Competitive Research

Service Introduction

Competitive research focuses on the external factors influencing enterprises' strategies and policies. The industry's environment is critical for a company's operations. Businesses need to have a comprehensive assessment of the environment and their own situation in it in order to set up proper strategies and policies.

The industry's environment refers to the relationships between customers, suppliers and competitors. Analysis of the industrial environment reveals opportunities, threats, and crucial factors for success in the industry, helping businesses to establish strategies and policies.

Businesses have to understand their competitors when establishing strategies and policies. By analyzing the competition, they can find out what strategies are feasible and successful, and how competitors would react to potential changes in the industry, what measures they would undertake in the new environment.

Service Content

Industrial Competition Analysis

Large differences exist between different industries: economic characteristics, competitive environment and future profit potential. The industry's economic characteristics depend on the total market demand and growth, the rate of technology changes, the market's geographical limits, the volume and size of buyers and sellers. All this together with the degree of economies of scales and their impact on cost as well as whether the product is simple or diversified, determines the structure of distribution channels.

Industries also differ in terms of the competition level, including price, product quality, performance and specifics, services, advertisement and promotion, as well as product innovation. In some industries price is the main basis of competition, in other, it is quality or product performance, or brand image and reputation.

The future profit room in an industry largely depends on the economic characteristics, competitive environment and their development trends. Enterprises with great performance will hardly win satisfying profits in industries of poor development. In contrast, small enterprises might achieve admirable operation results in attractive industries.

Industrial analysis focuses on the following aspects:

Market Size
Market Segmentation
Market Structure
Industrial Value Chain
Products and Technologies
Marketing Channels
Policy and Legal Environment
Development Trends

Competitor Analysis

Competitors are only these enterprises that are strong enough to compete with our own business. As such, an analysis on competitors should focus on the right target, rather than equally discussing all enterprises.

Competitor analysis comprises the following elements:

Background and Operations
Management and Organization Structure
Sales Performance
Financial Situations
Production and Development
Marketing Strategy
Future Development Strategy

Analysis Methods and Models

Analysis of the Porter's Five Forces

The key factor for a business' profitability is the “Industrial Attractiveness”. Enterprises must fully understand the competition principles determining the industrial attractiveness in order to set up competition strategies. The Porter's Five Forces analyze the competition in five specific aspects that impact the product price, costs, necessary investment, and determine the industry structure and profitability.

Threats to New Entrants: What are the barriers to entry in the industry and their level?
Threats to Substitute Products or Services: Are products or services easily replaced, particularly products of low technological contents?
Bargaining Power of Suppliers: The influence that suppliers can exert on the industry and product prices. Are there any powerful suppliers?
Bargaining Power of Buyers: The impact that buyers have on the industry and product prices, the amount of orders
Competitive Rivalry among Existing Firms: Are there any powerful competitors in the market, any dominating firms in terms of strength and size? Are competitors all equal?

SWOT Analysis

SWOT is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities and Threats involved in a project or in a business venture. It is a very objective and precise method applied to evaluate the actual performance of a business unit and is largely used in organization management and strategic planning.

Strengths	Weaknesses
Your specialist marketing expertise Access to all natural resources Patent rights A new, innovative product or service Business location Competitive costs from independent intellectual properties Competitive quality flow and control Competitive brands and reputation	Lack of marketing expertise and experience Undifferentiated products and services (compared with rivals) Business locations Distribution channels overtaken by rivals Poor quality goods or services Poor business reputation
Opportunity	Threat
Growing emerging markets (China and Internet) Merger, joint ventures or strategic alliances Moving into new segmented markets New international markets Loosened government control Eliminated international trade barriers A market vacated by an ineffective competitor	New rivals in the market Price wars with competitors Rivals develop new, innovative products or services The government sets new restrictive rules New trade barriers emerge Potential tax burdens introduced on your products or services

Confrontation matrix can be used to combine internal and external factors in the SWOT analysis for an in-depth analysis.

	Opportunity	Threat
Strengths	Offensive Make the most of these	Adjust restore strengths
Weaknesses	Defensive Watch competition closely	Survive Turn around

BCG Matrix

BCG Matrix labels all the strategic business units (SBUs) in an organization in a two-dimensional matrix map to show which SBU provides high potential incomes and which SBU is the funnel of the organizational resources.

Businesses must have a product mix with diversified growth rates and market shares, if they expect success. The composition of the mix rests with balance of cash flows.

Star (=high growth, high market share)

Star products use large amount of cash investment. They lead the market and generate large amounts of cash.
Star products frequently stay in balance on net cash flow. In order to keep and expand market share, it is worthwhile to make any efforts and investment. As they have taken up large market share, the businesses will be rewarded with a cash cow.

Cash Cows (=low growth, high market share)

Cash cow products generate high profit and cash. They need low investment, because of the low growth rate.
Cash cows are normally stars of yesterday, serving as the basis of business operations.

Dog (=low growth, low market share)

Try all means to avoid or minimize the amount of dog operations
Beware of expensive “turn-around plans”
If dogs cannot deliver cash, liquidate them.

Question Mark (=high growth, low market share)

Question mark products have the worst cash characteristics of all, because high demands and low returns, due to low market share.
If nothing is done to change the market share, they will absorb large amounts of cash.
Our strategy to question mark products: either sell them out or make no more investment and allow them to develop freely, so as to get cash. Increase market share or deliver cash.

There are some other methods in actual use, as represented by

Key success factor analysis
Experience curve analysis
Strategic group map
GE matrix
Mckinsey 7S Model
Value chain analysis
Benchmarking
Patent analysis

All these theories and analysis tools will only facilitate decision-makers to better understand the facts and logic of the matter. They cannot replace the creativity of decision-makers.