Understanding your competitors

“This makes no sense! They’re going to undermine the entire sector’s profitability: I never would have imagined that they would make a decision like this.” Such reactions are not unusual, according to a study conducted by John Horn, author of Inside the Competitor’s Mindset. His survey of 519 Western or Indian corporate leaders shows that over 85% of them believe that their competitors at least occasionally act in an irrational manner.

That could seem anecdotal. In reality, this presupposition of irrationality is dangerous. It leads to the more or less conscious belief that seeking to anticipate competitors’ moves is a lost cause.

Indeed, many leaders focus their strategic thinking on the company’s internal resources and the needs of customers, to the detriment of the competitive environment. Yet the actions of competitors are very often crucial to the success of a strategy. This was illustrated by the resounding failure of American brewer Anheuser-Busch when it ventured into the snack food market. Discreet trials in niche markets had shown promising potential. But in launching this offering on a large scale, the company communicated very widely, which immediately alerted the market leader, Frito-Lay. The latter reacted very aggressively to the arrival of this new competitor, by lowering its prices and multiplying its promotional spending. This failure to anticipate competitive reaction cost Anheuser-Busch dearly: the failure of this diversification forced it to sell, at a low price, its factories to Frito-Lay and its brands to Procter & Gamble, which resulted in a loss of over 200 million dollars.

In reality, detailed and attentive competitive intelligence can yield numerous benefits: anticipating competitors’ reactions in order to face them, identifying the opportune moment to embark on a project, giving up on initiatives that risk being blocked by a competitor’s counter-offensive, picking up on weak signals indicating the arrival of a new player… How can we return this essential link in strategic planning to its rightful place? And most of all, how can we focus our efforts on the most enlightening data to guide our strategic choices?

In this synopsis:
– Competitive analysis, a blind spot of strategic planning
– Anticipating your competitors’ moves
– Organizing roleplaying games to better anticipate your competitors’ reactions