Comparison of Two Journal Articles Highlighting Competitor Analysis - Coursework Example

Critical analysis: perspectives on competitor analysis principles BY YOU YOUR ACADEMIC ORGANISATION HERE HERE Critical Analysis Introduction Competitor analysis, generically described, is a strategic management tool designed to provide a proper strategy to combat competition by measuring the individual strengths and weaknesses of competitive entities. Competitor analysis measures the financial strength of competition as well as their products, marketing, operations and leadership capabilities, transforming this information into a tool for strategic planning. Both in the private and public sector, competitor analysis is vital to working out an appropriate change in business practices or the development of forward strategy to achieve growth in their unique market environments. This report compares two journal articles highlighting competitor analysis, identifying the varying approaches to competitor analysis and key findings as to best practice for strategic management through competitor monitoring and assessment. Managerial approaches to analysis Identifying potential opportunities and threats associated with competitor activities is the fundamental purpose of competitor analysis in order to determine whether the business can maintain a competitive advantage and how best to go about doing this. Bergen & Peteraf (2002) describe the importance of competitor analysis as being a positive motivator to increase managerial awareness of external threats and risks, essentially creating a leader who does not take a rather myopic approach to business strategy. The authors suggests that once the competitor has been identified, it is a primary goal to define the market in which the business thrives and determine whether competitors have an edge in finance, product or marketing and look for avenues by which to close this edge through positive business changes. Through this method of competitor analysis, the business understands the overall relevance of competitive activities and prevents the company from being blindsided by surprise moves in similar market environments. The authors propose a detailed, two step framework in competitor analysis in which the most important element is recognizing the level of threat stemming from each competitive entity. For instance, indirect competition is measured along with potential competition and direct competition (Bergen & Peteraf). By identifying competition in this fashion, business leadership creates a company profile based on the level of threat that each competitor maintains in any given business situation. This profile is then compared to long-term company strategy to determine which, if any, internal or external company resources should be allocated to combat competitive strategy. For instance, under this theoretical model of competitor analysis, direct competition may play a more serious threat to the business than that of indirect competition, thus it is crucial in this analysis framework to secure a competent understanding of where and how various competitors can serve to erode the business’ market share. The authors of the aforementioned article are utilizing a series of propositions based on competitor analysis which determine the correct method of business strategy which should be utilised to prevent competition from eroding the business’ market position. One proposition in this model is understanding resource equivalency and the likelihood of competitive attack. For instance, the authors propose that once analysis has determined that resources between competition and the business are relatively equal, the probability of attack is reduced. As resource equivalence becomes lower (due to financial differences or other product-related capabilities), the likelihood of attack increases. Under this model of analysis, the process of identifying competitor activities determines whether or not immediate competitive strategies should be deployed to prevent risk or whether slow-scale changes are required due to insufficient resource availability by competitors. This proposition-based model of analysis provides a template by which the business leader understands probabilities in business theory and allows the assessor to correlate business activities with sound company and market theory regarding competitive strategies. A differing approach Bennett (2003) offers insight into competitor analysis from a different approach by suggesting that the source of information by which business leaders gather competitor-related information is vitally important to successful strategy formulation. Approximately 80 percent of information on competitors, for most businesses, is gathered from annual reports, trade journals, newspapers and online websites (Bennett). Many business leaders use this information as a means of developing competitive strategy. This would imply a less-intensive approach to competitor analysis and the yield from these sources is not very high. Having offered this, the authors suggest that a primary study gathered from human sources is crucial to successful analysis of competition as it provides both qualitative and quantitative information based on interviews, surveys, consumer questionnaires or even observational approaches to gathering information. This approach is considerably different than that of Bergeran & Peteraf who do not point out any potential hindrances to research and its source material so long as it speaks of the current position of competition. However, Bennett identifies that the specific source from which analysis is conducted can create a series of useless strategies as public sources of information do not provide a detailed assessment of strategic strengths and weaknesses of competitive firms. Interestingly, Bennett identifies a specific strategy which competitors use to gain a competitive edge which involves false market signalling in the event that competitor analysis has been conducted and a business opponent has reached a strategy to undermine competition. False market signalling is the process of sending false or otherwise deceptive indications of business intention or goals in the pursuit of allowing competitors to respond poorly to misleading information (Bennett, 2003: 338). For instance, the business might release online media regarding long-term business strategy which is not actually in-line with internal activities, always randomising publicised strategic moves to make competitors unable to create a framework for their competition’s business strategies. The aforementioned is an activity, utilised by competition, to prevent competitors from fully measuring their internal and external strengths and weaknesses by adding unpredictability to competitor analysis and further obscure the true intention of the business’ moves. Though this might be considered a rather unethical business strategy, it does tend to illustrate the severity of tactics being utilised by firms today as a means to ensure competitive advantage and increased market share. This would tend to support Bennett’s approach to competitor analysis, citing the importance of gather information through primary sources. Online and trade journal sources as information about competitor activities may actually lead to the gathering of false information about competitive strategy, thus granting the assessor opportunities to create a series of combative strategies which will not, in any measurable form, create advantage or benefit for the company. Through primary data collection and observation, the true strategic position of the business can be uncovered, granting the assessor a more accurate picture of competitive activities and forward planning. Bennett further supports benchmarking as a primary element of competitor analysis, or the process of identifying (through SWOT analyses) the internal strengths and weaknesses of competition and determining how strengths in similar-market competitors can be incorporated into the business. This approach to analysis suggests that it serves as a tool for innovation by lessening the strategic advantages of existing competition and building a process or strategy that is directly in-line with competitive capabilities. This tightens the gap between resource availability and strategic edge. Benchmarking can also indicate issues of total performance behaviour, such as employee competencies or measuring potential deficiencies in the management hierarchy, measuring the assessing business against these strengths and weaknesses to ensure that none of the same defects exist in the assessing business. Essentially, through benchmarking and competitor analysis, recognising whether a competitor is successful or a business failure allows the assessing company to weed out similar defects in the business. This process becomes much like an internal housekeeping function to ensure that all internal processes are streamlined to function without negative impacts to the business based on competitor failures in similar processes. Similarity of competitor analysis theories There are several similarities which appear to be generic throughout the entire competitor analysis process in regards to both groups of author perspectives on the subject. In terms of market strategy, competitor analysis allows a firm to grasp how well their competitors have managed to build marketing successes or differentiate similar products in the minds of consumers to give them a strategic sales advantage. A SWOT analysis of two medium-sized businesses, for example, might uncover superior sales volumes for similar products based on a marketing differentiation strategy which has moved from conservative values to progressive values in terms of relating to diverse consumer audiences. This is both an opportunity for a firm and a threat in terms of the damage it can cause for market share erosion. The opportunity is for the business to create its own differentiation strategy which builds a new image for the competing products whilst the threat lies in a competitor which maintains a superior marketing department or marketing strategists internally. Perhaps the competitors’ marketing successes are because of internal resources who provide excellence in market strategy or because of changing tastes in the consumer demographic. Competitor analysis allows the business to look at all aspects of internal and external business operations and the consuming population, working as a template by which assessing firms can redevelop tangible business capabilities (such as manufacturing or other processes) or simply add window-dressing to the firm’s marketing strategies and capitalise on its positive effects based on consumer preferences. All in all, the process of competitor analysis appears, in both author perspectives, to require an efficient utilisation of the SWOT analysis template as the fundamental starting point for successful competitor analysis. However, where the authors differ is in the strategic importance of whether the measurement of strengths versus weaknesses is most vital to the assessment or whether opportunities and threats (as part of risk management) is most important to creating a workable competitive strategy. Conclusion Clearly, businesses which maintain competition in similar market environments are concerned with competitor activities to the degree that competition is often a war of strategy to determine a victor, measured by percent of market share. However, in order to reach this pinnacle of marketing strategy, both of the articles described for this analysis suggest differing approaches to combating or defending against competitor activities. The integrity of information gathered, suggesting higher importance over primary research information than that of secondary sources, speaks to the overall validity of the competitor analysis. Since it is a competent assumption that the results of a competitor analysis will dictate the appropriate strategy necessary to gain competitive edge, it is important to recognise the vast tools available for assessing companies to create a quality competitor profile. Bennett suggests profiling as a means of measuring both the internal and external capabilities of the firm whilst Bergen & Peteraf propose a similar methodology. Both articles are similar in approach regarding building a case study of total competitor resources and capabilities. Where the articles differ in approach was also discussed in terms of benchmarking and the misleading efforts of sending false market signals. Benchmarking was proposed as a means of mimicking the activities and capabilities of competitors to create similar operating environments, somewhat negating the idea of innovation and individualism in the business. As a counter strategy to other competitor efforts, false market signals could decrease the viability of gathered competitor information, reinforcing the importance of ensuring the integrity of information gathered prior to formulating a forward business strategy. However, there does appear to be one common factor in the importance of analysis, and this appears to be that the process is never-ending due to the fact that business and the essence of competition is changing so rapidly that the process of SWOT analysis and other models for measuring competitor strengths and weaknesses requires constant adjustment and monitoring. Business evolves rapidly and both authors of the assessed articles clearly indicate that competitor analysis is a vital tool for securing competitive edge or increased market share simply by creating a competent framework of competition and using this information to create strategies which are congruent with budget and long-term company goals. Bibliography Bennett, Roger. (2003). ‘Competitor analysis practices of British charities’. Marketing Intelligence & Planning, Bradford. 21(6): 335-350. Bergen, M. & Peteraf, M.A. (2002). ‘Competitor identification and competition analysis: A broad-based managerial approach’. Managerial and Decision Economics. 23(4): 157-168. Read More