Analyzing Competitors

This chapter starts off with "having an understanding of customers is not enough today" - in saturated markets where growth is relatively flat, business growth will predominantly come from taking market share away from competitors, hence, the importance of knowing your competitors.

This market situation is one faced by many companies/brands competing in Europe and North America. Other parts of the world, such as the Middle East and Africa are experiencing market growth and so as long as a company/brand holds onto its market share, the business will grow with the market.

Kotler goes onto to say that companies should have a good understanding of the following five things;

i) who are our competitors ?
ii) what are their strategies ?
iii) what are their objectives ?
iv) what are their strengths and weaknesses ?
v) what are their reaction patterns ?

Who are the competitors ? This often appears to be a simple question to answer but it is important to gain a good understanding of how a market works and have a view based on the industry and customers.

"Economists define 'close substitutes' as products with a high cross-elasticity of demand" Companies often take a view that their market is made up of companies offering similar products at similar price points - but, as Kotler points out, consumers take a different view - in one of the markets I work in, we have witnessed the small automobile market being affected by motorcycles - traditionally, the small automobile market would have been viewed as all small automobiles. Due to the economy, consumers are seeking out more cost effective ways to satisfy their need for independent travel - motorcycles are satisfying this need very well.

Having identified the competitors, marketers must then work to establish; their strategy, objective(s), strengths & weaknesses and what their reaction patterns maybe.

This level of information will be vital for a company to establish its own strategy of where market share growth will come from, i.e. which competitors to attack and how and which competitors to avoid.

As Kotler says, "this is especially necessary in slow-growth markets because sales can only be gained by winning them away from competitors"