Marketing Strategy and Competitive Positioning pdf ebook

CHAPTER 5 COMPETITOR ANALYSIS
where an organisation possesses competitive advantage over the competition. Similarly, 
since competitive advantage is a relative concept, a company that has poor understanding 
of its competitors can have no real understanding of itself. Several studies demonstrate a 
positive link between a clear understanding of competitor strategies and actions, and cor-
porate performance (see, for example, Kapelianis et al. , 2005 ). 
In the 1980s and ’90s, when Japanese companies sought to compete more effectively with 
US-based rivals, they very much embraced Sun Tzu’s obsession with enemy (or competitor) 
analysis. During this time, the commitment of Japanese companies to gathering information 
was a major distinguishing feature of their business strategies. As one example, Lehmann 
and Winer (1991) report that one Mitsubishi intelligence unit in the USA filled two entire 
floors of an office building in New York. Indeed, as long ago as the early 1980s, Business 
Week described how Japanese companies had established ‘surveillance posts’ throughout 
the heartland of the US computer industry in California’s Silicon Valley, monitoring US 
technology development by hiring American software experts. Of course, this is not just 
limited to Japanese companies, and today most successful organisations invest significant 
amounts annually in order to gather, analyse, interpret and act on market-based data. 
This chapter provides a framework for the essential activities of gathering, disseminating 
and acting on competitor intelligence. It covers four areas: 
1 
benchmarking against rivals;
2 
the dimensions of competitor analysis;
3 
the choice of ‘good’ competitors;
4 
the origins, sources and dissemination of competitive information.
5.1 
Competitive benchmarking 
Competitive benchmarking is the process of measuring your company’s strategies and 
operations against ‘best-in-class’ companies, both inside and outside your own industry. 
The purpose is to identify certain practices and methodologies that can be adopted and/or 
adapted to improve overall performance. Benchmarking usually involves four main steps. 
5.1.1 Identifying who to benchmark against 
Industry leaders are obvious firms with whom to compare activities. Central to such an 
analysis is identifying the key factors to their success in the market. What is it they do 
differently from others? What makes the difference to their operations? Why are they 
‘winners’? 
In organisations traditionally viewed as ‘non-profit’, such as hospitals and universi-
ties, benchmarking also takes place. For hospitals, the ‘best in class’ might be considered 
those with the lowest mortality rates, or highest patient throughput, or of late those with 
the highest patient satisfaction scores. For universities, ‘best in class’ might be those with 
the best research reputations, highest employability rates for graduates, highest students’ 
satisfaction scores or those most able to attract the best students. 
Benchmarking can also be undertaken against lower-ranked competitors in a market. 
New entrants or smaller, more focused firms may have particular strengths from which 
larger and more established organisations might learn. These strengths may be in a par-
ticular aspect of their operations rather than their operations in total. One firm may be 
a leader, for example, in terms of customer service, while another may be the best in the 
industry at cost control. 
Organisations can also benchmark specific activities (such as procurement and pur-
chasing) against organisations outside their immediate competitive space, leading to 
change and innovation opportunities. For example, when Xerox wanted to improve 

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COMPETITIVE BENCHMARKING
order processing and warehousing, it benchmarked itself against L.L. Bean (a mail-order 
company), which was believed to be far more ‘cutting edge’ than Xerox’s traditional 
competitors (Swain, 1993). Many companies now look to organisations such as Amazon 
and UPS as exemplars for order processing and warehouse management. This illustrates 
one of the issues and potential dangers with benchmarking. If everyone within a particu-
lar competitive space only benchmarks with each other, then necessary change is often 
missed, as incumbents tend to think and act (and are organised) in very similar ways. Here, 
the wrong benchmark ‘set’ is used. These markets tend to open themselves up to smaller 
and more innovative challengers, who recognise the need for change and the competitive 
opportunity that exists.
5.1.2 Identifying what aspects of business to benchmark
All aspects of business across the value chain are candidates for benchmarking. Scarce 
resources and time constraints generally dictate the selection of a few key central processes 
for detailed benchmarking. These will initially centre on key factors for success in the indus-
try. Initial focus will also typically be on processes that account for significant costs, make 
a significant impact on customer satisfaction and show greatest room for improvement. 
Subsequent analyses should be broadened, in an attempt to create fresh competitive advan-
tages in new areas of operation.
5.1.3 Collecting relevant data to enable processes and operations 
to be compared
Operational data on one’s own organisation are likely to be easily available, relative 
to that of competitors. Three main sources of competitor information for benchmark-
ing that are important and useful are published sources, data sharing and interviews 
(Swain, 1993):
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