December 3, 2011

Analyzing Competitors

Marketing Management Revision Article Series


Competition is growing more intense every year. Michael Porter identified five forces that determine the level of competition in an industry. If the competition is very intense, profits will be low in the industry. The five forces are:
1. Intensity of rivalry among present competitors
2. Threat of new entrants
3. Threat of substitute products
4. Threat of buyers' growing bargaining power
5. Threat of suppliers' growing bargaining power
The first three forces represent competitors. Therefore, the companies have to pay attention to the actions of their competitors in addition to their attention to customers' needs and desires.


Analysis of Competitors - Introduction

Companies need to know five things about competition. .

Who are our competitors?
What are their strategies?
What are their objectives?
What are their strengths and weaknesses?
What are their reaction patterns?

Who are our competitors?

Kotler outlined four levels of competition, based on the degree of product substitutability.

1. Brand competition.
Companies that are offering similar products and services at similar prices.
2. Industry competition
Companies offering the same class of products.
3. Form competition
Companies offering a product to serve the same need.
4. Generic competition
All companies that are competing for the customers' dollars.

What are their strategies?

Identifying Competitor Strategies

Resourceful competitors revise their strategy through time.  Companies have to monitor the strategies of companies that fall in their strategic group more closely.
A group of firms following the same strategy in a given target market is called a strategic group. A company needs to identify the strategic grouping  in which it competes.
It has to monitor efforts of even  potential new entrants into this strategic group. Also it has to monitor efforts of companies in adjoining strategic groups.

What are their objectives?

Determining Competitors’ Objectives
 The company has to make efforts understand what drives each competitor’s behavior. Normal microeconomic assumption is that every firm attempts to maximize their profits. However, in actual practice, companies differ in the weights they put on short-term versus long-term. Hence, each firm pursues a mix of objectives, current profitability, market share growth, cash flow, technological leadership, service leadership etc. with different weights attached to them.

 What are their strengths and weaknesses?

Assessing Competitors’ Strengths and Weaknesses
 Resources and capabilities determine the competitive advantage. Marketing department has to determine the strengths and weaknesses of competitors. When market share is to be increased, the marketing department has to know the weaknesses of competitors, which can be attacked in the market place for grabbing market share. For determining this, it may conduct a primary research among consumers, retailers and wholesalers regarding their satisfaction with various desirable attributes of a product and the offering of various competitors.

What are their reaction patterns? 

Reaction Patterns of Competitors

The laid back competitor
This firm does not react quickly or strongly.
The selective competitor
The firm reacts to certain types of attacks very strongly.
The tiger competitor
The firm does not remain quiet. Any attack on its market or product is given a strong response.
The stochastic competitor
The firm does not exhibit a predictable reaction pattern

Designing the Competitive Intelligence System

A well designed system provides company managers with timely information about competitors and responds better to requirements of more information when needed in response to significant new about the actions of a competitor.


Philip Kotler, Marketing Management, 9th Edition

Marketing articles are available under the label

Article on differentiating and positioning

Planned Revision schedule for marketing chapters is in February and March

Article originally posted by me in
Many article in this blog were migrated from Knol. On Google's Knol plat I reached the Global Number One English Author Position.

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