Competitor analysis refers to a strategic planning endeavor carried out with the aim of identifying the strengths and weaknesses of a rival company and/or products and services. After identification of the strengths and weaknesses of a rival, the information can then be employed to conjure with effective strategies of competing favorably. Another aim of conducting competitor analysis is to get unanimous agreement from stakeholders to go on with the development of products or services.
Being of competitors’ weaknesses and strengths has the advantage of enabling a company to have an understanding of historical, current and future trends. Such information is vital for the purpose of developing key measures, which can enable the company gain competitive advantage over rivals. Another major advantage of competitor analysis is that enables a business to forecast returns that can be made from the implementation of particular strategies.
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Competitor analysis can be carried out in the following three main steps
1. Planning and Obtaining Information
This is the first step in conducting competitor analysis, and it involves the identification of whose ones competitors are. Since UCCA’s store will be online, the best way to obtain such information is by conducting a web search using popular search engines, such as Taobao, Baidu and Sogou. Another way of obtaining the information is through online journals, especially those about online businesses. After the competitors have been established, the next activity is to obtain information on the kind of products they sell. In this case, these products will include books, artworks, and merchandise such as toys, T-shirts among others.
Other than getting product information from respective websites, it can also be obtained through a web search. Key words (of products) should be searched in at least five websites. Greater emphasis should be placed on those online stores that appear consistently in different search engines. Lastly, information about customer satisfaction can be obtained from customer reviews; which may be on the store’s website or on independent sites. Generally, competitor information that UCCA should try to obtain include: sales and profits, customer satisfaction levels, distribution strategies and costs, number and types of customers, advertising strategies and future plans. Possible sources of competitor information include annual reports, price lists, adverts, and ex-employees.
Relevant information obtained from the search engines should then be categorized in order of relevance; such as price and level of customer satisfaction. After categorization of the information, the type of threat posed should then be identified. Such information should include the competitors’ selling point and their weaknesses. The other kind of information to be analyzed includes the objectives and strategies of competitors. This is especially useful in determining how they respond to various setbacks in the environment of online trading. The management or policy makers should deliberate on appropriate means of outdoing the competitors’ advantages.
For instance, information on how online shopping site Taobao, which boosts of about 91 percent of user penetration rate (China Internet Network Information Center, 11), manages to have such a huge market share can be sought and then implemented in UCCA. For example, one suggestion could be for UCCA to sell its good or services at a price lower price than that of its competitors if feasible.
Information regarding weaknesses should be used as a basis of coming up with ideas to capitalize on them. Information on why some online shopping stores have low user penetration rates, such as Joyo, can be used to strategize on how to avoid such pitfalls. For instance, one weakness can be the delivery of substandard products. The UCCA can capitalize on this by ensuring its products come from reputable and certified sources.
3. Implementation and Evaluation
This is the last step in competitor analysis involves putting in place goals formulated at the analysis stage. Before the goals are operationalized, it is of utmost importance that not just the positive but also the negative effects should be considered. To gauge the effectiveness of the strategies, feedback should be collected from customers. This can be done by either requesting them to complete simple questionnaires or conducting face to face interviews where possible. The feedback should be used to make improvements or eliminate those strategies that are not achieving the desired outcomes.
SWOT refers to a business analysis strategy which draws its name from the four steps it entails, these are; Strengths, Weaknesses, Opportunities, and Threats. This strategy is useful in determining a particular business model that best suits an organization in regard to its capabilities and operating environment. The main objective of using SWOT analysis is to help identify and maximize upon a business’s strengths while at the same time eliminating or minimizing threats. Each of the steps is addressed as follows:
This refers to those qualities that make a business enjoy continued success and maintain dominance over rivals. In the case of UCCA online store, being the leading brand in 798 district gives it an edge over competitors. To maintain this advantage, the management should work hard to improve on weaknesses. Another factor, which makes UCCA a leading brand, is possession of a wide range of diverse merchandise. This can be maintained by scouting for new and better brands of Chinese artwork. Securing famous contemporary artists has helped UCCA online store stay ahead of its competitors. This can also be maintained by continuously searching for emerging exceptional artists and securing their services. Other advantages include exclusive merchandise and diverse product range.
UCCA’s weaknesses include exclusivity of products, lack of online shopping and giving clients less value added services to clients in comparison with competitors. Exclusivity can be remedied by sourcing for a more varied collection of products. UCCA should also include some value-adding services, such as awarding loyal shoppers with gift vouchers or applying security tags to some products before shipping. UCCA can also gain on competitive advantage if it introduces online shopping. This is because online shopping is gaining popularity, where 85 percent of the world’s internet users made online purchases as by 2008. Therefore, this underlines UCCA’s need to adopt online shopping, China being the leader in online shopping.
Opportunities in online marketing present themselves in various forms. One of the factors in the Chinese market that can be considered as an opportunity for online retail is the increase in the number of individuals accessing the Internet (including those doing so from mobile phones). The expected increase of middle class individuals from 200 million to 800 million people over the next 20 years also provides a good business opportunity for online stores (Idvik). Another factor that can be considered as an opportunity is the improvement of shipping prices and reliability, more especially in the urban coastal cities. The increased demand for particular goods can also be viewed as an opportunity that can be exploited. For instance, results obtained from the research carried out by China Internet Network Information Center show that 70.1 percent of online shoppers in China purchased clothing and shoes (11). This, therefore, means that UCCA should stock more T-shirts because they are more likely to sell more than other artwork products.
Threats are those factors in the environment that jeopardize a business’s ability to make profits. Unlike weaknesses, threats are beyond the control of the business. However, strategies to minimize the likelihood of some threats can be developed. Online marketing’s major threats include intense competition, information security risk, fake goods, credit card fraud, and inadequate shipping infrastructure to Tier 3 & 4 cities.