Competitor and CLC Analyses

Competitor and Competitive
Life Cycle Analyses

Learning Objectives
Independently conduct competitor and
competitive life cycle analyses
MGT 450: Business Policy & Strategy

Ranucci, Spring 2016
52
Connecting Industry & Competitive

Analysis
2. Within that industry context
how can my firm be different
from the other competitors?
Analyze the firm-competitor dyad
Firm
1. What are the drivers

of an industrys
profit potential?
53
Competitor
Competitors
Competitors are firms operating in the
same market, offering similar products and
targeting similar customers

54
Competitive Rivalry
Competitive Rivalry includes ongoing actions and
responses taking place between an individual firm and its
competitors for advantageous market position
Firms study competitive rivalry in order to predict the competitive

actions and responses that each of the their competitors likely will take.

55
Competitive Analysis
Step1:Identifyyour
competitors

Step2:Gather
intelligenceonyour
competitors
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Step3:Analyzethe
competitivepositionsof
rivalsandcompare
strengthsandweaknesses
withyouownandother
competitors
Who are a firms direct competitors?

1. Market commonality
Number of markets (product, geographic, consumer) with which the
firm and competitor are jointly involved
Multimarket competition occurs when firms compete against each
other in several product or geographic markets
Degree of importance of the markets to the firm and the competitor
What product markets does AT&T have in common with Verizon?

With Comcast?
What information can you use to ascertain the relative importance of a
market to a firm (e.g. how would you do this for your project)?

57
Who are a firms direct competitors?

2. Resource similarity
Extent to which the firms tangible and intangible resources are
comparable to a competitors in terms of type and amount
What are AT&Ts key resources?
How similar are they to Verizons resources?
Comcasts resources?
High on both (market commonality
& resource similarity) then more
likely to be direct and mutually
acknowledged competitors

58
Gather Intelligence on competitors
Organization Website to identify a wide array of organizational details

from geographic footprint to stated strategy (usually in a tagline or About
us section)
Performance Metrics (revenues, market share, ROA, R&D investment,
profit margins, etc.), past and present to identify trends
Analyst Reports (in Lexis Nexus database) to provide indicators of
strengths/weaknesses, market expectations, future outlook
Hiring activity to identify areas/geographies of strategic focus or growing
capability
Press releases and News coverage of strategic partnerships, product
launches, new services, geographic expansion, plant closures, employee
issues, etc.
Put it in a spreadsheet or table for easy comparison
These will be appendices in your written projects
Link on Blackboard to book templates

59
Analyze Rivals
FutureObjectives:
Assumptions:
CurrentStrategy:
Capabilities:
Whatdrivesthe
competitor?
Whatdoesthe
competitorbelieve
abouttheindustry?
Whatisthe
competitorcurrently
doingandwhatcan
theydo?
Whatarethe
competitorsstrengths
andweaknesses?
In undertaking a competitor analysis a firm is trying to understand:
What will our competitors do in the future?

Where do we hold an advantage and where do they hold an advantage?
How will any action change our relationship with our competitors?

60
Use your Competitive analysis to

draw insights.
Will your competitors take a particular action? If you act will
your competitors react? Their action will be a function of their:
Awareness
Doesthefirmrecognizetheresourcesimilarity
andmarketcommonalityenoughtoactorreact?
Motivation
Dothegainsofengagingincompetitiverivalry
outweighthelosses?
Ability
Doesthefirmhavetheresourcesandflexibility
toactorreact?

61
Types of Actions and Responses

Afterconsideringlikelihoodofactionorresponse,itisimportantto
consider:
Speed,Magnitude,Location..and Type:
Tactical
Involvesfewerresourcessoeasiertoimplementand
reverse
Shouldonlybeusedtofinetuneastrategy
Strategic
Significantcommitmentoforganizationalresources
Difficulttoimplementandreverse

62
Act or React?
FirstMovers
(takesinitial
competitiveaction)
SecondMovers
(Followersor
imitators)
Advantages
Disadvantages
Gainearlycustomerloyalty
andmarketshare
Candictatethedirectionor
focusofthecompetition
Higherrisk
Largeresource
commitment
Learningcurvemaybe
steep
Learnsfrommistakesof
firstmover
Takesadvantageof
additionaltime,somore
efficientandlowerinitial
outlay
Moreefforttoshiftloyalty
andcapturemarketshare
Lessofanunderstanding
abouthowtocreatevalue
forcustomers
HenryFordiscreditedwithsayinghewouldratherbethefirstpersontobesecond.
Beingasecondmovercanbeanintentionalstrategy Canyouthinkofanysuccessful
secondmovers?
63
Competitive life
cycle (CLC)
analysis
Analysis of the pattern
of competitive action
and reaction among all
firms in an industry
Maturity
Emergence
Marginallycompetitive
firmsexit(Shakeout)
Focusoncostsavingsand
incrementalinnovation.
Pricepressurecompresses
margins
Disruptivenewtechnology,
product,process
Widespreadmarketentry,lots
ofvariance&experimentation
Growth
Emergence
Profitability
Maturity

Convergenceonadominantdesign(annealing)
leadstoincreasedadoptionbycustomers
Significantgrowthindemandmovesfocusto
meetingdemandandheadtoheadcompetition
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Step One: Chart your position and

your competitors positions on the CLC
What phase of the life

cycle are your products
and technology in?
Repeat for competitors
products and technology
Maturity
The book charted Apple in

2011. How would you chart
Apple products today?

Emergence
Growth
65
Step Two: Characterize the CLCs

How long is each phase?
Emergent phase
Is there a dominant design or multiple designs?
How close is the industry to a dominant design?
Maturity Phase
How significant are the price pressures?
How many more incremental improvements can be made?
Is there a lot of room for prices to move down?
Is there a new disruptive product or technology on the

horizon?

66
Emergence
Growth phase
Is demand still growing?
Are there barriers to imitation?
Are competitors starting to exit?
Are competitors starting to compete on cost?
Are competitors starting to make just incremental

improvements to the product or technology?
Profitability
Maturity
Time
Slow Cycle Markets
Competitive advantages are shielded from

imitation commonly for long periods of time
Imitation is costly
Example: Proprietary advantages, Pharmaceuticals
Emergence
Discovered:1972
BeechamResearchLaboratories
Growth
67
Time
Maturity
1998
Genericbrands
Fast Cycle Markets

Imitation is rapid and inexpensive
Cannibalization common
Examples: PCs, Smart phones,
Tablets

68
Time
Standard Cycle Markets

Each new disruption moves through
the cycle at a different speed

69
Time
What can you learn from a CLC analysis?

About you current product & technology portfolio
Need to understand where your current products or technology are in their
life cycle so you can anticipate future returns to profitability (e.g.
profit margins tend to be higher for products in the growth phase than in the
mature phase)
May want to diversify across phases
What does the Apple CLC tell you about future margins on their products?
The diversity of their portfolio?
Profit potential of new product or technology investments

If entering with a product in the mature phase, demand may be high but
competition will be tough and margins will be lower
Important inputs for future tools
Scenario planning, Portfolio planning
70
StratSim CLC Analysis

Step 1: Chart your position and your competitors positions on the CLC
Step 2: Characterize the CLCs
These require insights across gathered across tabs and over time:
Internal (e.g. product margins)
Market (e.g. demand, new product launches or product development)
Competition (other products, product price and features)
Tools (e.g. demand expectations)
You dont have a lot of history to do Step 2 at this point which is why CLC is
not required for your StratSim Strategic Analysis but it is required for your
individual assignment

71
StratSim Competitor and CLC

Analysis
Step 1: Identify your competitors (Some will be more direct than
others)
Market commonality product, consumer (consumer-customer
segments), geographic market (dealers)
Resource similarity technology and product attributes, financial
resources
Step 2: Gather intelligence on your competitors

Hint: Use competition tab in StratSim
Step 3: Analyze the competitive positions of rivals and compare

strengths and weaknesses with your own and other competitors
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Take-Aways
Dont assume you will be able to execute your strategy without
competitive challenges. Competitive analysis plays an
important role in strategy development.
Competitor analysis involves gathering and analyzing
information on competitors to anticipate competitive actions
and develop differentiated strategies
The set of competitive actions and responses will differ with
the competitive life cycles in which a firm operates

73

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Competitor and Competitive

Life Cycle Analyses

MGT 450: Business Policy & Strategy

Connecting Industry & Competitive

1. What are the drivers

MGT 450: Business Policy & Strategy

Firms study competitive rivalry in order to predict the competitive

MGT 450: Business Policy & Strategy

MGT 450: Business Policy & Strategy

Who are a firms direct competitors?

What product markets does AT&T have in common with Verizon?

MGT 450: Business Policy & Strategy

Who are a firms direct competitors?

MGT 450: Business Policy & Strategy

Gather Intelligence on competitors

Organization Website to identify a wide array of organizational details

MGT 450: Business Policy & Strategy

In undertaking a competitor analysis a firm is trying to understand:

What will our competitors do in the future?

MGT 450: Business Policy & Strategy

Use your Competitive analysis to

MGT 450: Business Policy & Strategy

Types of Actions and Responses

MGT 450: Business Policy & Strategy

MGT 450: Business Policy & Strategy

Step One: Chart your position and

What phase of the life

The book charted Apple in

MGT 450: Business Policy & Strategy

Step Two: Characterize the CLCs

Is there a dominant design or multiple designs?

How close is the industry to a dominant design?

How significant are the price pressures?

How many more incremental improvements can be made?

Is there a lot of room for prices to move down?

Is there a new disruptive product or technology on the

MGT 450: Business Policy & Strategy

Is demand still growing?

Are there barriers to imitation?

Are competitors starting to exit?

Are competitors starting to compete on cost?

Are competitors starting to make just incremental

Slow Cycle Markets

Competitive advantages are shielded from

Fast Cycle Markets

MGT 450: Business Policy & Strategy

Standard Cycle Markets

MGT 450: Business Policy & Strategy

What can you learn from a CLC analysis?

May want to diversify across phases

Profit potential of new product or technology investments

StratSim CLC Analysis

MGT 450: Business Policy & Strategy

StratSim Competitor and CLC

Step 2: Gather intelligence on your competitors

Step 3: Analyze the competitive positions of rivals and compare

MGT 450: Business Policy & Strategy

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