Competitor Analysis Framework

Michael Porter suggested a framework for evaluating competitors. This framework is based on the following four key aspects of a competitor:

· Competitor’s Objectives

· Competitor’s assumptions

· Competitor’s strategy

· Competitor’s capabilities

Objectives and assumption drive a competitor and strategy and capabilities are what the competitor is doing or is capable of doing.

Competitor’s Objectives

Knowing your competitors objectives facilitates a better prediction to the competitor’s reaction to the different competitive moves.

Whether the competitor is meeting its objective provides an indication of how likely it is to change its strategy.

Competitor’s Assumptions

A competitor’s assumption maybe based on a number of factors such as

· Beliefs about its competitive position

· Past experience with a product

· Regional factors

· Industry trends

A comprehensive Competitor’s analysis also would include the assumptions a competitor makes about its own competitors and whether that assessment is accurate.

Competitor’s Strategy

The two main sources of information about a competitor’s strategy are what the company says and what it does. The stated strategy however differs from what the competitor actually is doing. What the company is doing is evident where its cash flow is directed.

Competitor’s Capabilities

Information of the competitor’s assumptions, objective, and current strategy is useful in understanding how the competitor might want to respond to a competitive attack. However, its resources and capabilities determine its ABILITY to respond effectively to an attack.