Competitor Analysis and Multimarket Competition The Role of Competitor Position

Competitor Analysis
and
Multimarket Competition
The Role of Competitor Position
in Crafting Strategy
Know Your Rivals
What: their objectives and strategies
 Why? to predict their future strategies
• Why? to guide own strategies
What: their strengths and weaknesses
 Why? to compare with own strengths and weaknesses
• Why? to evaluate opportunities and threats
–Why? to build and sustain own position
Sources of information
 Recorded data, e.g, annual reports; press releases; newspaper articles;
analyst reports; tender offers; regulatory reports; government reports
 Observable data, e.g., pricing; advertising and promotion; seminars and
conferences; patent applications; presentations/speeches; trade shows
 Opportunistic (anecdotal) data: from suppliers; distributors; customers
and competitors; ex-employees
Hard-to-find information
 Overall sales and profits
 Sales and profits by market
 Sales by main brand
 Cost structure
 Market share (revenues and volume)
 Organization structure
 Distribution system
 Advertising strategy and spending
 Customer/consumer profile & attitudes
Multimarket Competition
 What: firms competing against each other in several markets in, e.g.,
 different geographical markets for the same products
 different parts of a vertical
 substitute markets
 Why
 Increase in related product diversification
 Increase in geographic market diversification
 Greater use of coordinated worldwide strategies
Results
 “Mutual forbearance”: benefit of aggressive action in any market is
reduced because rivals can retaliate in multiple common markets
 True for repeated actions (e.g., promotional activities) but not
introduction of innovations
Visual Aids
 Multimarket Competitor Chart: displays competitors in common markets
 Strategic Group Map: displays clusters of rivals along two dimensions of
industry positioning
Simple Multimarket Competitor Chart
2000
Firm
Operating
Systems
Google
Apple
X
Email
Photo Online Mobile
Editing Adv.
Phone
X
X
X
X
X
2011
Firm
Operating
Systems
Google
Apple
X
Email
Photo Online Mobile
Editing Adv.
Phone
X
X
X
X
X
X
X
X
Global Product-Market Competition
Industry/
Country
Industry/
Country
Industry/
Country
Industry/
Country
Client
Products:
a, c
Products:
c, d
Products:
a, b, c
Products:
b, c, d
Competitor #1
Products:
a
Products:
e
Products:
c, e
Products:
d, e
Products:
a, b, c, d, e
Competitor #2
Competitor #3
Products:
a, e
Competitor #4
Products:
a
Products:
a, e
Products:
a, b
Products:
a, b
Segment Multimarket Competition
Pet Food Industry
Economy
Average
Gourmet
Dog Food
Cat Food
Dry
Wet
Moist
Snack
Strategic Group Maps
 A strategic group consists of rival firms with similar competitive strategies
and positioning in an industry
 A strategic group map displays clusters of groups within an industry based
on two variables that you choose for their strategic significance.
Some Strategic Variables
 Specialization
 Brand identification (private label, brand)
 Distribution channels
 Product quality
 Vertical integration
 Cost position
 Service
 Price point
***Outcome variables like profit and market share should not be used to
distinguish competitive groups
Constructing a Strategic Group Map
1. Choose two variables that distinguish competitors
 Maximize contrast
 Minimize correlation
2. Plot on graph
3. Represent firm/group size with circle proportional to market share
OR
1. Begin grouping firms and then identify variables
2. Position firms on map
3. Represent firm/group size with circle proportional to market share
Example of Strategic Group Map in Stage 1
Luxury Goods Market
Hermes
10
Quality Level
Loro Chanel
Piana
Louis
Vuitton
Tiffany
Burberry
Gucci
1
$350
$500
Price Point
$1500
Luxury Goods Market: Potential Variables
 Target customer*
 Top tier: (24%) not affected by business cycles
 Aspirational: (36%) upper middle class; make luxury purchases “AOAP”
 Accessible luxury: (40%) affluent middle class; make occasional luxury
purchases when times are good
 Scope of products sold
 Degree of vertical integration
 Distribution channel
* Research by Bain and Co.
Interpreting the Map
 Fiercest rivalry occurs within strategic groups
 The closer the clusters, the stronger the rivalry
 Firms attempt moves into different segments as industry conditions change
 Mobility barriers: group-specific entry barriers that restrict movement
across groups
 Identify mobility barriers