Competitor Analysis: A Continuous Process
This is the second of a multi-part discussion. This article focuses on Competitor Analysis (a system of continuous feedback) gives businesses the winning edge over competitors – even in challenging economic times.
In this segment, we will define the competitive environment and give some examples of how companies use Competitor Analysis to anticipate or react to business challenges.
Competitive Environment: It’s not just your competitors
For most businesses, the main focus of their Competitor Analysis is on their competitors, with pricing and product/service offerings as the main areas of concern.
Directing one’s focus solely on competitors is understandable and provides some useful insights, but having your company’s radar and response capability focused on a small part of the competitive environment can leave your business exposed to being blindsided.
The competitive environment includes the following:
- New technologies;
- Demographics (New or changing markets, changes in product/service demands, development of new population centres, etc.);
- Supply chains and the availability and pricing of raw materials;
- Legislation (actual or proposed) and special interest groups
New Technologies: the Quick and Dead
New technologies may be either technologies recently developed or technologies adopted from non-related industries.
We forget how Napster took the recording industry by surprise. Polaroid and Kodak were overtaken by digital photography, because they were too slow to change.
Is your company at risk because of changes in technology or an inability to adapt? Or is there a technology being used in another industry that can give your company an edge over the competition?
Demographics: New or Changing Markets
Demographics are not usually considered to be important in business decision-making. This is unfortunate because we can see the effects of changes in demographics all around us.
For example, the aging baby-boom generation has seen many products and services developed just for them: whether it is retirement communities, financial services or personal care products, this large and generally wealthy population group has had its needs taken care of.
Growing economies in China, India and Russia, as another example, provide businesses with the opportunities and challenges to do business in those markets.
Is your company in a position to profit from changing demographics or socio-economic conditions in Canada and around the world?
Supply Chains and Raw Materials
Companies may be vulnerable because they are dependent on raw materials from overseas. Whether it is fuel or rare earth metals, if a company’s sources are threatened or if there is a sudden price increase, then the company’s survival is imperilled.
In this case, Competitor Analysis will play a part in the development of contingency plans to offset sudden price increases or cuts in supply. Plans may include creating a reserve supply, developing business relations with alternative suppliers, or even seeking or developing alternative raw materials that are less susceptible to shortages or fluctuating prices.
Legislation can affect a company’s profitability with new regulations or deregulation. If your company can anticipate changes or quickly adapt to changes, it will be able to overcome and profit from the turmoil that may put competitors out of business.
Monkey Traps: Separating the Quick from the Dead
In some parts of world, monkeys are hunted using a monkey trap. This trap consists of a heavy pot with a hole large enough for a monkey to insert an open hand, but not withdraw a closed fist. Monkey food is put in the pot, the monkey grabs the food and, refusing to let go of the food when the hunters approach, is caught, killed and eaten.
Businesses that do not use Competitor Analysis and are not prepared to quickly make the changes needed to compete are soon caught, killed and eaten. Don’t be a monkey.
In our third segment, we will show actual examples of how Competitor Analysis has been used by companies to retain a competitive edge. Our fourth and final segment will deal with counter-intelligence.
Enrico Codogno is the president of Customer Foresight Group, Limited, a Toronto-based Competitor Analysis and Market Research agency, specializing in providing Canadian businesses with customized research services.