Competitor Profiling
The strategic rationale of competitor profiling is simple. Superior knowledge of rivals offers a legitimate source of competitive advantage. The raw material of competitive advantage consists of offering superior customer value in the firm’s chosen market. The definitive characteristic of customer value is the adjective, superior. Customer value is defined relative to rival offerings making competitor knowledge an intrinsic component of corporate strategy. Profiling facilitates this strategic objective in three important ways. First, profiling can reveal strategic weaknesses in rivals that the firm may exploit. Second, the proactive stance of competitor profiling will allow the firm to anticipate the strategic response of their rivals to the firm’s planned strategies, the strategies of other competing firms, and changes in the environment. Third, this proactive knowledge will give the firms strategic agility. Offensive strategy can be implemented more quickly in order to exploit opportunities and capitalize on strengths. Similarly, defensive strategy can be employed more deftly in order to counter the threat of rival firms from exploiting the firm’s own weaknesses.
Firms practising systematic and advanced competitor profiling may have a significant advantage. A comprehensive profiling capability is a core competency required for successful competition.
A common technique is to create detailed profiles on each of the major competitors. These profiles give an in-depth description of the competitor’s background, finances, products, markets, facilities, personnel, and strategies. This involves:
- Background
- location of offices, plants, and online presences
- history – key personalities, dates, events, and trends
- ownership, corporate governance, and organizational structure
- Financials
- P-E ratios, dividend policy, and profitability
- various financial ratios, liquidity, and cash flow
- profit growth profile; method of growth (organic or acquisitive)
- Products
- products offered, depth and breadth of the product line, and product portfolio balance
- new products developed, new product success rate, and R&D strengths
- brands, the strength of brand portfolio, brand loyalty and brand awareness
- patents and licenses
- quality control conformance
- reverse engineering or deformulation
- Marketing
- segments served, market shares, customer base, growth rate, and customer loyalty
- promotional mix, promotional budgets, advertising themes, ad agency used, sales force success rate, online promotional strategy
- distribution channels used (direct & indirect), exclusivity agreements, alliances, and geographical coverage
- pricing, discounts, and allowances
- Facilities
- plant capacity, capacity utilization rate, age of the plant, plant efficiency, capital investment
- location, shipping logistics, and product mix by plant
- Personnel
- number of employees, key employees, and skill sets
- strength of management, and management style
- compensation, benefits, and employee morale & retention rates
- Corporate and marketing strategies
- objectives, mission statement, growth plans, acquisitions, and divestitures
- marketing strategies
Media Scanning
Scanning competitor’s ads can reveal much about what that competitor believes about marketing and its target market. Changes in a competitor’s advertising message can reveal new product offerings, new production processes, a new branding strategy, a new positioning strategy, a new segmentation strategy, line extensions and contractions, problems with previous positions, insights from recent marketing or product research, a new strategic direction, a new source of sustainable competitive advantage, or value migrations within the industry. It might also indicate a new pricing strategy such as penetration, price discrimination, price skimming, product bundling, joint product pricing, discounts, or loss leaders. It may also indicate a new promotion strategy such as push, pull, balanced, short term sales generation, long term image creation, informational, comparative, effective, reminder, new creative objectives, new unique selling proposition, new creative concepts, appeals, tone, and themes, or a new advertising agency. It might also indicate a new distribution strategy, new distribution partners, more extensive distribution, more intensive distribution, a change in geographical focus, or exclusive distribution. Similar techniques can be used by observing a competitor’s search engine optimization targets and practices. For example, by conducting keyword research, one may be able to determine a competitor’s target market, keywords, or products. Other metrics allow for the detection of a competitor’s success. Little of this intelligence is definitive: additional information is needed before conclusions should be drawn.
A competitor’s media strategy reveals budget allocation, segmentation and targeting strategy, and selectivity and focus. From a tactical perspective, it can also be used to help a manager implement his own media plan. By knowing the competitor’s media buy, media selection, frequency, reach, continuity, schedules, and flights, the manager can arrange his own media plan so that they do not coincide.
Other sources of corporate intelligence include trade shows, patent filings, mutual customers, annual reports, and trade associations.
Some firms hire competitor intelligence professionals to obtain this information. The Society of Competitive Intelligence Professionals maintains a listing of individuals who provide these services.
New Competitors
In addition to analysing current competitors, it is necessary to estimate future competitive threats. The most common sources of new competitors are:
- Companies competing in a related product/market
- Companies using related technologies
- Companies already targeting the target prime market segment but with unrelated products
- Companies from other geographical areas and with similar products
- New start-up companies organized by former employees and/or managers of existing companies
The entrance of new competitors is likely when:
- There are high-profit margins in the industry
- There is unmet demand (insufficient supply) in the industry
- There are no major barriers to entry
- There is future growth potential
- Competitive rivalry is not intense
- Gaining a competitive advantage over existing firms is feasible
- Dissatisfaction with the existing suppliers
