Competition and competitiveness are terms that are frequently used both in business and in public discussions about economic entities, their environment, and their performance in accordance with the strategic or political goals derived from business, economic or social goals.
But despite the fact that, as Krugman states, “…people who use the term “competitiveness” do so without thinking”, the meaning of the terms remains vague, the exact meaning depends on the problem at hand.
Competition is one of the most inevitable forces in today’s business world. No matter what the company, large or small, it has competitors in the industry, and the strategies of those competitors influence the process of formulating strategic plans. Competition is an accepted feature of corporate life for for-profit organizations.
Analysis of the organization’s competitors helps to uncover its weaknesses as well as to identify opportunities and threats in the industrial environment. When creating a strategy for the organization, managers must take into account the strategies of the organization’s competitors. Competitive analysis guides an organization’s strategy and affects how companies act or react in their industries. The organization conducts competitive analysis to measure its position among its competitors.
The competitive analysis aims to provide a deep understanding of the competitive forces found in a given organization’s competitive environment. You will seek to understand an organization’s industry, its competitive position in it, the requirements for survival and prosperity, the nature of competition, and the market process.
The analysis also provides a forum for management to discuss and evaluate their assumptions about the company’s capabilities, market position, and competitors. Additionally, it helps them in choosing viable strategies that will strengthen the organization’s position in the market. Therefore, the competitive analysis serves as the basis for the strategy formulation process.
Competitive analysis is part of the larger strategic analysis process. Strategic analysis is an examination of an organization’s external and internal environment. The organization must consider industry and competitive conditions when formulating strategy and determine its own competitive capabilities, resources, internal strengths, weaknesses, and market position.
Competitive analysis deals specifically with an organization’s external environment.The analysis of the competition is the management tool, which is used in strategic administration in an assessment of strengths and weaknesses of current and potential competitors.
As a result, traditional perimeter scanning exposes many organizations to the risk of dangerous competitive blindspots due to a lack of robust competitor analysis. Ghoshal and Westney stated that competitive analysis is a system for discussing the environment and the entire industry, focusing on both the external and internal atmosphere. Gathering and analyzing competitive intelligence is very important to determine the business position and make decisions. When examining a competitor, the analysis must delve beneath the surface of a company’s end products to uncover the hidden.
External manifestations can change in a competitive environment, the root system nourishing the organizational competencies of the company, thus influencing its strategic intent and its ability to survive, compete and thrive.
By focusing on the root system as the basis of ‘s competitiveness, one can infer a company’s future direction with greater certainty than just looking at the level of the fruit. Even when a company penetrates new markets, it is usually about using a tangible advantage through existing, acquired, or newly developed competencies. This observation is not surprising since the leaves and fruits of a tree are produced by absorbing the richness of the root system.