1. Analyzing Competition
What is market orientation?
o Chance favours the prepared mind and an organization that gathers market
intelligence, analyzes it, disseminates it, learns from it and then responds to it is
favoured by chance.
No competition occurs when there is a single supplier of a particular product, such as
a regional electrical utility that has control over price, quality, and quantity supplied. A
monopoly is often government regulated and regulators often undertake financial audits and
customer satisfaction surveys to check on whether the monopoly is making excessive profits
and satisfying customers. Trends revealed in this publicly released information can be used by
a potential new entry to argue against the continuation of the monopoly. In many countries
there has been a shift away from state supported and regulated monopolies toward state
regulated oligopolies because competition, even if only between two suppliers, gives
consumers choice, which encourages innovation and price competition.
Oligopolistic competition is a market dominated by a few large suppliers such as
the detergent or aircraft industry. Oligopolies often evolve in industries that require very large
investments in equipment, technology, and/or distribution because such a requirement
encourages mergers and acquisitions. The few suppliers compete on price, product features,
advertising and sales promotion. Many modern markets evolve into oligopolies with a few
successful suppliers dominating the market, for example, the laptop computer market. Some
oligopolies exhibit fierce price and innovation competition, others do not. A lot depends on
what the famous English economist Lord Keynes called the animal spirits in the market: the
drive to constantly improve in ways that satisfy customers and reduce costs.
Monopolistic competition has many suppliers offering a variety of products, each of
which has a small, loyal market share. Examples are found in salad dressings or barbeque
sauces, local beauty salons and bars. The feature of this type of competition is that there
exists a lot of product and service differentiation (differences) between rivals as well as price
Perfect competition is when many suppliers sell essentially the same product, such
as the Thompson Seedless Grape producers. Supply and demand will control the price;
advertising and sales promotion will have little influence. Low cost production of a quality
product and efficient distribution determine success in such a market.
Market share is measured as a companys percentage of total industry sales over a
specified time period.
Before determining our major competitors - define the market (not easy)
The market is normally specified by a realistic assessment of company resources and
company growth objectives
A companys market share can change dramatically depending on whether the market is
defined as global, a particular export region (say the EU), the U.S. market, a region of
the United States, a city, a segment of users, or by the product form (e.g. diet colas). Module #2
For example, some of the different types of markets a product competes in are illustrated in
The closest and most immediate competition comes from rivals products that share
similar, specific design features (e.g., diet cola cans) and are targeted at the same consumers.
The next level of market competition comes from products that share some similar
features (e.g., soft drinks). More general competition comes from products that satisfy a core
benefit (e.g., thirst-quenching or pick-me-up drinks).
o Both Pepsi and Coke were so focused on each other that they neglected to respond in
time to the bottled water, iced tea and Red Bull market threats.
The newspaper industry has also focused too narrowly on who its competition was for
advertising. The result was that the whole industry was late in creating e-newspapers and of
course completely missed the search advertising market opportunity that Google created and
has made into a $30 billion dollar industry.
o Took away most of the revenue, shares, and consumers from the newspaper industry
over to Google advertising industry
Problem- too much focus on measuring the number of current competitors, the
concentration of market share (the combined market share of the largest four competitors)
and the current balance sheet of major competitors.
More on commercializing and diffusing of new innovation into the marketModule #2
o competitive insight comes from process thinking that explains such success in the
market, not from knowing who has the largest market share.
Competitor-research efforts seldom require defining market share down to the last share
point (a share point is 1 percent of market share) because defining the exact bounds of the
market is rarely that precise. Competitor research efforts are better spent finding out which
established competitor or new start-up company is using radical new product or process
technology to increase customer satisfaction and reduce costs.
The history of the evolution of technology suggests that small start-up companies such
as RIM or a large company in a different market often revolutionize a market, so keep a special
eye on them.
To see the threat you have to see it in the new competitions processes, which means
you need to be a good intuitive process thinker and observer.
o For example, the traditional process of buying a book involved going to a book store and
browsing, rather than browsing a website.
o Amazon.com developed a web-based process (a way or method) of browsing books and
buying books, and suggesting other books through analyzing purchasing patterns that
traditional book retailers not only did not invent but refused to accept until they started to go
out of business.
Daniel Lamarre the president of Cirque du Soleil, has observed, You dont look around,
you look ahead.1 You focus on a profitable business development opportunity using a new
technology that delivers more in benefits than the current technology. You have to have more
than good vision; you have to be a visionary. You have to be able to see beyond the horizon.
While the change in market sales share over time is a crucial indicator of the
competitive environment, it is not the only measure of competitiveness. The following are
often used as leading indicators of a likely change in future sales, profits, and competitiveness.
1. Changing b