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ADDENDUM TO CHAPTER 2: COMPETITIVE ANALYSIS

It is nice to have valid competition; it pushes you to do better.
– Gianni Versace (Fashion Designer) 1

Developing a Framework for Competitive Analysis
Before developing a marketing strategy, a firm needs to complete an external analysis, looking at social, demographic, economic, technological, political/legal and competitive factors, as outlined in Chapter 2. As the textbook states on page 26, management has little control over the competitive environment in regards to what is faced by a firm. This does not imply, however, that the analysis of competition is a fruitless activity.
In fact, understanding the actions of competitors can be a key component in developing a company’s own strategies. If a company is to develop a competitive advantage that will form the basis of any strategy, it must first understand the competitive environment in which it can create such an advantage (called Competitor Analysis). Then, it must understand the product choices currently available to potential customers (called Competing Products Analysis).

Competitor Analysis
First, a company must understand the types of competition it will face. In order to find the current and potential competitors in a marketplace, a firm must be able to differentiate the various types of competition: direct and indirect. Direct competitors are those branded or product-based competitors that have created direct substitutes to what a company is offering. Generic competitors often compete directly but often without the features and benefits provided by direct competitors. Indirect competition focuses more on satisfying the customer’s needs rather than competing with a direct substitute.
An example of direct competition for Pepsi would include soft drinks such as Coca-Cola and Canada Dry, energy drinks such as Monster, and bottled water…...

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