Competitive Analysis Helpful in strategic planning Allows companies to: Develop competitive advantages relative to competitors See competitive disadvantages Understand competitors’ strategies What to consider Who are our competitors? What is their strategy? What are their strengths/weaknesses? How do they compare to us? How do they operate? (products, pricing, promotion, production, facilities, etc.) What would you like to know in the simulation? Where to find data Annual reports Talking with ex- Industry publications employees Market research Patent applications Speeches Press releases Newspaper articles Government reports Promotional material or data Trade shows SWOT Analysis SWOT analysis is a tool to analyze a company’s current performance and position in a marketplace It can be used for decision making at a variety of levels SWOT stands for: S: Strengths W: Weaknesses O: Opportunities T: Threats Strengths What advantages do you have? What do you do well? What relevant resources do you have access to? What do other people see as your strengths? To discover strengths, look at: major sources of revenue and profit market share of company in its various product lines strong brands marketing/advertising effectiveness availability of skilled employees morale of employees What is the cost of capital? What is the stock price? Does the company harness information technology effectively? Does the company manage its inventories efficiently? Has the company demonstrated the ability to adapt and change? Is the company able to innovate? How has the company withstood international competition? Weaknesses What could you improve? What do you do badly? What should you avoid? To discover weaknesses, look at: least profitable product lines weak brands marketing/advertising effectiveness Lack of focus Ability to attract talent biggest expenditures of the company Ability to raise money stock price history Has the company been able to bring new ideas and products to the market place? Employee morale Do employees have faith in management? Competition Opportunities Where are the good opportunities facing you? What are the interesting trends you are aware of? Useful opportunities can come from such things as: Changes in technology and markets Changes in government policy related to your field Changes in social patterns, population profiles, lifestyle changes, etc. Local Events To discover opportunities, look at: Competitive position of the company New technologies that innovate or lower costs Inexpensive acquisition opportunities Use of internet Possible incentive plans to boost employee performance International opportunities Is there an opportunity to demand better prices from suppliers? Are there opportunities to cooperate with non- competitive businesses for mutual benefit? Can dead-wood work-force or product lines be reduced to boost profitability? Can the company get more predictable cash flows by establishing better relations with customers? Threats What obstacles do you face? What is your competition doing? Are the required specifications for your job, products or services changing? Is changing technology threatening your position? Do you have bad debt or cash-flow problems? Could any of your weaknesses seriously threaten your business? To find threats, look at: level of reserves needed to withstand sudden changes in the environment level of regulation in industry trade union activity that could have an adverse effect international competitors amount of trained and motivated employees Financial soundness Ability of company to keep up with technological changes Pressure on margins Size of transactions Competition in cyberspace Example: A start-up small consultancy business might carry out the following SWOT analysis: Strengths: respond very quickly (no red tape, no need for higher management approval, etc.) really good customer care, as the current small amount of work means we have plenty of time to devote to customers lead consultant has strong reputation within the market change direction quickly if marketing is not working little overhead means good value to customers Weaknesses: Our company has no market presence or reputation We have a small staff with a shallow skill base in many areas We are vulnerable to vital staff being sick, leaving, etc. Our cash flow will be unreliable in the early stages Opportunities: Our business sector is expanding, with many future opportunities for success Our local council wants to encourage local businesses with work where possible Our competitors may be slow to adopt new technologies Threats: Will developments in technology change this market beyond our ability to adapt? A small change in focus of a large competitor might wipe out any market position we achieve The consultancy might therefore decide to specialize in rapid response, good value services to local businesses. Marketing would be in selected local publications, to get the greatest possible market presence for a set advertising budget. The consultancy should keep up-to-date with changes in technology where possible.