The Greek philosopher Epictetus’ words are indeed fascinating: “Circumstances do not make the man, they only reveal him to himself.” Holding a mirror to our organization in order to understand who we are, what we do and how we do things will not suffice anymore; what is important is to have a ‘relative’ approach. When we talk about macro environment, we mean understanding political, economic, technological, etc. environments; understanding the industrial dynamics; being able to read about the competitive environment; in short, we need to construe our ‘Playground’, context and conditions, trends, constraints and possibilities carefully and effectively.
Before generating our strategic options and positioning, it is useful to more closely examine the competition in our field of activity. We can start by grouping other organizations on our playground into ‘those with similar strategic features’ or ‘those who behave in a similar manner’. Several factors such as customers, products and services, raw material supply, investment fields, capacity utilization, geographic allocations, production technologies, distribution channels, income and profitability levels can serve as a compass. Or, we may analyze their primary resource allocations such as; ‘do they use power of their brand?’, ‘if yes, how much’; ‘what is the nature of their workforce, their marketing and communication activities (such as sales force, advertising), their expertise, their quality of products or services, their speed of adopting technology’… By this method, which we call ‘segmentation’, it would be possible to segregate companies, not only of similar nature, but also of different characteristics and behaviors. It is also essential to understand the quantitative dimensions and competition in each segment, as well as anticipating the growth potential and trends that might develop.
In order to effectively construe the competition, it would be necessary to establish correlations among different parameters. For instance, it might make sense to establish a relationship between the product range and budget allocated to marketing; or a relationship between operating abroad and budget allocated to R&D from revenues can be evaluated.
Segmenting competition into meaningful groups would also throw a light on the potential opportunity areas and strategic options of our own organizations. It might even be possible to capture unaddressed market opportunities. Of course, it is also our job to evaluate all the risks and advantages of entering unaddressed ‘niche’ fields (markets)… Moving from one market segment to another is a big deal. It should be considered as an introduction to a new market.
Right after segmenting the competition, it would be necessary to consider grouping customers (current and potential) with similar requirements and expectations. In this case, there may be a few perspectives. For instance, when we group the consumer market by demographics (people and organizations) we rather consider their income level, age, gender, the stage of their life cycle (such as infancy, childhood, adulthood, and old age), geographical position, lifestyle; when we group the consumer market by industrial markets, we consider the industry, geography, scale, profitability, management style, etc.
Another perspective might be their purchasing and consuming habits. Brand loyalty, selection criteria, purpose of use, application area, purchase volume and frequency, purchasing behavior and type of channels, etc. may stand out. Or, requirements and preferences of Customers may influence their decisions. Brand preference, quality, product or service features, easy access, convenient handling, performance requirements, supplier orientation, service requirements, quality, price, etc. can be critical decision-making factors.
We should also not ignore the fact that parameters may vary depending on time, location, situation and person. Budgetary status; the knowledge, experience and preferences of decision makers; urgency factors such as risk perception can enable different behaviors.
All right, we have increased our relativity; we understood the competition and customer preferences better. Hmmm … let us see now; how will this information help us? It will help us to determine a target market or make strategic choices in the current market and position our organization strategically.
Our ultimate goal should be to find a position in the minds and even in the hearts of our target customers, where we make our products and services unique and differentiated compared to the competition.
That’s why it’s time for us to turn around and look in the mirror.
Release: SME-EFOR December 2012