Independent Study--Competitive Strategy Chap 3 A framework for competitor analysis

It is an important part of strategic planning in concentrated industries competitor analysis. Competitor Analysis is an assessment of the strengths and weaknesses of competitors. Analyzing your competitors will not only help understand their strengths, but also prepare you for their next move. Understanding their strategies can be very helpful while developing your own strategies. The framework is based on four key aspects of a competitor: Future goals, assumptions, current strategy, and capabilities.
Future Goals--to provide clues on its status. Moreover, Risk tolerance, management incentives, backgrounds of the executives, the stated goals and objectives in the financial statements. In addition, any recent strategic changes by the competitor that may influence the competing business unit. A firm is building market share in a specific market, overall business, entering a new market or even just maintaining profitability. For example, Facebook is a social network which function is to reconnect with friends, meet new friends, and have conversation online. Now, Facebook is trying to add online chatting and maybe it will have professional referral function later.
Assumptions--understand about overall market. for example,trend in the market, products, and consumers.) If in the past the industry introduced a new type of product that failed, the industry executives may assume that there is no market for the product. Such assumptions are not always accurate and if incorrect may present opportunities. For instance, Netflex was successfully launched the online movie market and gain the market share from Blockbuster.
Current Strategy--understanding of a competitor's strategy. For example, annual reports will often indicate what the company’s current strategy is and how close the company is to fulfilling it. Similar information can also be obtained from press releases and analyst reports. It is necessary to look at the current use of capital and cash flow to determine what the actual strategic goal may be. In addition, the competitor’s current recruitment activity, any mergers and acquisitions and any marketing activity may indicate what its current strategy. For example, Southwest Airlines, which pursued a "no-frills, point-to-point service and which turned out to be a highly innovative, industry-changing and value-creating strategy. Another example is Microsoft acquisitions Skype to gain more customers.
Capabilities--give a firm an idea of how a competitor can achieve its strategy and objectives, and also give a firm a timeline for when it would expect competitors to pursue certain activities. An analysis of a competitor’s resources is much like a SWOT analysis,it can also help the organization to avoid the same mistakes that competitors had made.