Protecting Your Business from Threatening Competitors

September, 2007

Your market is a jungle filled with predators that compete for the same resources. Survival depends upon understanding your competitors, especially their Capability and Propensity to attack.

Capability to attack

Experience:
   - Have they been competing in this industry long?
   - Do they understand the costs involved?
   - Can they benefit from their experience curve?
Strength:
   - Are they credible, well known, respected, and imbedded?
Staying Power:
   - Can they absorb the cost of an attack?
   - Can they afford the risk?

Propensity to attack

Negative impact:
   - What happens to them if they fail to respond?
   - Are you threatening the core of their business?
Commitment:
   - Are they committed to this industry?
Predictability:
   - Are they likely to act in a positive way for the industry?
   - Are they predictable?
   - Do they "play by the rules"?
   - What is their history of retaliation?
Market stage:
   - Does high-growth encourage accommodation?
   - Does decline encourage a cash grab?

The following chart lays out your market like a playing board, showing each of your competitors' and their position in the market. When you analyze the data, each competitor falls within one of four quadrants:

"Good" Competitor   (High Capability, Low Propensity)
   - Have the ability to act, but prefer a positive response.

No Threat   (Low Capability, Low Propensity)
   - Have neither the will nor the way to respond.

Disruptive   (Low Capability, High Propensity)
   - Lack the means, but must try anything to survive.

Dangerous   (High Capability, High Propensity)
   - Have the assets required, the desire, and the skills to use them.

This chart analyzes the real world market for the movie download service. It was prepared for Vudu.com who offers a set-top box and 5,000 movie titles with flawless image quality and instant download/playback. This industry is expanding rapidly as a result of increasing bandwidth and lower prices.

Vudu's two competitors with the highest propensity to attack are NetFlix and CinemaNow. NetFlix has significant resources, is extremely committed, and was one of the first to shake up the movie rental business. CinemaNow is invested heavily and is unpredictable.

The two competitors with the greatest capability are XBoxLive and NetFlix. XBoxLive has significant staying power and NetFlix is very experienced with many strengths.

A chart like this should be mounted on the wall of every manager's desk. Understanding your competitors' capabilities and propensity will help you recognize the true threats and choose when and how to initiate or respond. Choosing the right battles is as critical to your success as the quality of your product or service.

So where do you go from here?

These are just a few of the issues to consider when developing your marketing strategy. The greatest problem for most business owners or managers is knowing the right questions to ask and how to properly apply the right strategic methodology.

The Business Insight Solution
We've seen thousands of companies benefit from analyzing their business model and identifying new ways to improve their situation. By performing our Business Insight analysis they have identified their most threatening competitors and developed the proper strategy to stay ahead of the competition. Our Business Insight analysis will ask the right questions and apply proven strategic models to your business. We are so confident that you will benefit from our Business Insight analysis that we guarantee your money back if you are not satisfied.

Model for Success
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  • Michael Porter's Competitive Five Forces
  • Boston Consulting Group Matrix
  • SWOT Analysis
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  • Pricing Strategy
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    This results in a set of analyses, including:
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  • Over 30 graphs that analyze key market concepts (including Capability and Propensity to Attack)
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