April 24, 2019 – 0 Kommentare

Meetup 8: Competitive Analysis – Understand your position in the market

Events

Length: one hour 
Frequency: once a month

Taking place in person or via Skype, this series of events teaches you everything you need to know about start-up tools and methodologies from idea to pitch. Each session consists of a presentation on a specific start-up topic in theory, followed by a guest speaker providing you some practical business insights.  Wrapping up each event there is time for some questions from the audience as well as a chance to network.

Competitive analysis: Understand your position in the market

Understand what makes your business so unique

A healthy competitive landscape drives businesses to make customers happy, provide high quality products and challenge the status quo.  Monopolies, on the other hand, have been shown to provide lower quality goods at higher price levels. That’s why a certain level of competition is valuable – we need it to keep markets sustainable.

“I have been up against tough competition all my life. I wouldn’t know how to get along without it.”

  • Walt Disney

However from a company’s perspective, competition can seem like something you would prefer not to have. But burying your head in the sand won’t help: Whether you like it or not, your competitors are out there. Acknowledging this fact and using it to your advantage will help your organization to stay ahead of the game. By identifying your firm’s strengths and weaknesses in relation to those of your competitors, you can proactively shape the market. Sounds better than lagging behind and imitating the trends set by others, right?

Whether you’re a recently incubated startup or a giant corporate flagship, you need to understand and analyze the competitive landscape of your market to position yourself effectively. All too many companies underestimate the potential of a well executed competitive analysis. But how to go about it? One thing you can do is consider whether your business follows a blue or red ocean strategy.

Red and blue ocean strategies

Red and blue oceans are metaphors for the level of competition in a certain market. A red ocean represents a highly competitive situation in which lots of companies battle for market share. Ultimately this saturated market or, metaphorically speaking, ‘ocean’ turns red with blood as companies fight to win customers. Companies following a red ocean strategy aim to increase their market share either through  a differentiation strategy or a cost leadership strategy. One goal of the red ocean approach lies in converting your competitors’ customers into your customers.

In contrast, blue oceans are the result of untouched, unexplored markets with high potential. In blue oceans there are little to no competitors and those competitors that do exist are often irrelevant. Needless to say, new markets provide larger profit potentials.

So you want to swim in a blue ocean? Well, good news! Blue ocean markets are created by companies themselves. All you have to do is offer a product for which there has previously been no demand. Sounds easy, right? But let’s take a closer look at how the strategy leads to you success. Companies pursuing a blue ocean strategy focus on differentiating their products and lowering costs. The blue ocean strategy moves away from the idea of competing for the biggest slice of pie. Instead, its aim is to open up new possibilities by creating a new and larger pie for all. Remember, the fact that your product lacks competition means that you can make it any price you want! In this way, the blue ocean strategy helps companies to automatically dominate markets and profit from significant growth.

So two key take-aways to remember are:

  • Classic markets can be considered red oceans: competition drives innovation and low prices.
  • Not-yet existing markets fulfilling unprecedented needs enjoy unlimited price setting and can be considered blue oceans

Source: https://everast.net/insights/blue-ocean-strategy/

Now what? In order to benefit from the strategy you’ll first need to decide whether a blue ocean is for you or not. This mainly depends on your ability to bring not only innovation but also revolution to the market. So let’s start by assessing your portfolio in order to define your strategy.

Improve your portfolio

In the jungle of business strategies you’ll need to know whether the blue ocean strategy fits your portfolio. That’s where the ERRC grid comes in. It challenges you to redefine your offer by showing you where to cut costs and improve your product.  ERRC stands for…

EliminateWhich factors that the industry has competed on can be eliminated?RaiseWhich factors can be raised above the industry standard?
ReduceWhich factors can be reduced below industry standard levels?
CreateWhich factors can be created that the industry has never offered?

Source: https://www.blueoceanstrategy.com/tools/errc-grid/

Determine your product’s potential

Another tool you can use to challenge your current and future portfolio is to plot your offers on the Pioneer-Migrator-Settler Map. This will help you to find your corporate strategy by evaluating the potential of your portfolio. “Pioneers” refers to innovative products that offer significant growth potential, meaning they are well on their way to opening up a blue ocean. “Migrators” are located between red and blue oceans and refer to products that are better than most in the market and “settlers” are products that merely imitate innovative products and remain stuck in a red ocean.

Take a look here for more details on how to plot your Pioneer-Migrator-Settler Map.

You’d best make sure that your portfolio doesn’t solely consist of migrators as you will only attain average growth. And if settlers dominate your portfolio, you can only expect to achieve minor growth – you should think about raising your investment in innovations

As a strategist, remember to keep challenging your direction and explore potentials. The following questions will help you:

  • In which alternative industries can you offer your products?
  • Are there strategic groups in the industry?
  • Which new buyer groups are possible?
  • Which complementary products and services can be considered?
  • Which functional or emotional buying motives are relevant?
  • Do sustainable trends exist?

As you now know, blue oceans are all about creating markets and meeting unprecedented customer needs. Without even realizing it, all of us have probably already made a blue ocean purchase by having developed new market-driven needs. Basically, a blue ocean is created every time an innovation pops up that adds to existing markets but does not substitute needs. There are some great examples of blue ocean strategy implementation out there. Here are two of them:   

Example: Apple   

We all know that Apple tends to do things differently. Even their slogan ‘Think different’ embodies this ethic. One of Apple’s many bold moves was to launch iTunes in 2003. Back then there were no alternatives to legally purchase music online. CDs, vinyls or illegal downloads were the only way to listen to artists. By launching iTunes, Apple created a new market via a channel that had never been used for this purpose before. And look where this has led us to: CDs have practically vanished from the market and music is predominantly consumed digitally.

Apple not only thought differently about digital music. They were the first to use on-screen keyboards instead of keys thereby improving user navigation and experience on mobile devices – a strong selling point for everyone. Their smart devices enabled us to go from carrying an MP3-player, a cell phone, a map and much more to fitting all of this into one single device. Apple was courageous enough to make leaps and bounds in technology whilst keeping this progress relevant to customers.

Example: Nintendo Wii

Nintendo used to face strong competitors like PlayStation and X-Box. A red ocean of entertainment electronics kept its competitors busy finding ways to survive. Then Nintendo found a way to bring unprecedented technology to the existing market and create a unique added value for customers: The Nintendo Wii allowed users to play in groups and guided them through workout exercises. The brand new console overcame barriers and opened up new possibilities for gamers. It revolutionized the gaming experience and brought it to a new and more engaging level.

Through the blue ocean strategy they managed to cut costs and pursue product differentiation. They removed technological parts of the device that their competitors had considered essential. At the same time they added unique, valuable features to their product, such as the wireless remote control. In this way they were able to open up a previously untouched market, surpass competition, and even win new target groups that had not considered buying a Nintendo before.

Are blue oceans the Holy Grail?

Let’s be frank – the blue ocean strategy can represent huge potential for your company but it’s not for everyone. If you profit from economies of scale and your product faces very similar or even higher quality competitors you might be better off remaining in a red ocean. As we saw in the cases of Nintendo and Apple, it takes large investments, a revolutionary spirit and courage to dive into  the blue ocean. Happy swimming, good luck!

Read more:

Blog of the strategy’s creators and economy professors Kim and Mauborgne

Business Strategy Hub

Innovation consultancy Decidedly

Find out more about our latest and upcoming meetups following us on Yammer #startuplab.

If you are interested in receiving further information and want to experience the techniques during a workshop, please contact:


Elisa Schneider
Elisa.Schneider@dpdhl.com 

​Tilo Hergarten
Tilo.Hergarten@dpdhl.com