SIE 415SIE 415Thursday, April 23, 2009Thursday, April 23, 2009

CompetitionCompetition

Guest SpeakerGuest SpeakerCarrie Speth Carrie Speth

Technical Sales Professional with IBMTechnical Sales Professional with IBM

Please write down and submit two Please write down and submit two questions for our guest speaker. questions for our guest speaker. (Be sure to include your name.)(Be sure to include your name.)

SIE 415SIE 415Thursday, April 23, 2009Thursday, April 23, 2009

Upcoming:

No Class on Apr 28th - view video and review slides

(D2L Unit 20: Customer Relationship Management -

Bill Price Presentation)

Homework:

Peer Evaluations (see form in D2L)

Due April 28th

Competitive Analysis Report or Presentation

Due April 30th

Individual or Small Groups (up to three students)

Read:

“Do you really know what the competition is doing?”

The Competitive EnvironmentThe Competitive Environment

Competitive IntelligenceCompetitive Intelligence Methods and ModelsMethods and Models

Competitor ProfilingCompetitor Profiling SWOT AnalysisSWOT Analysis PEST AnalysisPEST Analysis Five Forces AnalysisFive Forces Analysis Competitor’s Strength GridCompetitor’s Strength Grid Etc.Etc.

What is CI?What is CI? Competitive Intelligence: A Competitive Intelligence: A

systematic and ethical systematic and ethical program for gathering, program for gathering, analyzing, and managing analyzing, and managing external information that external information that can affect your company's can affect your company's plans, decisions, and plans, decisions, and operations.operations.

Categories of Competitive IntelligenceCategories of Competitive Intelligence Market IntelligenceMarket Intelligence

Industry level information on Industry level information on • TrendsTrends• Government regulationsGovernment regulations• Geopolitical issuesGeopolitical issues

Partner IntelligencePartner Intelligence Monitoring activities of Monitoring activities of

• Company’s major suppliersCompany’s major suppliers• Strategic partnersStrategic partners

Competitor IntelligenceCompetitor Intelligence Detailed monitoring & Detailed monitoring &

analysis of key competitorsanalysis of key competitors High-level scans of other High-level scans of other

competitorscompetitors Ongoing identification of new Ongoing identification of new

entrantsentrants

Technical IntelligenceTechnical Intelligence Monitoring advancements of Monitoring advancements of

technical developments technical developments Customer/Prospect Customer/Prospect

IntelligenceIntelligence Determining & monitoringDetermining & monitoring

• Key internal influencesKey internal influences• Budget cyclesBudget cycles• Key focus areasKey focus areas

Uses/Applications of Competitive IntelligenceUses/Applications of Competitive Intelligence

Facilitate Strategic DirectionFacilitate Strategic Direction

Strategic AlliancesStrategic Alliances

New Product/Service New Product/Service DevelopmentDevelopment

Sales ProcessSales Process

Marketing/Communications/Marketing/Communications/Public RelationsPublic Relations

HR and RecruitmentHR and Recruitment

Rival FirmsRival Firms

Competitor & Market Competitor & Market ScenariosScenarios

Acquisitions/Preventing Acquisitions/Preventing AcquisitionAcquisition

Methods & Models used in CIMethods & Models used in CI Competitor ProfilingCompetitor Profiling SWOTSWOT Porter’s 5 Forces ModelPorter’s 5 Forces Model PEST AnalysisPEST Analysis Competitive Strength GridCompetitive Strength Grid Strategic Group Map TechniqueStrategic Group Map Technique Executive Management ProfilingExecutive Management Profiling Financial Ratio AnalysisFinancial Ratio Analysis Environmental & Event AnalysisEnvironmental & Event Analysis Plus more…Plus more…

Competitor ProfilingCompetitor Profiling

What businesses probably already know What businesses probably already know their competitorstheir competitors Overall sales and profitsOverall sales and profits Sales and profits by marketSales and profits by market Sales by main brandSales by main brand Cost structureCost structure Market shares (revenues and volumes)Market shares (revenues and volumes) Organization structureOrganization structure Distribution systemDistribution system Identity / profile of senior managementIdentity / profile of senior management Advertising strategy and spendingAdvertising strategy and spending Customer / consumer profile & attitudesCustomer / consumer profile & attitudes Customer retention levelsCustomer retention levels

Competitor ProfilingCompetitor Profiling What businesses would really like to know What businesses would really like to know

about competitorsabout competitors Sales and profits by productSales and profits by product Relative costsRelative costs Customer satisfaction and service levelsCustomer satisfaction and service levels Customer retention levelsCustomer retention levels Distribution costsDistribution costs New product strategiesNew product strategies Size and quality of customer databasesSize and quality of customer databases Advertising effectivenessAdvertising effectiveness Future investment strategyFuture investment strategy Contractual terms with key suppliersContractual terms with key suppliers Terms of strategic partnershipsTerms of strategic partnerships

SWOT AnalysisSWOT Analysis Strategic planning methodStrategic planning method Credited to Albert Humphrey (Stanford University, Credited to Albert Humphrey (Stanford University,

1960’s – 1970’s)1960’s – 1970’s) Internal Internal

StrengthsStrengths Weaknesses Weaknesses

ExternalExternal OpportunitiesOpportunities ThreatsThreats

Company SWOT analysisCompany SWOT analysis Internal attributes of an organization and external conditions Internal attributes of an organization and external conditions

that affect ability to achieve objectivesthat affect ability to achieve objectives Product SWOT analysisProduct SWOT analysis

Direct comparison with the products/services of competitors Direct comparison with the products/services of competitors within a given market segment within a given market segment

Source: Adapted from M. E. Porter, Competitive Strategy, Free Press, 1980, p. 4.

Threat ofThreat ofsubstitutessubstitutes

Potentialentrants

Threat ofThreat ofentrantsentrants

Suppliers

BargainingBargaining powerpower

Substitutes

Buyers

BargainingBargaining powerpower

COMPETITIVE RIVALRY

Five forces analysis

Five Forces AnalysisFive Forces Analysis

•helps the marketer to contrast a competitive environment

•tends to focus on the single, stand alone business or SBU (Strategic Business Unit) rather than a single product or range of products. •looks at five key areas:

•threat of entry•power of buyers•power of suppliers•threat of substitutes•competitive rivalry

Threat of EntryThreat of EntryEconomies of scaleEconomies of scale Benefits associated with bulk purchasingBenefits associated with bulk purchasing

Cost of entryCost of entry Cost for the latest technology Cost for the latest technology

Ease of access to distribution channelsEase of access to distribution channels Competitors have the distribution Competitors have the distribution channels sewn upchannels sewn up

Cost advantages not related to the size Cost advantages not related to the size of the company of the company

Personal contacts or knowledge that Personal contacts or knowledge that larger companies do not own or learning larger companies do not own or learning curve effects. curve effects.

Government actionGovernment action New laws that may be introduced that New laws that may be introduced that will weaken competitive position will weaken competitive position

Importance of differentiation Importance of differentiation Champagne brand cannot be copied Champagne brand cannot be copied

Power of BuyersPower of Buyers

Few, large players in a market Few, large players in a market large grocery chains large grocery chains

Large number of undifferentiated, small Large number of undifferentiated, small suppliers suppliers small farming businesses supplying the large grocery small farming businesses supplying the large grocery

chains chains Cost of switching between suppliers is lowCost of switching between suppliers is low

One fleet supplier of trucks compared to another One fleet supplier of trucks compared to another

Power of SuppliersPower of Suppliers The power of suppliers tends to be a reversal of The power of suppliers tends to be a reversal of

the power of buyers.the power of buyers. Switching costs are high Switching costs are high

One software supplier to another One software supplier to another Powerful brand Powerful brand

Apple, Pizza Hut, Microsoft. Apple, Pizza Hut, Microsoft. Possibility of the supplier integrating forwardPossibility of the supplier integrating forward

Brewers buying bars Brewers buying bars Customers are fragmented (not in clusters) so Customers are fragmented (not in clusters) so

that they have little bargaining powerthat they have little bargaining power Gas/Petrol stations in remote places Gas/Petrol stations in remote places

Threat of SubstitutesThreat of Substitutes Product-for-product substitutionProduct-for-product substitution

email for faxemail for fax Substitution of need Substitution of need

better toothpaste reduces the need for dentists better toothpaste reduces the need for dentists Where there is generic substitution competing Where there is generic substitution competing

for the currency in your pocketfor the currency in your pocket video suppliers compete with travel companies video suppliers compete with travel companies

We could always do without We could always do without cigarettes cigarettes

Competitive RivalryCompetitive Rivalry

This is most likely to be high where:This is most likely to be high where: entry is likelyentry is likely there is the threat of substitute productsthere is the threat of substitute products suppliers and buyers in the market attempt to suppliers and buyers in the market attempt to

controlcontrol This is why it is always seen in the center This is why it is always seen in the center

of the diagram. of the diagram.

Competitor’s Strength GridCompetitor’s Strength Grid Method to visually illustrate strengths and weakness of a Method to visually illustrate strengths and weakness of a

company, product or servicecompany, product or service

WEAKNESSWEAKNESS STRENGTHSTRENGTH

Product qualityProduct quality AA BB CC DDProduct differentiationProduct differentiation BB AA CC DDPricingPricing DD BB CC

AAMarketing/promotionMarketing/promotion CC BB AA DDBrand recognitionBrand recognition BB CC AA DDDistribution channelsDistribution channels CC BB DD AA

Competitive Analysis HomeworkCompetitive Analysis Homework

See assignment in D2LSee assignment in D2L

CLASSROOM ACTIVITYCLASSROOM ACTIVITY Consider one of the following familiar products or Consider one of the following familiar products or

services: services: single-serving frozen entreessingle-serving frozen entrees bottled waterbottled water handheld digital musical playershandheld digital musical players cell phonescell phones internet service providers (ISP)internet service providers (ISP) choose your ownchoose your own

Create a Competitor Strength Grid with five or more Create a Competitor Strength Grid with five or more attributes and four or more competitive products or attributes and four or more competitive products or services.services.

Be prepared to present your grid.Be prepared to present your grid. Submit grid with names of students who participated Submit grid with names of students who participated

on the assignment. on the assignment.

Format for Competitor’s Strength GridFormat for Competitor’s Strength Grid

Weakness Strength Weakness Strength Attribute 1Attribute 1Attribute 2Attribute 2Attribute 3Attribute 3Attribute 4Attribute 4Attribute 5Attribute 5

A – ABC CompanyA – ABC CompanyL – LMN CompanyL – LMN CompanyT – TUV CompanyT – TUV CompanyX – XYZ CompanyX – XYZ Company