Firms may investigate competitors in order to benchmark. Benchmarking involves identifying best practices in an industry in order to copy those practices and achieve greater efficiency.
Benchmarking the act of identifying best practices in an industry in order to adopt those practices and achieve greater efficiency
Keeping track of a firm’s competitors is also an important strategic function. This type of strategic intelligence can be critical to a firm.
To undertake effective research about its competition, a company must first determine who its competitors are. The domestic market will certainly provide some input here. However, it is important to include any foreign company that either currently is a competitor or may become one in the future. The monitoring should not be restricted to activity in the competitors’ domestic market but, rather, should include competitors’ moves anywhere in the world. Many foreign firms first innovate in their home markets, expanding abroad only when the initial debugging of the product has been completed.
Aside from general business statistics, a competitor’s profitability may shed some light on its capacity to pursue new business in the future. Learning about others’ marketing operations may enable a company to assess, among other things, the market share to be gained in any given market. Whenever major actions are planned, it is extremely helpful to anticipate the reactions of competitive firms and include them in the company’s contingency planning. Of course, monitoring a competitor’s new products or expansion programs may give early hints of future competitive threats.
Analysis that focuses solely on studying the products of key competitors can often miss the real strength of the competitor. To understand an industry and where it is headed over the next five years, it is important to study the core competencies in the industry.
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