On the whole, companies do competitor analysis, broadly speaking, including the following aspects: (1) identify the company's competitors. Broadly speaking, the company can make the same product or the same level of products are considered competitors. (2) Identify the competitor's objectives. What are competitors looking for in the market? What are the drivers of the competitor's behavior? It is also important to consider the competitor's objectives beyond profit goals, as well as the competitor's mix of objectives, and to note the objectives the competitor uses to attack different product/market segments. (3) Determine the competitor's strategy. The more similar a company's strategy is to that of other companies, the more intense the competition between the companies. In most industries, competitors can be divided into several groups that pursue different strategies. A strategic group is a group of companies in an industry that pursue the same or similar strategies. Identifying the strategic group to which a competitor belongs will influence some of the company's important perceptions and decisions. (4) Identify competitors' strengths and weaknesses. This involves collecting information about competitors over a period of several years. Generally, a company can figure out the strengths and weaknesses of competitors through secondary sources, personal experiences, and rumors. Customer value analysis can also be conducted to understand this information. (5) Determine the competitor's response pattern. Understanding competitors' objectives, strategies, strengths and weaknesses is all about explaining their possible competitive actions and their responses to the company's strategies for product marketing, market positioning and mergers and acquisitions, i.e., determining competitors' response patterns. In addition, a competitor's particular business philosophy, internal culture, and guiding beliefs may also influence its reaction pattern. (6) Finally, determine the company's competitive strategy.
The four dimensions of competitor analysis
1. Decision-making level dimension
The first dimension that should be determined before conducting a competitor analysis is the decision-making level dimension, i.e., which business decision-making level of the enterprise determines the implementation of competitor analysis tasks. Different levels of business managers to do competitor analysis should be involved in the content of the difference. For example, the main purpose of competitor analysis for an enterprise's product sales agent is to win the agent's bid; the competitor analysis for a sales manager will mainly involve the price of the opponent's products and predict and evaluate its new pricing strategy; the competitor analysis for the manager of a business division or a strategic operating unit is for the division to establish its position in the marketplace; and the CEO of a company may be for strategic purposes such as mergers and acquisitions or expansion. or for strategic purposes such as expansion. Therefore, only after determining which decision-making level conducts competitor analysis can you ensure the relevance and usefulness of competitor analysis.
2. Decision Type Dimension
While determining the decision level dimension of competitor analysis, we can also differentiate between three types of decisions, such as operational, tactical, and strategic, i.e., the decision type dimension. Please see the following - Management Level vs Decision Type diagram.
It can be seen that top managers are concerned with strategic type of competitor analysis, middle level functional managers are more concerned with tactical type of competitor analysis, while front line managers are most concerned with operational type of competitor analysis.
3. Market/Customer Scope Dimension
The third dimension that needs to be considered when doing a competitor analysis is the customer and market scope dimension, which is a detailed definition and description of customers and markets. Determining the scope of customers and markets is critical to the usefulness of the results of the analysis. For example, a multinational automobile manufacturer analyzing its competitors within the customer base and market scope of Beijing is different from analyzing its competitors within the customer base and market scope of the whole of China, and even more different from analyzing its competitors within Asia or even globally. Below is an illustration of the relationship between the geographic scope of a large domestic (multinational) electrical installation manufacturer, its related industry players, and its strategic development initiatives.
It can be seen that the competitor analysis of the enterprise, carried out in a different geographical scope, the content and scope of the industry involved is very different, and therefore the complexity of the analysis will also be very different.
4. Time Span Dimension
The determination of the time span range of competitor analysis is also part of this work. How far back the historical analysis of competitors and their industries, and how far back the analysis of their future development are issues that need to be considered. For example, does the analysis of Haier Electric's competitors in the European market go back to the beginning of the 20th century? A mooncake manufacturer is to analyze the sales price dynamics of competitors in recent years, or only the price of this year's Mid-Autumn Festival period to analyze the direction of the next year or the next few years to determine the competitive strategy. These are the elements to be defined first in the competitor analysis.
Three, competitor analysis methods
After the above aspects are determined, do competitor analysis, we should usually do what? Our experience is that, first of all, the competitors have been identified to carry out continuous tracking to understand, collect information on the opponent, as far as possible to grasp the opponent's business trends, and its possible impact on the company. In addition, it is also possible to think backwards, i.e., how our company's business strategies may affect our competitors. This requires companies to establish a set of orderly system that can collect and record competitors' information and can be called upon at any time - competitors' information collection system. On the basis of information collection, the enterprise should conduct regular and specialized research on the information. For example, when an enterprise intends to take a certain competitor as an acquisition target or as a strategic partner target, it needs to analyze and study the relevant information. For example, from the continuous data collection, it is found that the competitor in a certain region to make large investments or in a short period of time to recruit a large number of scientists. What is its purpose? Specialized research can help companies analyze and answer these questions. Another role of competitor information collection is to analyze and compare with competitors' business management performance and capabilities in order to motivate oneself to improve the management and performance of the enterprise.
1. Establishing a competitor information collection and analysis system The competitor information collection and analysis system includes the collection of information on all aspects of business management. Below are only some of the main aspects of the system for the reader's reference, the purpose is to provide a way to establish the system and ideas, in order to design and operate according to the actual situation of the enterprise itself.
In the process of data collection, the scope of the opponent's information can also be given according to the actual situation to increase or decrease, each aspect of the information and data content can be refined and preliminary analysis. The result of the analysis can be data or evidence obtained directly from the information, or can be based on the basic information to make a judgment.
●Financial Indicators The purpose of making a record of a counterparty's financial indicators is that some of the key financial data is reflective of the counterparty's recent operations. It is important to note that very few large businesses are in a single business, although some are in a single business but may be a multinational corporation. Therefore, there are columns for groups, divisions and units in the Financial Indicators Information Sheet. There are also other columns that can be subdivided according to the business organization of the rival. Assuming that we analyze Hyundai as a competitor, the "Group" column should belong to the Hyundai Group, the "Sector" column should reflect Hyundai's global organization, and the "Unit" column should reflect Hyundai's global organization, while the "Group" column should reflect Hyundai's global organization. The "Group" column should belong to the Hyundai Group, the "Department" column should reflect the global organization of Hyundai Motor, and the "Unit" column should reflect the enterprise of Hyundai Motor in China. If the rival of the survey is Hyundai Motor's enterprises in China, the information of the group and department can be left out as the focus of collection for the time being. Also some index items in the table can be given increase and decrease according to the actual needs.
●Product Analysis It is generally believed that competition between companies often takes place at the product and service level. Of course, there is also competition for limited resources at the level of production units. However, it is the product competition with rivals that companies are most concerned with. Only four areas are listed in the previous product analysis table. Some columns can also be added according to the actual situation, such as advertising investment, development trend and so on. The data in the table should be derived from market research and relevant data projections. Marketing and product sales activities The information in this area is about how rivals exert their influence on the market. This information includes, among other things, information on the organization and size of the rival's sales force, promotional activities, product discounts, sales channels, and the layout of the number of stores. If you are targeting a professional services company, information on the rival's main service recipients, publicly available marketing materials, and internal publications are all areas that should be collected.
●Sources of Competitive Advantage The idea for the table came from Mike Porter's theory of the value chain. Porter's theory of the value chain, the main purpose is to identify the competitor's business activities to provide value to customers, so as to find the source of their competitive advantage. The headings in the table are distilled from Porter's theory of competitive advantage, but can also be used in language that is more important and familiar to the average manager.
●Activities that have a significant impact on the company By recording some of the major business activities of competitors, it is possible to analyze the rival's posture in the competitive market and what kind of actions and reactions they will take in the competition.
● Scale and scope of international operations Literally, this heading does not seem to be important to those who study competitors in their own countries. If all that can be learned is in which countries a competitor has operations, this element of analysis is indeed meaningless. However, two points must be noted. First, a multinational firm has a natural competitive advantage. We should not only analyze the situation in the enterprise's home country, but should also investigate and analyze the multinational enterprise as a whole. The competitive advantage of multinational enterprises is reflected in the globalized economic scale and high investment in research and development. Secondly, multinational enterprises have the advantage of globalized strategic resource integration and their strategic decisions are based on globalized operations. Therefore, understanding the current status of competitors' globalized operations is the most critical first step in analyzing and researching what business behaviors competitors may be expected to adopt in different environments.
●Key Factors When doing a competitor analysis, there are always some facts that can help to understand or reflect a competitor's corporate strategy, or that can foretell that a competitor is about to launch a new strategy. Under this table item, the data to be collected include such things as the location and number of rival's production bases, where the R&D bases are located, changes in the top management team and recent changes in shareholding. Depending on the industry and the type of rival, any information that is considered important in relation to the rival can be included in this table.
● Obvious strategy This table item is the core part of the competitor information collection system, and also the most difficult part to complete. The word "obvious" here has a specific meaning, that is, based on the analyzed information, it is inferred that the competitor is implementing a strategy. However, this is only an inference and there is no guarantee that it will be 100% correct or for how long. It is important to monitor and analyze competitor information on an ongoing basis to confirm the validity of these inferences and to detect contradictions, as well as to observe when competitors are able to implement new strategies.
● Strengths and Weaknesses We often do SWOT analysis for companies. So the methods of strengths and weaknesses analysis will not be repeated. But here I want to emphasize is that do competitor analysis must be established on an objective basis, minimize the impact of subjective desire on competitor analysis, can not overemphasize the advantages of the opponent, and do not subjectively expand the opponent's disadvantages, the results will make the analysis lose its objectivity and cause decision-making errors. For example, a U.S. company for many years to do tracking analysis of its main competitors, the conclusion is that several rivals have been on the verge of closure. A few years later, the company found that these rivals were still struggling and growing. The conclusion of that analysis was meaningless.
● Business Philosophy A company's management style and approach can also have an impact on its strategy and business behavior. For example, how is the role of the corporate headquarters positioned in the overall corporate organizational structure (parent-subsidiary or divisional)? How is the competitor positioned within the corporate group, is it a dominant position or a secondary follower? How does the head office judge its performance? How do its financial principles affect the cost of its products, and what is the management style of the CEO and general manager? All of these relate to the business philosophy of the company. These questions apply not only to competitors who are subordinate to a large conglomerate, but also to single companies whose business philosophy is similarly influenced by the organizational structure and management style of the firm. Therefore, it is essential to conduct competitor analysis to understand and analyze their business philosophies as well.
●Human Resource Policies Human resource policies are important aspects that have an impact on business strategy and performance. For example, lower compensation levels can create difficulties in attracting and retaining the best talent in a company, as well as affecting business performance and the achievement of long-term goals. Therefore, in addition to the compensation system, information about the quality and seniority level of competitors' employees, training opportunities provided to employees and career planning are all part of the survey for this form item.
●Critical Success Factors The first step should be to analyze the critical success factors of the company's position in the industry and make a score (0-10), which will be used as a constant when comparing the scores with those of competitors. Each competitor's Critical Success Factors are then scored in the same way. The Critical Success Factor Index is the quotient of each competitor's score divided by this business's score. This index can be used as a reference value when analyzing the strength of this business in comparison to other competitors. To accomplish this scoring and indexing requires in-depth analytical thinking on the part of the participants, and is best accomplished by a dedicated workgroup rather than by a single individual.
The application of the competitor information collection and analysis system is the purpose and key to establish it. First of all, the system can systematically collect, record and analyze competitors' data and information, and keep it constantly updated. In order to make good use of the system, the enterprise must set up a special group composed of senior managers to analyze and study the information in the system on a regular basis. When enterprises formulate development strategies, in addition to conducting the necessary industry analysis, the competitor information collection and analysis system will become an important auxiliary tool for enterprise decision-makers to formulate strategies. Using it, decision makers can compare the actual competitive behavior of competitors with what you expect them to do, and prompt decision makers to pay attention to which actions of competitors. It goes without saying that this information should be a corporate secret and must not fall into the hands of competitors, otherwise the system will become a target for competitors to disseminate false information.
2. Introduction to the analysis method
After the information is available, competitor analysis becomes an important part of the application of the system. Competitor analysis and general business analysis is basically the same, only the main body of the analysis is the competitors, the analysis tools used are not much different, such as the familiar Porter's Five Forces Analysis, Boston Matrix Analysis and so on. The following is a brief introduction to several methods used for competitor analysis.
(1) Portfolio Matrix Analysis
The basic purpose of the portfolio matrix analysis is to allow companies to understand all of their business activities, the relationship between the various businesses, and to help companies to decide to invest in those businesses, which business is a cash cow type, and which businesses need to be sold and which need to be closed.
The size of the circle in the chart above represents the size of the revenue of that business. It can be seen that the market prospects for business 2 is not good, but the market share is high, is currently the enterprise's "cash machine", so the enterprise should be invested enough money to maintain the normal operation of the business, so that the enterprise has the ability to utilize the current market share of the business for the enterprise to earn as much cash. Business 1 is in a situation of poor market prospects and low market share, then the enterprise needs to consider whether the business can be successful, even if it is considered to be successful, but also in the investment of human and material resources to be carefully considered. It may be more appropriate to abandon the business. Business 5 has a high market share and is very promising, but it is a "cash starved" business in the enterprise, and it is urgent to inject a large amount of capital to develop the business so that it can become a market leader and get a return as soon as possible. Business 4 has good market prospects, but its market share is very low. At this point, the decision maker should decide as soon as possible whether to continue the business or to abandon it. Because, in order to obtain a high market share, the enterprise must commit to the corresponding capital investment, otherwise over time, when the market leader to obtain more market share, the enterprise this business in the market will be in a more disadvantageous position. Other positions in the matrix represent different degrees of market share and market prospects for a particular business in the market competition. Combination matrix analysis can help enterprises in the business choice decision-making, for example, through the analysis can understand the enterprise's acquisitions and the establishment of strategic alliances strategy will make the enterprise's position in the market how to change; the enterprise to determine a large number of investment in the "cash-starved" type of business is not more than the number of enterprise The capacity of the "cash-machine" business.
The Portfolio Analysis Matrix also helps companies consider the timing of their strategy. For example, a company in a fast-growing industry has captured favorable market share in one or two countries and is considering a global expansion plan. A portfolio matrix analysis reveals that if it loses time and allows other competitors to overtake it, it will be at a devastating disadvantage and will no longer be able to catch up with its rivals; if the investment is too large or risky, the company may consider selling the promising business to recoup the cash or expanding through other forms of expansion, such as a strategic alliance.
One of the roles of competitor analysis using portfolio matrix analysis is to first determine the position of each competitor in the matrix diagram and compare it with the position of the firm to find out which competitors are in an advantageous position to compete nationally or globally. In particular, this method of competitor analysis and comparison is useful when a company is seeking international expansion opportunities and advantageous positions, while competitors in the industry are still regional and not truly global, and competitors do not yet know each other well and have not yet met in the marketplace.
For example, a company may be competing with a competitor in only one business area, and the competitor is also a diversified business type, but the business in which the company is competing with the competitor is in a different position and plays a different role in the respective business portfolio. Suppose the rival's competing business is in the middle of the matrix above, and this business is the rival's "cash machine" type of business, which must support the rival's other businesses' capital needs. This puts the firm's business in a favorable competitive position. This business is likely to receive more investment, whereas the rival's business, which is the source of funding for the entire enterprise, has a heavy burden of exporting resources to multiple "cash-starved" businesses, and is likely to underinvest in itself. By contrast, this business has a clear competitive advantage, and decision makers can determine to develop this business.
2) Value chain analysis
Mike. Porter pointed out that "to diagnose the competitive advantage of a business, it is necessary to determine its value chain in a particular industry competition." He also argues, "It is impossible to understand a firm's value chain by looking at it as a whole. The value chain emerges from the business activities that operate independently in a firm, such as product design, production, marketing, delivery, and support activities. All of these activities have a cost to the business and create a basis for differentiation. According to him, there should be five areas of work in a business, namely internal logistics, production operations, external logistics, market development and sales, and service. Each of these five areas of work has a great potential to provide value to the customer and help the organization to build a competitive advantage. Therefore, the first step in conducting a value chain analysis, whether it is an analysis of your own business or that of your competitors, is to examine the work processes involved in these five areas of your business, to determine where costs are incurred and what creates value for the customer. Several aspects mentioned in the table of sources of competitive advantage in the previous competitor information collection and analysis system, such as the enterprise's purchasing and supply, R&D, human resources and infrastructure are the support system for these five work scopes. Customers may not see the effectiveness of their operations, but they undoubtedly create and consume enterprise value as well. For example, the value of an airline's comprehensive crew training does not come directly from the training, but rather from the customer's perception of crew service and the crew's service behavior and quality. On the contrary, an airline with a poor training mechanism, poor crew service, poor customer evaluation, and as a result, fewer passengers, the company's performance is naturally bad. As you can see, the value chain exists in every business. Recognizing it and actively building it is an effective way for enterprises to create competitive advantage. Therefore, when doing competitor analysis, an in-depth understanding of the competitor's value chain is a useful and effective way for companies to develop a competitive strategy.
(3) Benchmarking
The benchmarking method is often used in the evaluation of business performance standards in competitor analysis. Benchmarking is a method of looking at the processes used by one business to achieve better performance than another, and comparing their performance with each other. Benchmarking includes the following elements.
● Determining what to benchmark;
● Determining who to benchmark;
● Researching the areas of interest to the organization;
● Researching the relevant areas of the organization being benchmarked;
● Comparing and analyzing the results of the research;
● Developing a program of improvement for the own organization.
The application of the benchmarking method focuses mainly on the level of enterprise operation process, and the main method is to compare and analyze as many performance indicators of our enterprise with those of our competitors. Of course, the acquisition of rival performance indicators is the key to the method. They can usually be obtained from trade associations or other industry publications and public information from statistical departments. Information can also be obtained with through specialized market research. Market research can be done on a competitor's particular service line. For example, the length of their time cycle from the customer order to door-to-door delivery to do the survey; on the product after-sales service when the service level of door-to-door maintenance engineers to do the survey; for the service stores open to the customer to do the survey, such as supermarket cash registers or bank counters in front of the peak hours of the customer queuing time, queuing time, length of the survey, and so on.
Benchmarking is a competitor analysis method often used by many world-famous enterprises, and it is also one of the effective methods for enterprises to cultivate competitive advantages. At the same time, this method can also be completely used to compare and evaluate the performance of various parts of an enterprise's internal processes. For example, if a multinational enterprise carries out the same business in different countries, it is possible to set up a benchmarking unit within the enterprise, so that other units with the same business can be used as benchmarks to follow. This will build confidence in the organization before it is benchmarked against external competitors.
In some cases, a business may not be able to find a suitable competitor to benchmark against. Then the following approach can also be taken.
● Benchmarking with a regional or foreign company that does not compete with the enterprise. For example, a public **** transportation company in Beijing can take a public **** transportation company of the same size in Shanghai as a benchmarking object for comparative research; a power generation enterprise in the Netherlands can be compared with similar enterprises in Japan or the United States for comparative research; a Chinese pharmaceutical chain can be compared with the United States or the United Kingdom's pharmaceutical chain stores in certain business and service aspects of the comparative study of the benchmarking method.
● Since benchmarking focuses mainly on the business process level of an enterprise, comparative benchmarking studies can also be conducted between enterprises in different industries with similar operational processes. Enterprises in the same industry may be in the lead in some operational processes, but other process aspects may not be as advanced as those of enterprises in other industries, so it is essential for industries to learn from each other.
In short, the benchmarking method is applied to competitor analysis, the purpose is not to copy some of the rival's management and operation procedures, but to draw on others' good solutions and experience to improve the operation and management of the enterprise, and its ultimate goal is to further strengthen the competitive advantage of the enterprise.