Chapter -7
The Competitive Analysis
Mg Htoo Nyi Nyi Kyaw
Ma Phyo Thinzar Khing
Ma Hsu Pyae Pyae Htet Paing
Ma Aye Thiri Hay Man Htut
The Competitive Analysis
1. The Impact of Competition
Real success occurs only if you attract many customers.
Entrepreneurs must know where customers are currently shopping.
You must have competitive impact—the ability to effectively compete.
Your store must offer quality, demanded products, and fair prices.
2. Competition and Private Enterprise
Competitors offer similar products or services for sale.
There must be many buyers and many sellers.
New businesses can start or stop at any time.
The FTC and antitrust laws help ensure fair competition.
3. Five Forces Model of Competition
Intensity of rivalry among existing competitors
Threat of entry by new competitors
Pressure from substitute products
Bargaining power of suppliers
Bargaining power of buyers
Rivalry Among Existing Competitors
Rivalry among competitors as the strongest of the
competitive forces.
Nine specific areas of rivalry –
1. Rivalry intensifies as the number of competitors
increases and as competitors become more equal in
size and capability.
2. Rivalry is usually stronger when demand for the
product is growing slowly.
3. Rivalry is more intense when industry conditions
tempt competitors to use price cuts or other
competitive weapons to boost unit volume.
4. Rivalry is stronger when the cost to customers of
switching brands is low
5. Rivalry is stronger when one or more competitors is
dissatisfied with its market position and launches moves
to bolster its standing at the expense of rivals.
6. Rivalry increases in proportion to the size of the payoff
from a successful strategic move.
7. Rivalry tends to be more vigorous when it costs more to
get out of a business than to stay in and compete.
8. Rivalry becomes more volatile and unpredictable when
competitors are more diverse in terms of their strategies,
personalities, corporate priorities, and countries of origin.
9. Rivalry increases when strong companies outside the
industry acquire weak firms in the industry and launch
aggressive, well-funded moves to transform their newly
acquired businesses into major market contenders.
Threat of Entry by New Competitors
Business in an industry or merely contemplating,
Careful consideration to a couple of factors:
First, what are the barriers to entering the new
market?
Second,what will be the reaction to your new
company by businesses already actively operating
there?
Barriers to Entry – The first barrier to entry is often the
question “How big do I have to be to enter the business and be
successful?”
Another barriers to entrepreneurs may be the technology or
specialized skills necessary to enter a particular business.
Brand loyalty – the consumer’s preference for familiar, well-
established brands – is an important entrance barrier facing many
new entrepreneurs.
The difficulty of penetrating and diffusing brand loyalty is one of
the tenets of marketing theory.
Difficult access to the necessary equipment, parts, and inventory
may prove a formidable barrier to entering the industry.
Competitive Reaction – How will firms already doing business
in the industry react to a new start-up?
- Will they ignore the new entrant as an
insignificant competitor ,or will they wage all-out
war?
- Will the competitors put pressure on their v
endors not to sell to the new business?
- Will they create promortional campaigns
aimed at solidifying brand loyalty?
- Will they send secret shoppers into the new
business?
- Will the competitors go so far as to break
the law?
Beware of the competition’s reaction to your new business.
Your competitors will learn about the start-up when you make your
business plan available to the bankers, vendors, and potential
customers.
Pressure from Substitute Products
To switch from natural gas to electric heat,customers
had to invest in electric heaters or even convert their
furnaces.
The danger from substitute products should be
addressed during the business planning process.
Potential substitution should be included in the
planning process.
Bargaining Power of Suppliers
Suppliers can influence prices if they control the supply.
Example: Diamond industry - supply was once tightly
controlled.
Even with open markets, supplier power remains critical .
Lack of sales is not the only thing that kills businesses; lack of
necessary supplies or raw materials can be just as deadly.
Bargaining Power of Buyers
Just as you should carefully research the power of suppliers to
the desired industry, you should also investigate the power of
buyers.
Quantifying buyers/customers is always an important planning
activity.
TYPES OF COMPETITION
As entrepreneurs analyze their competition, they must first
consider into which classification the com-peting firms fall-
direct or indirect competition.
Direct Competition
Direct competition refers to businesses that derive the majority
of their prof-its from the sale of products or services that are
the same as or similar to those sold by another business.
The number of direct competitors you identify and their
behavior in the marketplace will ultimately have a profound
effect on the new business.
It is important to evaluate your findings and try to determine
the reputation of your competitors.
Indirect Competition
Indirect competition is competition from businesses that derive
only a small percentage of their profits from the sale of
products or services that are the same as or similar to those
sold by another business.
Indirect competition can often prove to be the most dangerous
kind.
• Just as the number and behavior of direct competitors have a
profound effect on the new business, so do the number and
behavior of indirect competitors.
Assess your findings about indirect competitors
and try to determine their reputations and roles
in the marketplace.
GEOGRAPHIC CUSTOMER DISTRIBUTION
As entrepreneurs begin the process of formally getting to know
the competition for the planned business, they need to be
concerned with geography not geography in the sense of the
world but in the sense of customers.
To determine the geographic distribution of potential
customers, get a map of the area in which your business will be
located.
The circle on the map represents the geographic distribution of
your potential customers.
The circle on the map represents the geographic distribution of
your potential customers.
It also, to some extent, represents the geographic distribution
of your future competition.
Competitive Analysis
A competitive analysis is defined as the identification and
examination of the characteristics of a specific competing firm.
A business-specific com-petitive analysis pro-vides you with
the information you need to pinpoint strengths and weaknesses,
both yours and the competi-tion's.
This knowledge is essential for marketing success.
Analysis of Competitors Who Have Failed
Not only should all the identified direct and indirect
competitors be analyzed, so should any that have recently gone
out of business.
It is important to include them in your analysis so that you can
benefit from their mistakes.
Casual conversations with existing competitors will often yield
useful information.
Most will probably have an opinion on why the business in
question failed.
Some of the possible reasons for failure include poor
management, undercapitalization, lack of knowledge about the
business, and the competition's influence.
Factors to Analyze
Introduce the five key factors:
Price
Location
Facility
Type of Competition
Rank
Price
• How pricing affects competitiveness
• Importance of competitive pricing analysis
Location
• Advantages of competitor's location
• Impact on customer access and market reach
Facility
• Facility quality and capacity
• Influence on service delivery and customer experience
Type of Competition
• How to identify types based on offerings
• Examples of each type
Rank
• How to assess and rank competitors
• Impact on market positioning
Promotional Brochures
• Purpose and value of analyzing brochures
• What information to look for (e.g., product offerings,
pricing)
Yellow Pages
• How to gather competitor information
• Importance of local competitive insights
Promotional Advertisement
• Importance of identifying competitor’s advertising
strategies.
• Analyzing promotional messaging and targeting.
Competitors’ Customers
• Strategies to identify potential customers
• Importance of customer feedback on competitors
Competitors’ Vendors
Benefits of associating with trade organizations
Sources of valuable industry information
Trade Associations
How to check competitors' vendors for insights
Understanding the supply chain dynamics
Competitors’ Website
Importance of checking competitors’ web pages
Types of information to look for (e.g., products,
services, offerings)
Competitors’ Employees
• Engaging with competitors’ employees for
insights
• Understanding company culture and
operations
News Stories About Competitors
• Keeping updated with news related to
competitors
• Importance of understanding market
dynamics and competitive positioning
Shop the Competition
Visiting competitors' facilities as a form of
analysis
Observing customer service and product
offerings firsthandNews
Emergence of Competitive
Intelligence
• Explanation of how
competitive analysis has
created a new industry
• Mention of entrepreneurial
ventures utilizing competitive
intelligence
Professional Associations
• Society of Competitive
Intelligence Professionals
(SCIP)
• Overview of SCIP's purpose
• Role in supporting
professionals in competitive
intelligence
Implementing Competitive Intelligence
• Whether selling CI services or using it internally.
• Necessity of data-driven decision-making
The Cost of Poor Decisions
• Discuss how bad business decisions can lead to failure.
• Importance of financial and resource consideration for
small businesses
Legality of Competitive Intelligence
• Overview: Is competitive intelligence
legal?
• The role of ethical considerations in CI
practice
SCIP's Code of Ethics
• Overview of the Society of Competitive
Intelligence Professionals (SCIP)
• Importance of integrating SCIP's ethical
guidelines
• Employees never lie when
representing themselves
• No misleading information.
• No coercion or intimidation.
• Ethical use of internet research.
• Respecting confidentiality in interviews.
• No installing listening devices in competitors' businesses.
CI
for Small Businesses
The role
Intelligence of Competitive
for small
enterprises.
Tailoring CI processes
according to business size
The Competitive
Industry Intelligence
Overview of the CI market size and
global reach.
Importance of ethical considerations
across various business sizes
Success Factors in CI
• Importance of careful analysis of
competitors.
• CI as a science and its impact on
business success.
Thank You