1. Understanding And Predicting Competitor Response Shantanu Dutta n Objectives: A critical step in competitor analysis is to develop the ability to predict competitive response. n Use the framework in this note to develop a competitor profile for Barco, specifically a profile for Sony and how it might react. n Could Barco have predicted Sony’s product development actions, given its analysis of Sony ?

2. Framework n The framework consists of the following –list competitors in different segments –Use the value chain to understand competitors strengths or weaknesses –Understand competitor objectives –Predicting competitive response assess quality of response assess your vulnerability to this response

3. Competitor Customer Segment Names Competitors May Differ - Depending on Segment Identify the Competition

4. A Competitor’s Strategy: A Value Chain Approach Understanding and Targeting Customers Understanding and Targeting Customers Collaborators/ Distribution Collaborators/ Distribution Customer Service Customer Service Product Design/ Manufacturing Product Design/ Manufacturing Inbound Logistics Inbound Logistics How a competitor moves materials/supplie s from supplier’s to site of manufacturer How a competitor transforms inputs into finished products How a competitor identifies, targets, reaches, and satisfies customer needs Relations with distributors.How a competitor moves finished product through distribution channels to end- customers or users How a competitor delivers pre- and post-sales services

5. A description of a competitor’s value chain can be used to identify its strengths and weaknesses. Use the value chain as a basis for assessing strengths and weaknesses In particular, look at competitors’ actions in other markets to assess how they have leveraged their value chain Gain insight into the assumptions your competitors are making when formulating their strategy Strategies are often the explicit result of assumptions a competitor has made about the industry (rate of growth, rate of technological change) the general environment (demographic changes, regulatory changes) its own capabilities (e.g., continued resource support, ability to attract personnel) Uses of the Value Chain Approach

6. Assessing Strengths and Weaknesses If a competitor has changed its strategy recently, you might be able to infer something about its underlying assumptions You get an insight into your competitor’s ability to pursue various strategies Better able to predict their future behavior Look for things your competitor is improving and neglecting!

7. StrengthWeakness Improving/Neglecting Competitor_________________

8. What Are the Competitor’s Objectives? Understanding a competitor’s objectives helps to identify whether or not a competitor’s present performance is satisfactory or strategic changes are likely Financial objectives - indicates how willing it is to invest in its business market share, sales growth, and profitability objectives. Non-financial objectives - a leader in technology, or does it aim to be known as the premier service organization? Indicates what“turf” it is likely to defend. Objectives of the parent organization

9. Financial Objectives Market Share Sales Growth Profitability Other Non-Financial Objectives Interest in Being a Technology Leader? Interest in Expanding Distribution? Interest in Developing a Service Organization? Other Role Attached to Business Unit Central or peripheral to parent’s long-term plans Is this a growth area for the competitor? Does it supply cash to fund other areas? Does business create synergies with other operations? Other Competitor

10. Predicting Competitive Response What will your competitors do in the future? For example, will competitor respond to: decisions you make (e.g., enter a customer segment, changing prices) changes in your strategy by (de-) emphasizing certain key customer benefits decisions to change your advertising expenditures? You may have some assumptions about actions (even unprovoked actions) your competitor might make in the future

11. Is the competitor vulnerable? Refer to the strengths and weaknesses Pay particular attention to whether the competitor is improving or neglecting certain areas Will it provoke a response? Probably depends on the objectives of the competitor How effective will the response be? Combination of the objectives of the competitor and its strengths. Do you have an effective counter-response? What are your specific competencies? Four Important Questions

12. Competitor_________________ What if you enter this segment? Segment Name_________________ What if you increase/decrease benefit_______________ Is This Competitor Vulnerable? Will it Provoke a Response? How Effective Will the Response Be? What if you increase/decrease benefit _______________ Possible Actions You Might Take Some other action ________________________ Do You Have an Effective Counter- Response?

13. Competitor_________________ What if it enters this segment? Segment Name_________________ What if it increases/decreases benefit_______________ Are You Vulnerable? Will You Respond? How Effective Will the Response Be? What if it increases/decreases benefit _______________ Possible Actions This Competitor Might Take Some other action ________________________ Does This Competitor Have an Effective Counter-Response?

14. 5 Step Approach to Understand Competitor Response 1. Identify the Competition 2. Identify Their Current Strategy 3. Identify Their Relative Capabilities 4. Identify What They Want 5. Predict What They Will Do

15. Sources of Competitive Information n Press analysis n Trade interviews n Market analyst reports n Sales data n Senior management statements n Public announcements n Marketing communications to key customers n Launch of new products n Websites -mentioned n Improvements in operations and cost efficiencies n Price changes n Promotions n Sales force activities (e.g., increases/decreases in hires) n Advertising content n Order response n New support for channels of distribution Fuld, Leonard M. (1995), The New Competitor Intelligence, New York: John Wiley & Sons, Inc.