Understanding your competition

Understanding your competition - ANALYZING UNDERSTANDING...

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ANALYZING & UNDERSTANDING YOUR INDUSTRY AND COMPETITORS This chapter provides you with the background and resources you need for obtaining and interpreting critical information about your industry and the firms that compete with one another within the industry. I begin by overviewing the The industry analysis examines how the industry operates, how firms in the industry compete with one another and how these firms “compete” with firms in closely allied industries. More specifically, the main focus is on investigating: 1 1The nature and intensity of competitive interaction in the industry, including the trends in terms of numbers of competitors; The existence of entry or exit barriers that tend to prevent competitors from entering or leaving the industry; The existence of substitute products that may directly or indirectly compete with those produced by firms in the industry; and, Historical trends in sales, costs, and key ratios. An added objective of this analysis is to identify what are referred to as Key Success Factors (KSFs) in this industry. KSFs are characteristics of firms (i.e. essential skills or assets) within the industry itself that are critical for success. KSFs provide those firms which possess them a distinct competitive WHAT ARE HISTORICAL TRENDS AND FUTURE PROJECTIONS FOR THE INDUSTRY? To fully understand the market you serve, it is critical that you profile the major historical trends that have shaped the evolution of your market over time. This profile should include the items contained 1 This discussion is adapted from David A. Aaker (1991), Strategic Marketing Management , 1
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Check Sheet What are the historical sales trends for the industry? What are sales projections for the next five years? Are there trends in the number and size of competitors? How have average industry operating costs changed over time? What have been the trends for key industry financial ratios? How has indusrtry profitability changed over time? What have been the trends in marketing techniques used to reach, communicate with target markets? What are the Key Success Factors (KSFs) for firms in the industry? As a minimum, you should examine the changes in sales for your industry in both units and dollars. These trends will be closely tied to the “Product Life Cycle.” All products possess life cycles that begin with the introduction of the product into the market place and end with its eventual death and withdrawal. ANALYZING AND UNDERSTANDING YOUR COMPETITION Few business decisions are made without contemplating how the decision will affect competitors or, just as importantly, how competitors can be expected to respond to the decision. Needless to say, understanding the nature of the competition you face is essential. Competitors must be examined in detail to identify who they are, how they operate, and their relative strengths and weaknesses. Moreover,
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This note was uploaded on 04/15/2011 for the course MKTG 3010 taught by Professor Morris during the Spring '09 term at North Texas.

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Understanding your competition - ANALYZING UNDERSTANDING...

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