Competition is the rivalry between companies for market share in a target market where the customers have similar needs and wants.

A marketer’s job doesn’t ends at serving the needs and wants of the target customers. There may other companies as well who may see the same needs and wants. They may enter the same market with similar kind of products. The competition can be from an existing firm or the competitor may enter after the organisations product launch.

Competitor analysis forms an integral part of the marketing strategy. The analysis is based on the threats and opportunities basis the strengths and weaknesses of the existing or emerging competitors.

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This was developed by Harvard Business School’s Michael E. Porter in 1979. It is a method which answers questions about the competition.

The five forces model looks at five factors –

a) Threat of Substitute –
It is another form of product that will serve the same purpose. For example, a scooter with high fuel efficiency will be a substitute for a motorbike. A landline phone connection and a mobile phone are substitutes to each other. The entry or presence of substitutes will force the organisation to make changes in the marketing program (4P’s) like reducing prices, etc.

Substitutes pose threat because of –
• Price of the substitute
• Performance (for example, cassette and a CD, train and an aeroplane)
• Cost to the organisation for modifying the product or switching to the substitute with better performance, etc.

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Customers with similar needs and wants respond in a similar manner to a marketing offer. These customers form the target market for an organisation. Therefore, any offering in a market that serves the similar need and want is a competition to the firm which is trying to serve these customers. For example, Internet is a competition to news magazines, book publishers, and retail stores.

A firm faces competition from the industry as well as market. The firm needs to identify all forms of competition which is trying to make the most of the opportunities in the market. This can be from the industry as well as markets about which the firm might not be aware of. For example, solar water heaters are threat to manufacturers of electric water heaters. So the firm not only has to study the manufacturers making electric water heaters but also the strategies of solar water heater manufacturers.

Industry concept of competition or Brand Competition –

Industry is the group of organisations that offers products or services that serve the same needs and wants of the target market. These offerings can be similar to the company’s offering, or can be each other’s substitutes.  This concept is also referred as Brand competition wherein various brands with same product types compete against each other in the same market.

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An organisation gets a clear picture on the opportunities and threats once it does an analysis on the –

– Competitors current strengths and weaknesses
– Competitors future strategies basis the emerging market threats and opportunities

The following factors should be considered for understanding a competitor-
1) Current strategy on 4P’s – Information on Product, Price Place, and Promotion helps an organisation make changes to these to counter competition. The firm can invest in differentiation, positioning of the products and the brand differently. Information on the competitor product’s life cycle gives an idea on the future strategy that the competitor will adopt. Similarly, price changes can be done and distributor’s margins can be increased to garner distributors support.

2) Size, Growth, and Profitability – The recent and past records on sales and market share indicates the competitor as strong or weak. A strong competitor will generally have access to resources and will counter any threats in market strongly.

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Industry is the group of organisations that offers products or services that serve the same needs and wants of the target market. These offerings can be similar to the company’s offering, or can be each other’s substitutes.  This concept is also referred as Brand competition wherein various brands with same product types compete against each other in the same market.

The factors to be considered are –

• Industry size and growth gives the marketer an idea of the demand. Information on the sales, profits, costs, number of firms and employees helps a marketer do the analysis on the growth of the industry in recent years. The life cycle of the industry, demand in the market, and industry size help in formulating strong marketing strategies. The organisation should have concrete data on –
• Why are successful businesses in the industry successful?
• Why are unsuccessful businesses in the industry unsuccessful?
• Industry structure is the nature and competition intensity among the firms basis their numbers, their size, and differentiation of the offerings.
• Entry, Mobility and Exit barriers refer to the barriers a firm faces at different stages in the industry.

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