AA_Arland
02-06-2008, 10:55 AM
CRITICISMS OF COMPETITIVE ANALYSIS
While the practice of competitive analysis is generally recognized as an important component of longterm business success, some voices do offer cautions about flawed competitive analysis practices. They note that competitive analyses that are incomplete or based on incorrect data can lead businesses to construct faulty business strategies. Analysts have also pointed out that traditional competitive analysis has become more complex and potentially time-consuming, since so many businesses offer diversified products and services. Still others contend that excessive preoccupation with keeping pace with the strategies, products, and services of other competitors can result in atrophy in internal originality of production and design.
Other observers, meanwhile, argue that judging your company's performance strictly on the basis of how you are performing against chief competitors can retard your business's profitability and lead to a false sense of security. "As long as we appear to be doing better than someone else, we can feel that we must be doing well, so we don't need to change," wrote James R. Lucas in Fatal Illusions. "These illusions can begin when we compare ourselves with our own past performance …or with the performance of other organizations. The companies we're comparing ourselves to may all be performing at lower levels than the market requires. They may all be doing it wrong. Since every organization is unique, another company's solutions may not apply to us…. If we've grown at an annual rate of 15 percent compared with an industry average of 5 percent, we may be wildly successful—unless a new competitor from an unexpected direction or unrelated industry finds a way to deliver our service at 60 percent of our cost."
Finally, some experts contend that preoccupation with competitive analysis too often leads companies to spend too little time looking ahead. "Effective strategy formulation and implementation relies on concepts like uniqueness, differentiation and standing out in a very, very crowded marketplace. Ineffective strategy formulation and implementation relies on concepts like imitation, caution and blending in with the rest of the pack. Competitive analysis does a great job in fostering the latter," wrote Oren Harari in Management Review. "I have no problems in performing a quick, occasional scan of what today's competitors are doing. That is just plain prudent management…. The problem is that executives can easily wind up sinking big resources and becoming hypnotized into tracking the movements of today's solutions for yesterday's customers." Harari contended that "traditional competitor analysis is often shortsighted in depth, range, and possibility….If you'res pending a lot of valuable time tracking your competitors' movements, you're not only running in circles, but you're probably paying too much attention to the wrong guys. It's the folks that you can't track—the ones that don't exist yet either as competitors, or even as companies—who are your real problems. That's because they're not worrying about tracking you.
http://www.referenceforbusiness.com/small/Bo-Co/Competitive-Analysis.html
While the practice of competitive analysis is generally recognized as an important component of longterm business success, some voices do offer cautions about flawed competitive analysis practices. They note that competitive analyses that are incomplete or based on incorrect data can lead businesses to construct faulty business strategies. Analysts have also pointed out that traditional competitive analysis has become more complex and potentially time-consuming, since so many businesses offer diversified products and services. Still others contend that excessive preoccupation with keeping pace with the strategies, products, and services of other competitors can result in atrophy in internal originality of production and design.
Other observers, meanwhile, argue that judging your company's performance strictly on the basis of how you are performing against chief competitors can retard your business's profitability and lead to a false sense of security. "As long as we appear to be doing better than someone else, we can feel that we must be doing well, so we don't need to change," wrote James R. Lucas in Fatal Illusions. "These illusions can begin when we compare ourselves with our own past performance …or with the performance of other organizations. The companies we're comparing ourselves to may all be performing at lower levels than the market requires. They may all be doing it wrong. Since every organization is unique, another company's solutions may not apply to us…. If we've grown at an annual rate of 15 percent compared with an industry average of 5 percent, we may be wildly successful—unless a new competitor from an unexpected direction or unrelated industry finds a way to deliver our service at 60 percent of our cost."
Finally, some experts contend that preoccupation with competitive analysis too often leads companies to spend too little time looking ahead. "Effective strategy formulation and implementation relies on concepts like uniqueness, differentiation and standing out in a very, very crowded marketplace. Ineffective strategy formulation and implementation relies on concepts like imitation, caution and blending in with the rest of the pack. Competitive analysis does a great job in fostering the latter," wrote Oren Harari in Management Review. "I have no problems in performing a quick, occasional scan of what today's competitors are doing. That is just plain prudent management…. The problem is that executives can easily wind up sinking big resources and becoming hypnotized into tracking the movements of today's solutions for yesterday's customers." Harari contended that "traditional competitor analysis is often shortsighted in depth, range, and possibility….If you'res pending a lot of valuable time tracking your competitors' movements, you're not only running in circles, but you're probably paying too much attention to the wrong guys. It's the folks that you can't track—the ones that don't exist yet either as competitors, or even as companies—who are your real problems. That's because they're not worrying about tracking you.
http://www.referenceforbusiness.com/small/Bo-Co/Competitive-Analysis.html