In this article, we shared the answer to the question What is Competition Analysis? with you. According to Porter’s Five Forces Model, five factors affect the competitiveness of businesses. These are the bargaining power of buyers, the bargaining power of suppliers, the threat of new entrants, the threat of substitute products, and the existing competition in the industry. For businesses to make the right decisions according to the competition conditions in the market, they need to analyze these factors and correctly determine the areas where they can act in the current market.
In many cases, competition analysis is confused with competitor analysis. Competition analysis is much more than just the findings that can be obtained by examining certain strong competitors. The reason for this is that existing competitors are not the only factor threatening businesses in the market. Although the factors vary in proportion to the increase in the number of competitors, it will not provide an adequate perspective to analyze the market only with a competitor-oriented perspective.
According to Porter, the basis of competition in the sector is the economic structure that creates it. Factors such as shopping balance, prices, and market conditions exceed the behavior of not only the business but also all competitors operating in the sector. The five competitive strengths reflect the fact that competition in an industry goes far beyond existing players.
Why Competition Analysis Is Done?
Within the framework of the systems approach, businesses are sub-systems connected to other systems. Therefore, the survival of businesses depends on their adaptation to the changing environmental conditions they are in. Upper systems, such as environmental conditions, do not change only economically, politically or technologically. Changes in the general environment will eventually be reflected in the market environment, which is a sub-system, and the factors affecting the competition of the enterprise will also change in this direction. The integration of new technologies can change the production processes fundamentally and move the competitive conditions to different areas. The change in customer demographics may cause changes in expectations and preferences and the entry of new substitute products into the market, or political decisions may increase or decrease the intensity of competition by bringing new sanctions on competition conditions. All these changes may occur at different times, or all of them may occur together. In order for businesses to decide on the right course of action, they must analyze the changes in the upper systems they are connected to and carry out their plans in this direction, in terms of minimizing the use of resources, increasing their survivability, and gaining competitive advantage.
How to Perform Competition Analysis?
What is Competition Analysis? we also need to answer how we can conduct competitive analysis. Some elements should be considered in a properly performed competition analysis. As stated before, the competition analysis does not mean the analysis of competitors, but the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products, the threat of new entrants, and the intensity of competition among existing competitors. While performing the competition analysis, each factor should be interpreted in terms of the general situation in the sector, not from the point of view of the enterprise.
While the bargaining power of customers generally changes in direct proportion to the alternatives they have, that is, the number of competitors, product and brand loyalty should be measured by taking into account the density of customers, the number of orders placed each time, price sensitivity and the costs they face in preference changes. When interpreting the bargaining power of the suppliers, it is necessary to reverse the questions asked about the bargaining power of the customers and this time to consider the businesses operating in the sector as customers.
While the number of competitors in the market and their power situations are at the forefront of the factors that determine the intensity of competition among existing competitors, service and product differentiation, access to distribution channels, customer loyalty structure, the tendency of the government to intervene in the sector, cost advantage and the effects of technology in both production and products and services factors such as the degree of importance should also be evaluated.
It will be useful to evaluate the competition analysis together with the life cycle analysis instead of evaluating it alone in order to develop the perspective. At this stage, it is necessary to evaluate the threat of substitute products and possible competitor threats together with their life cycle. While the threat of substitute products is generally low during the initial and growth phase of the market, the threat of potential competitors who see the market potential will increase. However, as the profitability in the market will begin to decrease when the market matures, the threat of possible competitors will begin to decrease, and the threat of substitute products will increase in response to the need to respond to changing customer expectations in different ways. It is also possible to interpret the same evaluation to customers and suppliers.
Competition Analysis at STRATEJİ360
What is Competition Analysis? What does it do? How To Do It? The answer to all these questions is in STRATEJİ360. Click and take a 1-0 lead in the competition. Competition analysis in STRATEJİ360 is prepared within the framework of Porter’s five forces model. Decision makers are asked to answer the question sets prepared in the light of academic studies for each factor affecting competition by choosing one of the multiple-choice options. With the algorithm created in line with the answers received, a report is given on the state of competition conditions in the market.
Considering the fact that the enterprises operate in different sectors and the possibility that market conditions may differ according to the sectors, the question sets differ according to the sector information selected at the stage where the company information is entered.
In the report given after the analysis, detailed information and recommendations on each factor affecting competition are included, while the results of the analysis of the life cycle in the light of the results obtained are also given in detail.
