Competitive Analysis and Strategy

“No business can do everything. Even if it has the money, it will never have enough good people. It has to set priorities. The worst thing to do is a little bit of everything. This makes sure that nothing is being accomplished. It is better to pick the wrong priority than none at all” Peter Drucker.

Peter Drucker stated effectively the rules and regulations of business game. No business can do everything, it has to set priorities, and the worst is to do a little bit of everything, which definitely will lead to failure.  All the actions must be based on effective strategy. From ancient years we heard about Great Alexander that he was a successful leader/strategos. The word strategy derived from the Greek word strategos, which means the leader of the Army.

Two critical questions arise:

1.      What is strategy? There are a number of definitions of strategy in the extant literature, but the classic definition is attributed to Alfred Chandler: “strategy is the determination of the basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals”. A well-formulated strategy helps to marshal and allocate an organization’s resources into unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment and contingent moves by intelligent opponents. 

2.      What is competitive analysis? Zahra and Chaples define competitive analysis as the process by which a company attempts to define and understand its industry, identify its competitors, determine the strengths and weaknesses of its rivals, and anticipate their moves. The analysis also offers management a forum where they can discuss and evaluate their assumptions about the organization’s capabilities, market position and competitors. It also helps them to select viable strategies that will strengthen the organization’s market position. Therefore, competitive analysis serves as the foundation for the process of strategy formulation in the organization.

Consequently, the effective strategy formulation and implementation must be based on effective analysis of competitive external and internal environments. May we can meet words in the modern business world such as competitive strategy, competitive advantage, sustainable competitive advantage, and competitive analysis. The above words dictate the contemporary business game, and how the game must be being played in order to help organizations to survive in the global arena.   

Keegan stated that today many companies are discovering that industry competition is changing from a purely domestic to a global phenomenon. Thus, competitive analysis must also be carried out on a global scale. Global marketers must also have an understanding of national sources of competitive advantage.

The “Concept Strategy” is very big and too complex. There is not an easy task; otherwise either company or organization will be failed. Michael Porter stated very effectively of how complicate is the above concept: Why Do Good Managers Set Bad Strategies? When Porter started out studying strategy, he believed most strategic errors were caused by external factors, such as consumer trends or technological change. “But I have come to the realization after 25 and 30 years that many, if not most, strategic errors come from within. The company does it to itself.

Bad strategy often stems from the way managers think about competition. Many companies set out to be the best in their industry, and then the best in every aspect of business, from marketing to supply chain to product development. The problem with that way of thinking is there is no best company in any industry. What is the best car? It depends on who is using it. It depends on what it’s being used for. It depends on the budget. Years ago, corporate strategy was considered a secret known only by top executives for fear competitors might use the information to their advantage, said Porter. Now it is important for every one in the organization to understand the strategy and align everything they do with that strategy every day. Openness and clarity even help when coping with competition. It is good for a competitor to know what the strategy is. The chances are better that the competitor will find something else to be unique at, instead of creating a zero-sum competition.

The business game is not a static topic, the environment changes dramatically in all over the world. Such changes includes, technological, political, economical and environmental. Consequently, the above changes affect the organizations and individuals. Thus, in order to survive and be competent it is necessary to adapt to those changes otherwise we will fail. Strategic continuity, in fact, should make an organization’s continual improvement more effective.

“Most of us fear change. Even when our minds say change is normal, our stomachs quiver at the prospect. But for strategists and managers today, there is no choice but to change”.