How to Measure Competition

7/29/2019 How to Measure Competition

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Which industry is more

competitiveBeverages like soft drinks (Coke andPepsi), - Dabur

Milk: Nestle, Britannia, Amul, motherdairy, vishaka, Paras

Health drinks (Complan, Horlicks, Boost) Modi, CEAT, Dunlop, Good Year,Brigestone, Michelin India

Microsoft vs. Apple (Operating system)0r Airrbus and Boeing in (Aircraftindustry)

Binani, Ultratech, Ambuja, ACC, IndiaCements, Madras cements, JK cements,Lafarge India

Nestle and Cadbury in chocolate market Mars, Hershey, Nestle, Kraft foods and

Cadbury in GermanyNestle and Hindustan Unilever in Coffeesegment

France Unilever, Colgate-Palmolive,Henkel and Procter and Gamble fordetergent in France

Google vs. Bing


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Behavioral Approach Intent of Top management team

Compete in open market

Collude and fix the market especially in multi marketcompetition

Intent reflected in activities

Intent can be measured through

- Competitive Intelligence/ Competitive Orientation


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Firms ability to act and respond would be reflected incompetitive activities it takes

Hence, intensity of competition can be measured fromcompetitive dynamics theory by virtue of focusing oncertain competitive (generally market based activities)


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Measuring competition: By virtue of activity or

actionFerrier, Smith and Grin Behavioral Theory

of Competitive dynamics

Focus on five types of activities

Pricing action rebate, discount

Marketing action promote, distribute, campaign

Capacity action expand, boost output

Legal action sue, litigate, infringement copy right

infringement, defaming competitor by virtue of ads Signaling action: True or false promises, vows, seeks,

aims

Language wars

Spying (not generally visible)


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Oracle hiring detective agency to spy on Microsoft

Detective agency stole two laptops to obtain certaindata for the bribe of $ 1, 200

P&G hired competitive intelligence consulting firm togain information on hair care business of Unilever

Luxury goods retailer hired Deloitte and Touch whichprovided consultancy in computer forensics

They entered as repairmen in closed offices to copyhard drives of three key employees

In India, information on sales figure


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Based on these parameters Total competitive activity

Speed of response of competitive activity

Sony video games vs. Microsoft 2 days

New version Car earlier 3-5 years now just 20 months

Action repertoire simplicity: share or proportion of

competitive actions in the particular action category pi

2, where pi = proportion of one type of competitiveaction to total number of competitive actions.


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Attack imitation: Similarity of moves Leading toinstitutionalization

Competitive action speed: actual time gap betweenvarious strategic actions taken by a particular firm

Strategic action announcement - implementationtime lag


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Predicting cartel formation Tata Swach vs. Pureit

Gujrat Ambuja, ACC cements and Ultratech Cements

Meausring competitive activities For the last year i.e. 2011

Competitive intensity: Average of total sum ofactivities taken by firms

- Filter water 4 activities

- Cement industry 0.2


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Complexity of actions:

- Distribution channel enhancement (tie ups with

NGOs)- Brand promotion through health campaigns andcelebrity endorsement

- Legal infringement for notifying false quality

standards-Launch of new variants of purifier in low cost category


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After calculation 0.25

For cement industry 2.24

Only capacity expansion decision and new variantcement launch by Gujrat Ambuja

Attack Imitation

- water purifier industry: capacity expansion

announcement almost simultaneously, similar type ofhealth awareness promos

-new variants both firms working on


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Attack imitation is more visible in insurance andautomobile industry making a particular activityalmost critical success factor

- sharing distribution resources of banks

Cement industry capacity expansion


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Competitive action speed

- for water purifier 15 days

- for cement industry more than 200 days


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Growth measures and internal measures like efficiencynot considered

Eg: technology transfer for process improvement, if oracquisition to gain complementary assets to buildcapabilities

Poaching can have direct impact on competitive

intensity

If firms take more such activities, their performancewill improve and will have implication for

competitiveness also


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Magnitude of response not measured

Eg: resource exhausted in capacity expansion orcelebrity endorsement, no more activities can be done


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Strategic market based actions gap:

- In strategic: consider other activities across value

chain which can have direct impact oncompetitiveness of the firm

In water purifier industry the gap was 2 on an averageand in cement gap was 3.8

Magnitude of activity: Assign weights to activities


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How to Measure Competition