International Competitor Analysis: It’s a Red Ocean Out There...
Because ‘going global’ is such an involved process, doing competitor analysis is often overlooked. Myths abound in this space. CEOs say things like “we’re just going to focus on what we do and not get hung up on the competition” or “we’re just a small company, we don’t need to do competitor analysis, that’s for the big guys”, or best of all “we don’t have any competitors, no-one else makes this product”!
Let’s get real here. All businesses face competition. Even if you’re the only pub in town you have to compete with other businesses where your customers will spend their money instead of with you – cinemas, restaurants, and the race track.
And because people are increasingly searching for and buying goods and services online, you are no longer just competing with your immediate neighbours in your target geography. You may very well find yourself competing with businesses from other countries too.
Your competitor could be
- a new business offering a substitute or similar product that makes your own redundant.
- another product or service that's being developed and which you ought to be selling or looking to license before somebody else takes it up.
Even if you have a product or service which is a one-of-a-kind, it will still have competition, it just won’t be direct competition.
Understanding the competition is important. If you don’t know who your competitors are, or how they compare to you, you won’t be across what threats they pose or have a strategy for dealing with them. And that can have disastrous consequences, because it’s quite possible that you’ll be blindsided by your competition.
What happened to Nokia?
The demise of Nokia is one of the most notorious examples of this scenario. As you probably know, the Finnish phone company revolutionised the mobile phone industry in the late 1990s and helped turn Finland’s economy into one of the most prosperous in the world. At its peak in the early 2000s, Nokia supplied 40% of the world’s mobile phones, creating Finland’s first globally recognised consumer brand. At home its impact was even greater. According to the Research Institute of the Finnish Economy, Nokia contributed a quarter of Finland’s growth between 1998 and 2007.
But as quickly as it emerged, Nokia’s dominance of the mobile phone market came crashing down, hitting Finland’s economy hard and coinciding with the longest recession in the country’s history.
So what happened?
The problems began with the rise of the smartphone, and in particular the launch of Apple’s iPhone in 2007. Until then, Nokia had been focussing its attention on making the phone with the best battery life in the smallest case possible – and they were doing very well. In the early 2000s the mobile phone landscape became much more complex and Nokia wasn’t sure what it should be targeting – was it ease of use? Was it battery life? One of the mistakes Nokia made was failing to keep an eye on the competition, particularly those competitors like Apple which quickly began to eclipse them.
Nokia played catch-up in the smartphone market until 2014, when its mobile phone business was sold to Microsoft and the Nokia name was removed from its devices altogether. Today the mobile phone part of the company is essentially extinct and lives on in name only.
Where did Myspace go?
If you were a hip, young internet user in the early 2000’s you probably had a Myspace account. These days, many of us have not even heard of what was once one of the most popular websites on the internet. So where did Myspace go?
Myspace was a precursor to and almost certainly an influence of Facebook. It was launched in 2003 and became popular so quickly that in 2006 it was the most visited website in the United States, even surpassing Google.
Myspace was sold by its original owners to media giant News Corporation in 2005 for the hefty sum of $580 Million, and while it continued to see success, it was short-lived. Myspace’s decline began in 2008, when Facebook started becoming more popular. It would be easy to just say that Facebook killed Myspace and leave it at that, but there were a few other factors at play here.
Users were migrating to newer, better designed social media platforms which offered newer features and an overall better social environment. Myspace’s refusal to change its original core design, combined with a heavy increase in advertising space also contributed to its rapidly dwindling user numbers.
Unlike Facebook, where ads are smaller and targeted by a variety of measures (location, browsing habits, interests), Myspace ads were obnoxiously interfering and often not relevant, making for a frustrating user experience. And as much as we love to complain every time Facebook gets a new layout, the regular refreshing actually keeps us interested; Myspace’s refusal to change became stagnant and boring for users.
Although MySpace still exists, it caters primarily to music and brands and most of the data belonging to existing users has been deleted. The MySpace story is another classic example of a company that lost its grip on fame and fortune because it didn’t pay attention to the competition.
Three types of competitors
At the macro level, there are only three types of competitors that matter. These competitors apply across all industries and business types.
Direct Competitors
A direct competitor is probably what most commonly comes to mind when you think of the word “competition.”
This is someone who offers the same products as you, with the same end game. They make money from the same thing you do.
Direct competitors are very similar to you in multiple aspects of a product or service offering. They may or may not compete with all the same services, the delivery might be different, or they may have a different marketing strategy. Maybe you sell red apples and they sell green. You market the sweetness of your apples and the competitor highlights the texture of theirs. But essentially, you’re targeting the same kind of customers for the same product or service.
Competition on the basis of geography covered and price given to customers, is the most common in direct competition. Relationship management plays a major role in wooing customers and taking away market share from direct competitors. If a customer gets excellent service from your organisation, he or she is unlikely to move to a competitor.
Indirect Competitors
Indirect competitors offer the same stuff but have a different goal. They don’t drive revenue the same way. For example, if you sell an online game for a fee and another company provides a very similar game free-of-charge, as part of its marketing, that free product will compete with your paid product for people’s attention.
Replacement Competitors
A replacement competitor is something someone could do instead of choosing your product, using the same resources they could have committed to your product.
For example, if you operate a cinema, a replacement competitor is anything which your would-be customer chooses to do instead of going to the cinema. He or she might watch the movie (or a different movie) at home, read books, go to a restaurant or visit friends instead of spending his or her time at the cinema.
Replacement competitors are the most challenging competitors to identify, but the best way to do this is to interview customers, listen to their social media conversations, and understand macro trends to gain an understanding of what choices they are really making.
Building up the picture
Once you’ve worked out who your competitors are, your next job is to find out about them, to build up a detailed picture of them so that you can create a competitor analysis. This can be the hard part. While you can always approach your competitors directly, they may or may not be willing to tell you what you need to know to put together your competitor analysis.
You need to know:
- what markets or market segments your competitors serve
- what benefits your competitors offers
- why customers buy from them
- as much as possible about their products and/or services, pricing, and promotion, including:
- the products or services they provide and how they market them to customers
- the prices they charge
- how they distribute and deliver
- the devices they employ to enhance customer loyalty and what back-up service they offer
- their brand and design values
- whether they innovate – business methods as well as products
- their staff numbers and the calibre of staff that they attract
- how they use IT – for example, if they’re technology-aware and offer a website and email
- who owns the business and what sort of person they are
- their annual report – if they’re a public company
- their media activities – check their website as well as local newspapers, radio, television and any outdoor advertising
You should also find out as much as possible about your competitors’ customers, such as:
- who they are
- what products or services different customers buy from them
- what customers see as your competitors’ strengths and weaknesses
- whether there are any long-standing customers
- if they’ve had an influx of customers recently
Try to go beyond what’s happening now by investigating your competitors’ business strategy, for example:
- what types of customer they’re targeting
- what new products they’re developing
- what financial resources they have
So… how do you build that picture?
5 Methods of International Competitor Analysis
1. Read about your competitors
Look for articles or ads in the trade press or mainstream publications. Read their marketing literature. Check their entries in directories. If they are an online business, ask for a trial of their service. Are they getting more publicity than you, perhaps through networking or sponsoring events? If your competitor is a public company, read a copy of their annual report.
2. Go to exhibitions
At exhibitions and trade fairs check which of your competitors are also exhibiting. Look at their stands and promotional activities. Note how busy they are and who visits them.
3. Go online
Look at competitors’ websites. Find out how they compare to yours. Check any interactive parts of the site to see if you could improve on it for your own website. Is the information free of charge? Is it easy to find?
Business websites often give much information that businesses haven’t traditionally revealed – from the history of the company to biographies of the staff.
Use a search engine to track down similar products. Find out who else offers them and how they go about it. Websites can give you good tips on what businesses around the globe are doing in your industry sector.
4. Speak to them
Phone them to ask for a copy of their brochure or get one of your staff or a friend to drop by and pick up their marketing literature.
You could ask for a price list or enquire what an off-the-shelf item might cost and if there’s a discount for volume. This will give you an idea at which point a competitor will discount and at what volume.
Phone and face-to-face contacts will also give you an idea of the style of the company, the quality of their literature and the initial impressions they make on customers.
It’s also likely you’ll meet competitors at social and business events. Talk to them. Be friendly – they’re competitors not enemies. You’ll get a better idea of them – and you might need each other one day, for example in collaborating to grow a new market for a new product.
5. Listen to your customers and suppliers
Make the most of contacts with your customers. Don’t just ask how well you’re performing – ask which of your competitors they buy from and how you compare.
Use meetings with your suppliers to ask what their other customers are doing. They may not tell you everything you want to know, but it’s a useful start.
Use your judgement with any information they volunteer. For instance, when customers say your prices are higher than the competition they may just be trying to negotiate a better deal.
Analyse your competitors
Once you’ve collected information about the competitors that are present in your target market, study the insights that you’ve generated about each of them and ask:
“How are we going to compete with our competitors?”
One of the keys to competing successfully, at home and abroad (especially for small businesses) is to identify a market niche where they can capture a specific target market whose needs are not being met.
Good questions to ask here include:
- Is there a particular segment of the market that your competition has overlooked?
- Is there a service that customers or clients want that your competitor does not supply?
The goal of your competitor analysis is to identify and expand upon your competitive advantage – the benefits that your business can offer the customer or client that your competition can’t or won’t supply.
Create your competitor analysis
If you want to get really serious and take it a step further, you can formalise your digging and thinking into a competitor analysis. This is a document that contains the following sections:
- The competitive environment – This section outlines the competitive environment, identifies who your competitors are, how much of the market they control and any other relevant details about the competition.
- Competitors’ products/services – Outline your competitors’ products and services here. Think specifically in terms of the features, value provided to customers and how exactly they are being sold. Don’t forget to include details on how your competitors are marketing and distributing their products. Include information on product quality, and find out how they are both staffed and are operating (when you can).
- Competitors’ strengths and weaknesses – Be objective as you assess the strengths/weaknesses of your competition. A competitive analysis is useless if you allow your own belief in your products to cloud reality. Think about their products as if you actually work for the competitor, and discover what makes them so great. Is it the quality or are they more user-friendly? If they’re growing rapidly, is there a particular product or service that’s key to their growth?
- Competitors’ strategies – Use the “strategies” section of your analysis to paint a picture of how your competitors are going about building and maintaining their competitive position.
- Market overview – Give an overview of the market. Study the trends and figure out what the actual customers for your products are looking for. If the demand is growing there are probably going to be plenty of customers around. On the flip side, a flat or declining market will see fierce competition. This is not a good market to be in, as everyone scrambles to win (or maintain) market share. Focus on any niches that might be developing, and make sure you’re targeting what it is customer’s actually want. By the time you get to this stage of the analysis you’re going to have more than enough information to measure and determine a future outlook from the trends.
- How we will compete – Use the final paragraphs to explain your competitive advantage, explaining why and how your company will be able to compete with these competitors and establish yourself as a successful business in your new international market.
Once you’ve completed this process, you’ll be ready to face your competitors, anywhere.
