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Introduction
Competition has always been a central element in the field of analysts, directors, executives, entrepreneurs, founders, planners, and managers. Successfully positioning the company, adequately deciding on resource allocation, and defining an acceptable level of performance are key tasks of senior decision-makers. Regarding the former, a competitive analysis paired with market analysis approaches, such as market research, can be an invaluable tool for gathering the needed information. Skillful application of the gathered information is critically important in determining how the firm can more effectively compete and provide better value to its stakeholders.
Competitive Analysis
In a business or commercial context, the word competitive means a contest between two or more players. Its sources can vary greatly, from product or service offers to access to capital or resources, supplier contracts, or investor relations. Meanwhile, analysis implies a professional application of scientific and non-scientific processes and data interpretation methods to produce insightful conclusions and actionable opportunities for decision-makers (Bilgin et al., 2019). The combination of the two, competitive analysis, is a cornerstone of effective strategy formulation and implementation. Valuable analysis helps decision-makers understand and predict critical market-changing actions that competitors and other competition-impacting stakeholders may take. In addition, competitive analysis is not purely art or science it requires a practical application as well.
Competitive analysis is applicable in many ways, but its most common application relates to assessing a current market position. It allows developing strategies to preserve an advantage, withdraw from the market, or attempt an improvement (Bilgin et al., 2019). In particular, the analysis assesses the market share, client perception, prices, costs, and current marketing strategies (Bilgin et al., 2019). Additionally, it provides information about a firms competitors relative market positions, strengths, and weaknesses. In other words, the process identifies opportunities; subsequently, it points to strategies to exploit these opportunities in the market.
Market Research
Market research implies a systematic gathering of data about the market and a consequent analysis to better understand what the chosen group of interest needs. Traditional market research can provide valuable insight into customers perceptions of a marketplace and servicing suppliers, such as the firm and its competitors (Bilgin et al., 2019). Information for the research can be gathered on individual products, product types, various services, different suppliers, and client feedback in terms of product or service improvements.
Application
Competitive analysis can be understood as a broad three-step process. Firstly, there is a need to identify the focus of the firms current strategy and determine the analysis parameters, such as the market or products that need to be assessed. Secondly, the analysis itself takes place through market segmentation, industry evaluation, and market research. Finally, the gathered data should be examined; the gathered insight then serves to formulate a respective positioning strategy.
Current Focus and Analysis Parameters
Assessing the current business and marketing strategies will provide a starting point for moving forward. It also serves as a step in defining the projects scope and what the firms management hopes to gain from it. The former will impact the depth of analysis the firm is preparing to undertake (Hague, 2021). Regardless of the level of detail, it needs to make early decisions about data categories and parameters to gather. The data categorization is arbitrary and is a fundamental part of designing future analysis (Hague, 2021). Then, the firm has to consider the level of detail it plans to go into with its research, which depends on the size of investments from the competitive positioning process. Lastly, parameters considered in analyzing competitive position are the factors that can impact the firms market performance, such as revenue, brand image, market share, profit performance, productivity, prices, costs, and margins. These parameters can be examined at both the industry level and the level of individual product markets within it.
Analysis Process
Market Segmentation
Market segmentation divides the market into separate client groups that share particular attributes. The resulting market segment becomes a way to conceptualize the target market. It must be easily identifiable, measurable, and accessible through communication and distribution channels (Grover, 2018). It should have unique needs, possess relative stability over time, and be large enough to be a profitable target (Grover, 2018). Depending on the chosen division characteristics, such segments may be comprised of industry or individual consumers. An industry consumer segment is identified by geography, meaning client concentration and regional growth, client type; and how the clients behave, implying loyalty, order size, and frequency (Grover, 2018). In the meantime, individual consumers are divided into segments according to four following attributes: geography (location, population density, growth), demographics (age, gender), psychographic variables (values, lifestyle, attitudes), and behavior (loyalty, product usage, price sensitivity) (Grover, 2018). Proposed market segmentation allows for the division of the client base into small groups, making it easy for the company to identify the competitors who are also interested in these market segments.
Industry Evaluation
The firm should focus on industrial areas, including investigating current and potential products and markets of its competitors. Regarding the former, industry evaluation implies a strategic assessment of the competitive position of each competitor within the chosen market (Hague, 2021). This analysis considers such factors as the existing competition between market suppliers, the power of suppliers, the clients bargaining power in the marketplace, the threat posed by new market entrants, and the threat to the market caused by substitute products. Moreover, the analysis should also consider the long-term direction of a market, studying the broader industry framework to identify its trends (Hague, 2021). Lastly, it should aim to understand the industrys structural characteristics (Hague, 2021). For instance, the firm would need to know the competition level, number of competing firms, current market regulation, stability of the firms ownership, geographical concentration, and existing gaps in market coverage.
Market Research
Technological advance has significantly increased the variety of options market research can be conducted. Particularly, the information can be gathered via traditional face-to-face interviews or telemarketing, big-data analytics, and social media mining (Marmo, 2021). Furthermore, the firm can use detailed surveys designed and administered by professional researchers to generate statistically equivalent empirical information. A third party should conduct the research to limit the firms internal biases.
Data Examination
As a result, a lot of detailed information will be obtained in a competitive positioning analysis. Among the simplest and most commonly used ways to prepare a quick graphic summary of the main findings are the perceptual maps or competitive strengths and weaknesses matrices. Compiling these maps or matrices with a constant reference back to the gathered information will enable the analysts and the project team to develop a list of opportunities available to not only boost the firms competitive positioning but also to address specific problem areas for long-term competitive advantage.
Conclusion
A competitive analysis allows senior decision-makers to obtain information necessary for developing the firms short-term and long-term strategies. Its application starts with the identification of a current firms status and the definition of analysis parameters. Then, the actual three-faceted analysis takes place; it includes market segmentation, industry evaluation, and market research. Finally, the application implies assessing obtained information and developing a business strategy.
References
Bilgin, M. H., Danis, H., Demir, E., & Can U. (Eds.). (2019). Eurasian business perspectives: Proceedings of the 22nd Eurasia Business and Economics Society conference. Springer.
Grover, V., Chiang, R. H., Liang, T. P., & Zhang, D. (2018). Creating strategic business value from big data analytics: A research framework. Journal of management information systems, 35(2), 388-423. Web.
Hague, P. (2021). Market research in practice: An introduction to gaining greater market insight. Kogan Page Publishers.
Marmo, R. (2021). Competitive analysis based on social media mining. In Information Resources Management Association, Research Anthology on Strategies for Using Social Media as a Service and Tool in Business (pp. 454-465). IGI Global.
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