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Analyzing the competition.

In last month's article, we explored the first step in a five-step consideration in the analysis of your competitors. We discussed the levels of competition we needed to uncover through an industry analysis and an analysis of the value system within each segment and its relative importance.

In this installment, we will address the competitive forces and the methods to identify and describe competitors.

Analyzing the competition follows five steps:

* Define the competitive arena for the generic, specific, and variant product-markets;

* Identify and describe key competitors;

* Evaluate key competitors;

* Anticipate actions by competitors; and

* Identify potential competitors.

Competitive Forces

Various competitive forces are at play in the value-system chains of activities. Five competitive forces affect all industry performance as postulated by Michael Porter, the Harvard Business school author. The following "spider" graph depicts the forces, which pull and tug at each other in the dynamics of product/service marketing considerations.

Rivalry among existing firms recognizes that active competition among industry members helps to determine industry performance. It is also recognized that it is the most direct and intense form of competition. The aggressive competition between H.B. Fuller and ICI's National Starch in the adhesives and sealants arena, as well as the oligopoly rivalry that exists among DuPont, PPG and BASF in the North American automotive exterior coatings segments are but two examples that most of us can relate to.

Threat of new entrants focuses on the possibility of new competitors entering the market. Existing firms may try to discourage new competition and react aggressively through expansion and/or price/service tactics. The entrance of pre-coated Galvaneal coil stock back in the early 1980s, eliminated the need for much of the zinc rich primers for auto industry applications.

Threat of substitute products or new technologies that satisfy the same customer need are also important sources of competition and create a whole new method of solving a customer need. For example, the encyclopedia was made obsolete by CD-ROM technology.

Bargaining Power of Suppliers

The emphasis on quality improvement by many producers is encouraging cooperation with their suppliers. Companies may pursue vertical integration strategies to reduce the bargaining power of suppliers.

Bargaining power of buyers: Buyers many times use their purchasing power to influence their suppliers. Understanding which organizations have the power and influence in the value system, provides important insights into the structure of competition.

A major consequence of Porter's view of competition is that the competitive arena may be altered as a result of the impact of the five forces on the industry. The location of an organization in its value system and the extent of its control over the channel may have significant implications on that organization's business strategy.

Identifying and Describing Competitors

Key competitors are any organizations seeking the same market target as the firm conducting the analysis. H.B. Fuller and National Starch in the Packaging market segment would be considered key competitors supplying adhesives and sealants. And, PPG and Akzo (Ferro Powder) would be key suppliers of powder coatings in the appliance segment, for example. Also, different product types that satisfy the same need may actively compete against each other. In structural adhesives, for example, instead of bonding two dissimilar plastic moldings together with a modified urethane adhesive, a competitive alternative would be high frequency vibration welding.

A competitive profile must be developed. Here are a few of the evaluation fundamentals required in such a profile:

* Business scope and objectives;

* Management experience, capabilities and weaknesses;

* Current market position and trends;

* Market targets and customer base;

* Positioning strategy;

* Capabilities--financial, technical, operating; and

* Important completive advantages and resources.

Three Important Competitive Considerations

There are three important competitive considerations: scope of market coverage, past performance and "SWOT" analysis.

Scope of market coverage: This analysis concentrates on the segments targeted by the competitor and its actual market-share position.

Past performance: The customer value proposition offered by the competitor (by segment) is important information. This information could indicate competitive opportunities or a threat.

SWOT analysis: Exploring a competitor's strengths, weaknesses, opportunities and threats analysis are items that must be captured in very accurate form. Failure to do so will cause downstream errors in judgment in anticipating competitors' actions and reactions.

In the October issue of Coatings World, Chemark will continue its analyzing the competition series. The installment will address how to anticipate competitors' actions and reactions.

Phil Phillips heads the CHEMARK Consulting Group, a consulting firm focusing on the coatings, adhesives and sealants industries. Services range from M&A and value chain analysis to competitive analysis. Mt: Phillips can be reached at
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Title Annotation:Business Corner
Author:Philips, Phil
Publication:Coatings World
Geographic Code:1USA
Date:Sep 1, 2003
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