How to Analyze the Competitive Activity of your Company

What is a competitive analysis for a company?

It is a study that is based on what the competitive dynamics of a company represent in relation to its competitors.

In the theory of organizations, we often study two main currents which are classical analysis (which is based on the life cycle of activities) and industrial analysis which is born from the observation of the limits of this classical analysis. ;

This second form of study takes even more account of the notion of industrial economy and deserves our attention here to understand the functioning of a company .

Activity analysis of a given organization

The company’s sector of activity has, by itself, a more or less evolved life cycle and with a more or less strong concentration; To study this, we use two variables, winds and weather:

The four phases of a product’s life cycle

Competition has the property of changing along this life cycle. So, and although there are exceptions, the classical theory of competitive analysis tells us that:

The launch phase

begins with mass production with rapid growth. However, only a few companies offer the products with a premium price to leading consumers. The profits made are also limited due to the initial investments.

The growth phase

is considered expansive. If the product no longer has its new character, all consumers are affected by it and, in fact, there are more competitors. Risk-taking here is most often covered by the company’s sales, although market shares are changing sharply.

The maturity phase

is also special since consumers have all been affected, the level of growth is maintained in very strong competition and lower prices. The company’s profitability begins to decline.

The decline phase

is finally characterized by the fact that consumers are tired, that other products are emerging. Prices are driven by the low and the growth rate is falling; Profitability is low.

How is a competition structured?

In a situation of pure and perfect competition, it is necessary to observe the relationship between the suppliers and the applicants. Thereby :

We speak in the classical theory of atomicity of supply and demand when a multitude of suppliers and buyers exist, making it impossible for one of the actors to influence the market.

The fluidity of the market is the fact that there are no restrictions on entry into the market and makes competition non-fixed (this is not the case of the telephone sector in France for example).

Market transparency is identified as the fact that all players benefit from perfect information and conditions (one thinks in particular of prices).

The homogeneity of the product is the fact that all the products exchanged on the market are identical; Only the price matters.

The mobility of factors of production means that they can move so that each company can benefit from the same conditions of production.