Knowledge about the competition may be gained by raising the following questions. To answer each question requires systematic probing and data gathering on different aspects of competition.

    •  Who is the competition? now? five years from now?
    •  What are the strategies, objectives, and goals of each major competitor?
    •  How important is a specific market to each competitor and what is the level of  its
   commitment?
    •  What are the relative strengths and limitations of each competitor?
    •  What weaknesses make competitors vulnerable?
    •  What changes are competitors likely to make in their future strategies?
    •  So what? What will be the effects of all competitors’ strategies, on the  industry,
   the market, and our strategy?

Essentially, knowledge about competitors comprise their size, growth, and profitability, the image and positioning of their brands, objectives and commitments, strengths and weaknesses, current and past strategies, cost structure, exit barriers limiting their ability to withdraw, and organization style and culture. The following procedure may be adopted to gather competitive intelligence:

1. Recognize key competitors in market segments in which the company is active. Presumably a product will be positioned to serve one or more market segments. In each segment there may be different competitors to reckon with; an attempt should be made to recognize all important competitors in each segment. If the number of competitors is excessive, it is sufficient to limit consideration to the first three competitors. Each competitor should be briefly profiled to indicate total corporate proportion.

2. Analyze the performance record of each competitor. The performance of a competitor can be measured with reference to a number of criteria. As far as marketing is concerned, sales growth, market share, and profitability are the important measures of success. Thus, a review of each competitor’s sales growth, market share, and profitability for the past several years is desirable. In addition, any ad hoc reasons that bear upon a competitor’s performance should be noted. For example, a competitor may have lined up some business, in the nature of a windfall from Kuwait, without making any strategic moves to secure the business. Similar missteps that may limit performance should be duly pointed out. Occasionally a competitor may intentionally pad results to reflect good performance at year end. Such tactics should be noted, too. Rothschild advises the following: To make it really useful, you must probe how each participant keeps its articles and records its profits. Some companies stress earnings; others report their condition in such a way as to delay the payment of taxes; still other articlekeep to increase cash availability. These measurements are important because they may affect the company’s ability to procure financing and attract people as well as influence stockholders’ and investors’ satisfaction with current management

3. Study how satisfied each competitor appears to be with its performance. Refer to each competitor’s objective(s) for the product. If results are in concert with the expectations of the firm’s management and stakeholders, the competitor will be satisfied. A satisfied competitor is most likely to follow its current successful strategy. On the other hand, if results are at odds with management expectations, the competitor is most likely to come out with a new strategy.

4. Probe each competitor’s marketing strategy. The strategy of each competitor can be inferred from game plans (i.e., different moves in the area of product, price, promotion, and distribution) that are pursued to achieve objectives. Information on game plans is available partly from published stories on the competitor and partly from the salespeople in contact with the competitor’s customers and salespeople. To clarify the point, consider a competitor in the small appliances business who spends heavily for consumer advertising and sells products mainly through discount stores. From this brief description, it is safe to conclude that, as a matter of strategy, the competitor wants to establish the brand in the mass market through discounters. In other words, the competitor is trying to reach customers who want to buy a reputable brand at discount prices and hopes to make money by creating a large sales base.

5. Analyze current and future resources and competencies of each competitor. In order to study a competitor’s resources and competencies, first designate broad areas of concern: facilities and equipment, personnel skills, organizational capabilities, and management capabilities, for example. Each area may then be examined with reference to different functional areas (general management, finance, research and development, operations, and especially marketing). In the area of finance, the availability of a large credit line would be listed as a strength under management capabilities. Owning a warehouse and refrigerated trucks is a marketing strength listed under facilities and equipment. A checklist should be developed to specifically pinpoint those strengths that a competitor can use to pursue goals against your firm as well as other firms in the market. Simultaneously, areas in which competitors look particularly vulnerable should also be noted. The purpose here is not to get involved in a ritualistic, detailed account of each competitor but to demarcate those aspects of a competitor’s resources and competencies that may account for a substantial difference in performance.

6. Predict the future marketing strategy of each competitor. The above competitive analysis provides enough information to make predictions about future strategic directions that each competitor may pursue. Predictions, however, must be made qualitatively, using management consensus. The use of management consensus as the basic means for developing forecasts is based on the presumption that, by virtue of their experience in gauging market trends, executives should be able to make some credible predictions about each competitor’s behavior in the future. A senior member of the marketing research staff may be assigned the task of soliciting executive opinions and consolidating the information into specific predictions on the moves competitors are likely to make.

7. Assess the impact of competitive strategy on the company’s product/market. The delphi technique, examined in Article 12, can be used to specify the impact of competitive strategy. The impact should be analyzed by a senior marketing personnel, using competitive information and personal experiences on the job as a basis. Thereafter, the consensus of a larger group of executives can be obtained on the impact analysis performed previously.

Sources of Competitive Information Essentially, three sources of competitive intelligence can be distinguished: (a) what competitors say about themselves, (b) what others say about them, and (c) what employees of the firm engaged in competitive analysis have observed and learned about competitors. Information from the first two sources, is available through public documents, trade associations, government, and investors. Take, for example, information from government sources. Under the Freedom of Information Act, a great amount of information can be obtained at low cost. As far as information from its own sources is concerned, the company should develop a structured program to gather competitive information. First, a teardown program like Ford’s may be undertaken. Second, salespeople may be trained to carefully gather and provide information on the competition, using such sources as customers, distributors, dealers, and former salespeople. Third, senior marketing people should be encouraged to call on customers and speak to them indepth. These contacts should provide valuable information on competitors’ products and services. Fourth, other people in the company who happen to have some knowledge of competitors should be encouraged to channel this information to an appropriate office. Information gathering on the competition has grown dramatically in recent years. Almost all large companies designate someone specially to seek competitive intelligence. A Fortune article has identified more than 20 techniques to keep tabs on the competition. These techniques, summarized below, fall into seven groups. Virtually all of them can be legally used to gain competitive insights, although some may involve questionable ethics. A responsible company should carefully review each technique before using it to avoid practices that might be considered illegal or unethical.

1. Gathering information from recruits and employees of competing companies. Firms can collect data about their competitors through interviews with new recruits or by speaking with employees of competing companies. According to the Fortune article: When they interview students for jobs, some companies pay special attention to those who have worked for competitors, even temporarily. Job seekers are eager to impress and often have not been warned about divulging what is proprietary. They sometimes volunteer valuable information. . . . Several companies now send teams of highly trained technicians instead of personnel executives to recruit on campus. Companies send engineers to conferences and trade shows to question competitors’ technical people. Often conversations start innocently - just a few fellow technicians discussing processes and problems . . . [yet competitors’] engineers and scientists often brag about surmounting technical challenges, in the process divulging sensitive information. Companies sometimes advertise and hold interviews for jobs that don’t exist in order to entice competitors’ employees to spill the beans. . . . Often applicants have toiled in obscurity or feel that their careers have stalled. They’re dying to impress somebody. In probably the hoariest tactic in corporate intelligence gathering, companies hire key executives from competitors to find out what they know.

2. Gathering information from competitors’ customers. Some customers may give out information on competitors’ products. For example, a while back Gillette told a large Canadian account the date on which it planned to begin selling its new Good News disposable razor in the United States. The Canadian distributor promptly called Bic about Gillette’s impending product launch. Bic put on a crash program and was able to start selling its razor shortly after Gillette introduced its own.

3. Gathering information by infiltrating customers’ business operations. Companies may provide their engineers free of charge to customers. The close, cooperative relationship that engineers on loan cultivate with the customer’s staff often enables them to learn what new products competitors are pitching.

4. Gathering information from published materials and public documents. What may seem insignificant, a help wanted ad, for example, may provide information about a competitor’s intentions or planned strategies. The types of people sought in help wanted ads can indicate something about a competitor’s technological thrusts and new product development. Government agencies are another good source of information.

5. Gathering information from government agencies under the Freedom of Information Act. Some companies hire others to get this information more discreetly.

6. Gathering information by observing competitors or by analyzing physical evidence. Companies can get to know competitors better by buying their products or by examining other physical evidence. Companies increasingly buy competitors’ products and take them apart to determine costs of production and even manufacturing methods. In the absence of better information on market share and the volume of product being shipped, companies have measured the rust on the rails of railroad sidings to their competitors’ plants and have counted tractor-trailers leaving loading bays.

7. Gathering information from competitors’ garbage. Some firms actually purchase such garbage. Once it has left a competitor’s premises, refuse is legally considered abandoned property. Although some companies shred paper generated by their design labs, they often neglect to shred almost-as-revealing refuse from marketing and public relations departments.