Competitive Strength Assessment
Systematic assessment of a company’s competitive position is essential in the analysis of the company.
Competitive Strengths Assessment helps in assessing whether a company’s competitive position in the marketplace is strong or weak relative to close competitors.
Through Competitive Strengths Assessment, a broad-based assessment is made of a company’s competitive position and strength.
This step examines how a company matches competitors on the determinants of competitive success. The competitive strength rankings indicate which areas a company is strong or weak.
As a rule, a company’s competitive strategy should be built on its competitive strengths. A company has the best potential for an offensive attack in areas where it is strong, and competitors are weak.
Steps of Competitive Strength Assessment
- Step-1: Make a list of the industry’s key success factors and measures of competitive strengths or weaknesses.
- Step-2: Rate the firm and its competitors on each factor. Numerical scales (e.g., from 1 to 5) are widely used. However, ratings of stronger (+), weaker (-), and about equal (=) may be appropriate when assigning numerical scores coveys false precision.
- Step-3: Sum the individual strength ratings to get each competitor’s overall measure of competitive strength.
- Step-4: Draw conclusions about the size and extent of the company’s net competitive advantage or disadvantage based on the strength assessment. Also, take specific note of areas where the company’s competitive position is strongest and weakest.
The table below shows an illustration of unweighted competitive strength assessments.
|Key Success Factors/Strength Measure||XY & Co.||Rival# 1||Rival# 2||Rival# 3||Rival# 4|
|Quality/ product performance||8||5||10||1||6|
|Raw material access/cost||2||10||4||5||1|
|Relative cost position||5||10||3||1||4|
|Ability to compete on price||5||7||10||1||4|
|Unweighted overall strength rating||61||58||71||25||32|
When the key success factors or competitive strength measures are used as unweighted, it means that each key factor has been given equal importance by the company.
According to this approach, whenever a company achieves the highest rating on a factor, it implies that it has a competitive edge. The differences between the overall ratings indicate the net competitive advantage of the companies.
The example in Table XY & Co. has a score of 61. It implies that this company has a greater net competitive advantage over Rival-4 than Rival-1.
Note: The illustration is prepared based on Thompson and Strickland, p. 97. Rating scale 1= very weak; 10= very strong.
SWOT is most widely used in companies both in our country and other countries of the four techniques of company situation analysis. Therefore, a detailed discussion of SWOT analysis is devoted to it to help readers understand the relevant issues comprehensively.
We would like to conclude with a note that a company has the freedom to undertake situation analysis by using the techniques that have been discussed. However, managers should carefully examine each of the techniques to understand the concepts inherent in each technique.