The competitor analysis is the important step in development of strategy . The competitor analysis comprises of the following analysis.
- An analysis of the company
- An analysis of the competitor and
- Comparison of the competitor , vis-a vis, the company .
The analysis of the company and the competitor result in answering the question:
Am I Better Than or Worse Than or Equal to the competitor?
In other words this result in a POSITIONING Statement .the competitor analysis is normally carried out through the SWOT analysis – i.e , Strength and weakness analysis.
The starting point for a Strength and weakness analysis is always the financial analysis of the product/division / company . followed by the organizational analysis / competitive analysis (market positioning analysis) and finally the manufacturing to the value – added structure analysis.
The financial analysis is the most crucial analysis in determining the competitive positioning of the organization . for an ongoing company , there are 6 different parameters which need to studied . they are
- Turnover Analysis : This indicates the size of the business. Higher the turnover in relation to the competitor, indicates that perhaps the company has a cost advantage ( especially true in the case of volume- based product like the FMCG Product).
- Profitability Analysis :This indicates the Profit – making capacity of the business. Higher the profit in relation to the competitor, indicates deep pockets and hence, capability of long – draw strategies .
- Interest cost Analysis : This indicates the amount of borrowing that the company has . Higher the interest burden , Higher is the Vulnerability of the company and also lower will be the profitability , thus , reducing the maneuverability of the company.
- Debtor Analysis : This is an indication of the amount of goods that are locked up in the companies dealer’s customer . it also indicate that probably the 4Ps need to be revisited.
- Depreciation Analysis : A high level of depreciation in normal process process indicates high level of fixed assets . The issue involved then , are these assets optimally utilities many company also carry out a cost structure analysis with the objective of bench marketing their products with that of the competitor
- Inventory Analysis : This indicates the level of stock held by the company . there are three type of inventory :
- Finished Good Inventory : A high level of finished goods indicates that the goods are not moving in the market does this indicate that the 4Ps of marketing needs to revisited ? Alternatively it could also indicate that the planning system need to be revisited
- Raw material inventory : A high level of raw material indicates that the supply chain mechanism need to be revisited
- Work in Progress : Normally this is small compared to the raw material and finished goods Inventory. A high level of work in progress indicates that the production planning process need or be revisited .
The financial analysis is the most important tool in the strength and weakness analysis . this analysis help the marketer in taking pricing decision , cost cutting measures , etc. , it must be also understood that the strength and weakness prepared any one company for itself cannot be the same when prepared by its competitor for that company or vice versa.