The competitive position analysis is a tool used in the Design School of strategy. What exactly is competitive position analysis and how does it help a firm? We will look into the different aspects of this tool and answer these questions.
Strategy as a position
The Design School of strategy proposes specific positions to stay competitive. The word positioning was first used by Trout in his 1969’s paper. When we talk about a competitive position, we are mainly talking about the perception of our firm, brand, or product. There are different aspects of a competitive position. We shall look at these, one by one:
Firstly, we analyze how our products and our firm are perceived in the eyes of our customers. What are the unique features of our products and what makes our company different from others? We also look at different ways in which we could learn from the market.
Secondly, we also find out the strengths and weaknesses. You can do this by SWOT analysis. On the other hand, we assess specific products, services, or projects.
Finally, we can also look at The forces that shape our firm’s competitive landscape. We can do this through the porter’s 5 forces analysis.
The benefits of competitive position analysis
- It helps us make better decisions regarding the strategy of the firm.
- We can uncover strategically advantages positions.
- It also helps us uncover disadvantages that we may have.
- We learn about the perception of our product and our firm.
- Overall, it increases the profitability of the firm.
How to do CPA?
We can divide CPA into four different stages:
- Project definition
- Internal analysis.
- External analysis
- Strategy development.
Project definition
The first step in defining the project is to understand what we’re trying to achieve. It could be a new idea, a new project, a new business unit, or anything else. Also, an existing business can be improved further.
Internal analysis
Internal analysis is about finding the issues that needs to be solved. Some of the common issues in strategy are:
- Firm performance.
- Profitability
- Revenue
- New product development
External analysis
Topics that are covered under external analysis are related to the rivals as well as the business environment. These factors are generally out of the control of the firm. However, a firm can develop a strategy. Firms use it to counteract the changes in the external environment.
Strategy Development
There are various ways to develop a firm’s strategy. Some of the common strategic tools are the Ansoff matrix, Porter’s five forces, and the BCG matrix. A keenly developed competitive position will help the firm in meeting the goals set earlier.
Common tools of competitive position analysis:
SWOT analysis
This technique helps us identify the strengths and weaknesses that we have inside the firm. Additionally, it also helps us identify the opportunities and threats that reside outside the firm. You can read more about SWOT analysis in our detailed article.
Industry analysis
One of the most common tools of industry analysis is the porters 5 forces. Firstly, this tool is easy to use. Secondly, it helps us identify the relative position of different industries. Apart from porters 5 forces, there are also other tools. We can use them to identify the concentration in the market. For instance, we have got the Herfindahl-Hirschman index.
Ansoff Matrix
It is a revenue improvement tool developed by Igor Ansoff in 1957. Ansoff Matrix helps us develop different ways of increasing revenue. Firstly, revenue can be increased by market penetration. Secondly, we can develop new products. Thirdly, we can develop new markets. Finally, we can have diversification.
PESTLE analysis
We use PESTLE analysis to identify the risks outside the firm. There are various aspects outside the firm. Some of these are geopolitical problems, macroeconomic issues, regulations. A firm can formulate its strategic competitive position based on these aspects.