Five Force Analysis

[Vivek Raghuvanshi]

http://corporaterisks.info/blog/?p=546

Five Force Analysis

Competitive intelligence involves monitoring the operating environment. We need to monitor the suppliers, customers, substitution effect, threat of new entrants and competitive rivalry in the market place.

What we need to understand that a supplier of today could become a parallel or latent or existing competitor tomorrow and if we are able to monitor suppliers we can anticipate whether they will be going in for related diversification or unrelated diversification or backward of forward integration for being competitive in the market place.

This we call early warning if we are able to detect much in advance. A supplier of yesterday could become a lateral competitor or parallel competitor or existing competitor of tomorrow.

We need to monitor the substitution effect ie the lateral competitors and parallel competitors who eat into our market share. Competitive intelligence helps us identify competitors who eat into the market share by offering substitution alternatives to customers. These competitors who are our parallel competitors of today could become existing competitors of tomorrow who by using related diversification could contest for the same market space.

Customers need to be monitored to work on customer acquisition and customer retention efforts. When we monitor our customers and competitors customers we are able to plan our customer acquisition and customer retention strategies. Inputs for creating a ladder of loyalty are generated here and we can move the existing customer to becoming a client and a client to becoming a supporter and a supporter to becoming an advocate of our products and services who by word of mouth publicity generate goodwill can create positive perception in the eyes of the target segment.

New entrants need to be monitored as they would compete with us for the market space.

Anew entrant could be a existing competitor who is using either low cost or best cost or differentiation or focused low cost or focused differentiation strategy to reposition in the market segment. On the other hand a new entrant could be a lateral competitor who enters into our market space through unrelated diversification or backward or forward integration or related diversification. Further a new entrant could be a parallel competitor who may become our existing competitor through related diversification or backward or forward integration.

Further we need to keep our eye on the ball and monitor our existing competitors who may be low cost option providers and now are considering differentiation or best cost strategy to enter into our market space.

The ability to anticipate competitor movement by understanding strategic options is another way to being competitive. An existing competitor may use strategic options such as low cost or differentiation or best cost or focused low cost or focused differentiation and effect our market share.

Further when we monitor the environment and analyze the information we are able to use role playing and scenarios to generate early warning.