Wednesday, November 11, 2015

Analyzing the Competition

The Competitor Analysis: Understanding your Opponents article argues that the first step to a competitor analysis is developing a comprehensive list of competitors, both current and future. In todays market, however, I believe compiling this list of competitors is not enough to form the basis of corporate strategy. Disruptive technologies and the rapid development, growth, and failure of businesses makes gauging the landscape of various industries extremely difficult. A comprehensive list of competitors, and the subsequent analysis of each competitor on that list, is not enough to understand the entire competitive landscape. Although developing a company strategy based on the competition is necessary, it is also important to prepare for the unknown and what could be. George Day describes this best with his question “How attractive is the competitive arena?”
In industries where the barriers to entry aren’t extremely high and the market is extremely lucrative, it is very important that companies have strategies for defending market share against new market entrants. Industries with large overhead and/or large CAPEX (i.e. oil and gas) don’t have to worry as much about quick defense strategies against mark entrants due to the size of the initial investments required and the time it takes to set up the necessary infrastructure. In industries that are tech based, however, such as digital marketing or production of electronic devices, defensive strategies against market entrants are extremely important.

As an example, consider internet based companies. Due to the speed with which they can now grow in terms of users and revenue, defensive strategies and market retention strategies have become a central part of running online business. Without the proper strategies, companies won’t be prepared to respond to new threats in the market. However, this idea extends well beyond web-based companies. We can consider the dangers of not developing a well-rounded strategy by considering RIM, maker of Blackberry phones. The company lost the majority of its market share and businesses to smart phone produces, many of whom weren’t in the phone business until they saw how lucrative the global smartphone industry was (case and point would be Apple with the iPhone and Google with the Nexus.) Had Blackberry properly analyzed the industry and monitored the shift in the mobile phone environment they may have been able to prepare for the influx of smartphones and producers.

Examples like the one mentioned above are abundant. New companies are founded every week, and companies break into new markets on a regular basis. That’s why it is no longer enough to just analyze the competition. Without properly analyzing the industry and thinking about who and how a new company or existing company would enter the market, corporate executives will not be able to develop a strategy that adequately prepares them for changes in the competitive landscape.

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