Competitors analysis In formulating business strategy, managers must consider the strategies of the firm's competitors. While in highly fragmented commodity industries the moves of any single competitor may be less important, in concentrated industries competitor analysis becomes a vital part of strategic planning. Competito r analysis has two primary activities, 1) obtaining information about important competitors, and 2) using that information to predict competitor behaviour. The goal ofcompetitor analysis is to understand: with which competitors to compete, competitors' strategies and planned actions, how competitors might react to a firm's actions, how to influence competitor behaviour to the firm's own advantage.
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In formulating business strategy, managers must consider thestrategies of the firm's competitors. While in highly fragmentedcommodity industries the moves of any single competitor may beless important, in concentrated industries competitor analysisbecomes a vital part of strategic planning.
Competitor analysis has two primary activities, 1) obtaininginformation about important competitors, and 2) using thatinformation to predict competitor behaviour. The goal of competitor analysis is to understand:
with which competitors to compete,
competitors' strategies and planned actions, how competitors might react to a firm's actions,
how to influence competitor behaviour to the firm's ownadvantage.
The assumptions that a competitor's managers hold about theirfirm and their industry help to define the moves that they willconsider.
For example, if in the past the industry introduced a new type of product that failed, the industry executives may assume that there
is no market for the product. Such assumptions are not always accurate and if incorrect may
present opportunities. For example, new entrants may have theopportunity to introduce a product similar to a previouslyunsuccessful one without retaliation because incumbent firms maynot take their threat seriously.
Honda was able to enter the U.S. motorcycle market with a smallmotorbike because U.S. manufacturers had assumed that there wasno market for small bikes based on their past experience.
Finally, since the competitive environment isdynamic, the competitor's ability to react swiftlyto change should be evaluated. Some firms have
heavy momentum and may continue for manyyears in the same direction before adapting.Others are able to mobilize and adapt veryquickly. Factors that slow a company down
include low cash reserves, large investments infixed assets, and an organizational structure thathinders quick action.