal factors.
A strength could be:

• Your specialist marketing expertise.
• A new, innovative product or service.
• Location of your business.
• Quality processes and procedures.
• Any other aspect of your business that adds value to your product or service.

A weakness could be:

• Lack of marketing expertise.
• Undifferentiated products or services (i.e. in relation to your competitors).
• Location of your business.
• Poor quality goods or services.
• Damaged reputation.

In SWOT, opportunities and threads are external factors.
An opportunity could be:

• A developing market such as the Internet.
• Mergers, joint ventures or strategic alliances.
• Moving into new market segments that offer improved profits.
• A new international market.
• A market vacated by an ineffective competitor.

A threat could be:

• A new competitor in your home market.
• Price wars with competitors.
• A competitor has a new, innovative product or service.
• Competitors have superior access to channels of distribution.
• Taxation is introduced on your product or service.

A word of caution, SWOT analysis can be very subjective. Do not rely on SWOT too much. Two people rarely come-up with the same final version of SWOT. TOWS analysis is extremely similar. It simply looks at the negative factors first in order to turn them into positive factors. So use SWOT as guide and not a prescription.

Simple rules for successful SWOT analysis.

• Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis.
• SWOT analysis should distinguish between where your organization is today, and where it could be in the future.
• SWOT should always be specific. Avoid grey areas.
• Always apply SWOT in relation to your competition i.e. better than or worse than your competition.
• Keep your SWOT short and simple. Avoid complexity and over analysis
• SWOT is subjective.

Once key issues have been identified with your SWOT analysis, they feed into marketing objectives. SWOT can be used in conjunction with other tools for audit and analysis, such as PEST analysis and Porter's Five-Forces analysis. So SWOT is a very popular tool with marketing students because it is quick and easy to learn. During the SWOT exercise, list factors in the relevant boxes. It's that simple. Below are some FREE examples of SWOT analysis - click to go straight to them

Do you need a more advanced SWOT Analysis?

Some of the problems that you may encounter with SWOT are as a result of one of its key benefits i.e. its flexibility. Since SWOT analysis can be used in a variety of scenarios, it has to be flexible. However this can lead to a number of anomalies. Problems with basic SWOT analysis can be addressed using a more critical POWER SWOT.

SWOT Analysis Examples

A summary of FREE SWOT analyses case studies are outlined as follows (those in the table above are far more detailed and FREE!):

Example 1 - Wal-Mart SWOT Analysis. Strengths - Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.Weaknesses - Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.Opportunities - To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region. Threats - Being number one means that you are the target of competition, locally and globally.

Example 2 - Starbucks SWOT Analysis. Strengths - Starbucks Corporation is a very profitable organisation, earning in excess of $600 million in 2004.Weaknesses - Starbucks has a reputation for new product development and creativity. Opportunities - New products and services that can be retailed in their cafes, such as Fair Trade products. Threats - Starbucks are exposed to rises in the cost of coffee and dairy products.

Example 3 - Nike SWOT Analysis. Strengths - Nike is a very competitive organisation. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.'Weaknesses - The organisation does have a diversified range of sports products. Opportunities - Product development offers Nike many opportunities. Threats - Nike is exposed to the international nature of trade.

3. Competitive analysis - Perceptual mapping
From this site.

Marketing should include competitor analysis.

• Who are your competitors?
• What customer needs and preferences are you competing to meet?
• What are the similarities and differences between their products/services and yours?
• What are the strengths and weaknesses of each of their products and services?
• How do their prices compare to yours?
• How are they doing overall?
• How do you plan to compete?
• Offer better quality services?
• Lower prices?
• More support?
• Easier access to services?
• How are you uniquely suited to compete with them?

From the book 'Design mamagement':

Using matrices is a valuable way of fleshing out potential opportunities in the market because they provide a way to represent the relationships between an organisation's proposed product or service, the competing products or services, and any 'gaps' in the market. In this form of analysis, products and services are plotted on a 'positioning map' which allows them to be compared and contrasted relative to each other. The position on the map forms the criteria for differentiating an organisation's proposed business offer from the competition, and identifies the growth potential in launching a new product or service in an area not currently provided for.

From wikipedia:

Perceptual mapping is a graphics technique used by marketers that attempts to visually display the perceptions of customers or potential customers. Typically the position of a product, product line, brand, or company is displayed relative to their competition.

Perceptual maps can have any number of dimensions but the most common is two dimensions. Any more is a challenge to draw and confusing to interpret. The first perceptual map below shows consumer perceptions of various automobiles on the two dimensions of sportiness/conservative and classy/affordable. This sample of consumers felt Porsche was the sportiest and classiest of the cars in the study (top right corner). They felt Plymouth was most practical and conservative (bottom left corner).

Perceptual Map of Competing Products

Cars that are positioned close to each other are seen as similar on the relevant dimensions by the consumer. For example consumers see Buick, Chrysler, and Oldsmobile as similar. They are close competitors and form a competitive grouping. A company considering the introduction of a new model will look for an area on the map free from competitors. Some perceptual maps use different size circles to indicate the sales volume or market share of the various competing products.

Displaying consumers’ perceptions of related products is only half the story. Many perceptual maps also display consumers’ ideal points. These points reflect ideal combinations of the two dimensions as seen by a consumer. The next diagram shows a study of consumers’ ideal points in the alcohol/spirits product space. Each dot represents one respondent's ideal combination of the two dimensions. Areas where there is a cluster of ideal points (such as A) indicates a market segment. Areas without ideal points are sometimes referred to as demand voids.

Perceptual Map of Ideal Points and Clusters

A company considering introducing a new product will look for areas with a high density of ideal points. They will also look for areas without competitive rivals. This is best done by placing both the ideal points and the competing products on the same map.

Some maps plot ideal vectors instead of ideal points. The map below, displays various aspirin products as seen on the dimensions of effectiveness and gentleness. It also shows two ideal vectors. The slope of the ideal vector indicates the preferred ratio of the two dimensions by those consumers within that segment. This study indicates there is one segment that is more concerned with effectiveness than harshness, and another segment that is more interested in gentleness than strength.

Perceptual Map of Competing Products with Ideal Vectors

Perceptual maps need not come from a detailed study. There are also intuitive maps (also called judgmental maps or consensus maps) that are created by marketers based on their understanding of their industry. Management uses its best judgement. It is questionable how valuable this type of map is. Often they just give the appearance of credibility to management’s preconceptions.

When detailed marketing research studies are done methodological problems can arise, but at least the information is coming directly from the consumer. There is an assortment of statistical procedures that can be used to convert the raw data collected in a survey into a perceptual map. Preference regression will produce ideal vectors. Multi dimensional scaling will produce either ideal points or competitor positions. Factor analysis, discriminant analysis, cluster analysis, and logit analysis can also be used. Some techniques are constructed from perceived differences between products, others are constructed from perceived similarities. Still others are constructed from cross price elasticity of demand data from electronic scanners.

4. Paradigm of change
From the book:

Drucker's paradigm of change: organisation in past, present and future.
Flaherty further translated the zones into business 'dimensions': traditional, transitional, transformational.
This dimensions provide a rich strating point for identifying design opportunities and for exploring how design can respond to different operating aspects of an organisation.

1. Managing the Traditional business (improving current operations), how can design contribute to improving the current operations of the organisation? Perharps, for example, by concentrating on organisational strengths or creating efficiences in production process.
2. Managing the transitional business (adapting to new opportunities), how can design help the organisation to address new opportunities? Perharps, for example, by satisfying unmet customer needs for attracking new customers.
3. Managing the transformational business (focussing on innovation, or 'purposeful' planned change), how can design help the business to move towards a new vision of itself? Perharps, for example, by successfully exploiting new product development ideas.
   

5. Scenario of planning
From this site.

Scenario planning is a model for learning about the future in which a corporate strategy is formed by drawing a small number of scenarios, stories how the future may unfold, and how this may affect an issue that confronts the corporation.

Royal Dutch Shell, one of the first and leading adopters, defines scenarios as follows: Scenarios are carefully crafted stories about the future embodying a wide variety of ideas and integrating them in a way that is communicable and useful. Scenarios help us link the uncertainties we hold about the future to the decisions we must make today.

The scenario planning method works by understanding the nature and impact of the most uncertain and important driving forces affecting the future. It is a group process which encourages knowledge exchange and development of mutual deeper understanding of central issues important to the future of your business. The goal is to craft a number of diverging stories by extrapolating uncertain and heavily influencing driving forces. The stories together with the work getting there has the dual purpose of increasing the knowledge of the business environment and widen both the receiver's and participant's perception of possible future events. The method is most widely used as a strategic management tool, but it is also used for enabling group discussion about a common future.

Typically, the scenario planning process is as follows:

• identify people who will contribute a wide range of perspectives

• comprehensive interviews/workshop about how participants see big shifts coming in society, economics, politics, technology, etc.

• cluster or group these views into connected patterns

• group draws a list of priorities (the best ideas)

• sketch out rough pictures of the future based on these priorities (stories, rough scenarios)

• further work out to detailed impact scenarios (determine in what way each scenario will affect the corporation)

• identify early warning signals (things that are indicative for a particular scenario to unfold)

• monitor, evaluate and review scenarios

Some traps to avoid in Scenario Planning:

1. treating scenarios as forecasts
2. constructing scenarios based on too simplistic a difference, such as optimistic and pessimistic
3. failing to make scenario global enough in scope
4. failing to focus scenarios in areas of potential impact on the business
5. treating scenarios as an informational or instructional tool rather than for participative learning / strategy formation
6. not having an adequate process for engaging executive teams in the scenario planning process
7. failing to put enough imaginative stimulus into the scenario design
8. not using an experienced facilitator