Conduct a competitor and industry analysis. Explain how this would affect the implementation of your marketing strategy

 

A company is planning an important investment in a market and a competitor and industry analysis is requested. How this would affect the implementation of your marketing strategy?

It is imperative for a company to have a detailed knowledge of their competitors in order to position itself and distinguish it from its counterparts. As fierce competition erodes the competitive advantage, company must create more economic values than competitors to obtain or maintain a sustainable competitive advantage.  The company must have the capabilities to adapt in the fast-changing environment and react quickly, else it would not be able to keep up with the market and maintain the sustainable competitive advantage and profitability. This is particularly true when competitors have changed their market positioning strategies, marketing mix strategies or introduction of new products which directly affect or neutralise the company’s competitive advantage. Thus, company needs to perform competitor analysis to identify the threats, opportunities, or strategic uncertainties created by emerging or potential competitor moves, weaknesses or strengths, which will influence the product-market investment decision.

Competitor analysis is an important phase of external analysis and it starts with identifying current and potential competitors. There are 4 key issues to investigate.

First is to identify the competitors.

 

Second is to identify the most intense competitors and the less intense but still serious competitors.

Third is to identify the makers of substitute products.

Fourth is to classify competitors into strategic groups on the basis of their assets, competencies and strategies.

Fifth is identifying the potential competitive entrants.

After the competitors are identified, the focus shifts to attempting to understand them and their strategies. Marketers would then again need to investigate the following key issues on competitors:

 Mission Statement

By investigating competitors’ mission statements, marketers could study their main objectives and vision, which depicts long-term strategies. Marketers could then identify threats and opportunities from their strategies and make adjustments to its marketing strategies to counter or overwhelm competitor’s strategies.

Market Targeting

Through understanding of competitor’s market segmentation, marketers could identify which groups of the market the competitor attempts to target. It would then provide opportunities for marketer to explore and target a new market which competitors have not targeted.

Image and Market Positioning Strategy

Marketers need to understand how competitors position themselves in the market and the strength of their market positioning strategies on consumers. It could be analysed by using perceptual mapping, which attempts to visually display the perceptions of customers or potential customers. Typically the position of a product, product line, brand, or company is displayed relative to their competition. Competitors that are positioned closely together are close competitors and form a competitive grouping. Hence, marketers should consider the introduction of a new product in an area on the map that is free from competitors.

The level of entry and exit barriers

Marketers need to identify the level of entry and exit barriers to the market. If the level of barriers for entry and exit to the market are low, it means that lesser resources and capabilities are required to enter into the market. However, the company could face more competition and might dissipate market share and profitability.

Marketing Mix Strategy

Marketers need to identify what are the marketing mix strategies that are adopted by the competitors. Particularly, what are the products they are offering, how they promote their products, how they priced their products and what are the distribution channels used for the products, which ultimately influences the product-market decision makings.

Assessing Strengths and Weaknesses

Marketers need to identify competitors’ strengths and weaknesses. By analysing competitor strengths and weaknesses, company could identify opportunities and threats they should pay attention to, and develop marketing strategies to create more economic values.

Porter's 5 forces analysis is a framework for industry analysis and business strategy development, it helps to understand both the strength of the company competitive position, and the strength of a position the company is advancing to. Conventionally, the tool can be used to identify whether new products, services or businesses have the potential to be profitable.

The bargaining power of suppliers

It defines how easy it is for the suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one another to another. Thus, the fewer the supplier choices, the more the company need for suppliers’ help, the more powerful the suppliers are.

The bargaining power of buyers

It is driven by the number of buyers, the importance of each individual buyer to the company, the cost to them of switching from the company products and services to competitors. If the company is dealing with few, powerful buyers, the buyers would have higher bargaining power.

The intensity of competitive rivalry

It is driven by the number and capability of competitor. If the company has many competitors, and they offer equally attractive products and services, then the company would most likely have little power in the situation.

The threat of substitute products

It is affected by the ability of the customers to find a product that can be substituted with the company’s product. If substitution is easy and substitution is viable, then this would weaken the company’s power.

The threat of the entry of new competitors

Power is also affected by the ability of firms to enter the market. If it costs little in time or money to enter the market and compete effectively, if there are few economies of scale in place, or if there is little protection for company’s key technologies, then new competitors can quickly enter the market and weaken the position. If the company have strong and durable barriers to entry, then the company can preserve a favourable position and take fair advantage of it.

As the level of barriers to entry into the market is low, new competitors could replicate the key technologies and produce similar product design and functionality at a lower price. Just like in the case of hundreds over imitation brands of portable media players at a lower price in the market. A company needs to educate and convince the consumer in differentiating and demonstrate the desired benefits of its products respectively.

Conclusion

In conclusion, it is important for company to have detailed knowledge of competitor, so as to identify the opportunities and threats, which would influence the product-market investment decision. Marketer needs to evaluate its powers on whether it is worth the investment to enter into the market using the Porter’s five forces analysis. Ultimately, it is essential for the company to diversify and expand product lines, differentiating its products and increase brand loyalty in order to survive in portable media player industry.