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Nowadays, analysing competition is crucial for managers in order to understand the environment in which the business evolves

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Introduction

Nowadays, analysing competition is crucial for managers in order to understand the environment in which the business evolves, its competitors (their goals, plans etc) as well as implement strategies and position their companies. They can use a wide variety of techniques, each having its strengths and weaknesses. According to Prescott and Grant (1988), to select the appropriate techniques, managers have to know the different techniques available, how they are related to each other, the focus and scope of the area and the constraints limiting the extent of analysis. To analyse competition efficiently, they have to combine some of the different techniques available as they all have a specific aim. However, there are limitations that managers have to take into consideration in order to provide a clear and effective work. This essay outlines and evaluates the main weaknesses when understanding the business environment. They vary by nature. They can come from the interpretation of the managers and from the models themselves. However, they are in relation to each other, one flaw leading to another one. When analysing competition, the starting point is to precisely define the industry the firm belongs to and its boundaries. Managers may focus on the market of their company, narrowing their definition of the industry. They then forget or less consider other segments that can change quickly and have impact on the whole industry. ...read more.

Middle

Indeed, it is difficult to analyse till which point they contribute to the success of a company. Bagshaw (2000) states that "traditionally, companies have been valued according to their tangible assets, such as property and equipment. This is still important, but the intangible assets such as knowledge, brand and relationship with the customer, are coming into their own." An example of this weakness is that IBM and Merck laid importance on the advantage they could gain from their "specialised skills and capability of their personnel." (Zahra and Chaples) It is also important for a manager not only to focus on where the other firms compete but how they compete as well. This issue deals with how competitors use their skills to position themselves. This point is closely linked with the one above as when a firm has outlined and evaluated the visible and invisible functions of its rivals, it has a more precise knowledge on its competences. Zahra and Chaples (1993) underline the fact that forecasting rivals' decisions and intent is not easy, but managers have to focus on what their rivals can do with their skills. An example is Motorola and Texas Instrument which used new technology to compete on different market segments whereas their competitors thought they would not extend further than their initial market segment. ...read more.

Conclusion

Prescott and Grant (1988) in A Managers' Guide for Evaluating Competitive Analysis Technique evaluate the different techniques a manager can use along several dimensions. Their table sums up the different criteria among them the constraints cited above. Resources required for the different models vary depending on the requirements of the models and their decision criteria. It is important to evaluate them in order to avoid stagnation and obtain qualitative results. As a conclusion, analysing competition is not a simple task. If well orientated, its benefits are numerous as it enables a better understanding of the business environment; however managers have to be vigilant when doing so. Some weaknesses come from the definition of the different variables and their interpretation of the data collected. If they fail in precisely setting some basis, it will lead to an incomplete and/or inaccurate analysis of the situation, their industry and competitors, thus leading to incorrect decisions (some of them can be disastrous for the future of the company) as well as loss of time and money. Weaknesses also come from the models. They require current and specific data which is not easily available. Despite the advantages a company gains by analysing competition, Harari (2004) states that competitive analysis must not hypnotize managers. "The successful organisation conducts brief periodic scans that include what today's competitors are doing, but the primary attention is on doing whatever it takes to lead the race. ...read more.

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