Competitive Analysis

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Background

Central to the creation of expert planning systems as part of Ibis services and training are three questions:

bulletWhere are we?
bulletWhere do we want to be (and when)?
bulletHow are we going to get there cost effectively?

Competitive analysis is crucial element in the first two questions, as it will identify how far ahead or behind the competition the enterprise is, setting priorities for investment appraisal and action planning and implementation.

Building knowledge Centres

The development of knowledge centres, responsible for their own parallel planning and business monitoring will be part of the bottom up rather than top down plan creation which is vital for well grounded and realistic plans. By using key performance indicators within operational units and incorporating benchmarks, the entire range of competitive performance can be rapidly identified. Though key performance indicators vary from enterprise to enterprise, an example of selected components from the various divisions ( a subset of a much greater amount of information) could be as shown as in this table:

Factor

Source

Company

Benchmark

Target

Gross profit

Financial monitoring

59.00%

61.00%

62.00%

Customer satisfaction

Product performance monitoring

72.00%

88.00%

80.00%

% new products <3 years old

New product development

43.00%

65.00%

52.00%

AER

Administration monitoring

7.00%

2.80%

5.50%

Productivity

Personnel monitoring

$83590

$124845

$95500

Web hits/ month

IT monitoring

237200

145000

250000

Stock turn ratio

Production/ logistics monitoring

5.6

7.3

6.2

Customer spread ratio

Marketing monitoring

82.00%

47.00%

61.00%

This company has chosen to build its core competence in seven areas, with the data showing considerable differences against benchmark for these chosen operational KPI's. There are some components that are ahead of benchmark (such as Web hits), some that are close to benchmark (such as gross profit margin), and some that are considerably distant from benchmark requirements, such as productivity per employee and administrative expense ratio or AER. It is normal for these two measurements to move in tandem, so this type of inter-relationship would be expected. 

What this approach does of course define is the priorities that the enterprise needs to be placing within the development of its plan.

Consolidation or cost cutting will be needed to address productivity, stock turn and AER problems;
New product development will be important to improve the long term viability of the enterprise against its competition;
Improvements in customer satisfaction and customer spread ratios will be important for market penetration and driving higher levels of customer life value.

Within each of the knowledge centres, clear priorities for action become easily established, with each of the components converted to a project with associated investment requirements, timelines, milestones and responsibilities, all of which are then incorporated back into the monitoring system. 

Qualitative competitive advantage

Knowledge centres can also assist in the assessment of qualitative measures of competitive strength and weakness.

The most rapid technique is to use a Likert scale to subjectively assess the relative position of the enterprise against the market leader(s) or against the competitor which can be most easily attacked. Such an analysis obviously requires the enterprise to be clear about which segment and strategic business unit/ profit centre is involved in the competitive analysis.

Factor

Strongly positive

Positive

Neutral

Negative

Strongly negative

Financial strength

         

Cost base

         

Production capacity

         

Production flexibility

         

Production sophistication

         

Speed of service

         

Political strength

         

Product/ service quality

         

Product/service depth of range

         

Product service width of range

         

Product positioning

         

IPR

         

End user loyalty

         

Intermediary loyalty

         

Skills base

         

Supplier effectiveness

         

Information systems

         

Potential problems with entrants

         

Potential problems with substitutes

         

The advantages of a knowledge centre based approach to competitive analysis

Builds knowledge (both within the knowledge centre and the enterprise as a whole);

Clearly identifies priorities;

Speeds actions which are mainly focused at an operational rather than at a corporate level;

Creates realistic rather than unrealistic targets within the overall planning horizon;

Converts all actions into projects with associated investment appraisal;

Enables plans to be created more easily and more effectively.


If you are interested in this approach to competitive analysis and knowledge creation, e-mail Ibis for a no-obligation review of your current planning platform.

 

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14 March 2009 12:53:56

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