Competitive Analysis: Understanding the Competitive Environment

Goals of Competitive Analysis

Competitive analysis is the systematic study of competitors to forecast their behavior and develop one’s own strategy. It answers the questions: who are our competitors? What are their capabilities and vulnerabilities? How will they react to our actions?

Definition of Competitors

Direct competitors offer a similar product to the same segment. BMW vs Mercedes.

Indirect competitors satisfy the same need in a different way. Train vs airplane for the Moscow–Saint Petersburg route.

Potential competitors — new entrants and substitutes. Three sources: (1) companies for whom entry only requires minor changes (Amazon entered the cloud market); (2) companies with similar competencies; (3) technology startups targeting your industry.

Analytical Tools

SWOT analysis: Strengths, Weaknesses, Opportunities, Threats. Useful for structuring information, but not a strategy by itself.

Strategic group maps: display competitors on two-dimensional axes (e.g., price vs coverage). Companies within one group compete more intensively. Allows you to find a “strategic gap” — an unoccupied position.

Competitive profile analysis: for each KSF (key success factor), assess the weight and rating of competitors. The weighted average score is the positional profile.

Forecasting Competitor Behavior

Four elements: (1) future goals (what drives the competitor?), (2) current strategy, (3) key assumptions about themselves and the market, (4) capabilities (what can the competitor actually do?).

Game theory helps predict reaction: if we lower the price, will the competitor respond? The prisoner’s dilemma in price wars explains why companies often avoid price wars.

Practical Assignment

Choose a market you know well. Build a strategic group map: define axes, position 5–7 players. Answer: (1) Which groups are the most profitable and why? (2) Is there an unoccupied position? (3) How will the market leader react if you try to occupy this position?