Strong or Weak Competitors

The company can focus on one of several classes of competitors. Most companies prefer to compete against weak competitors. This requires fewer resources and less time. But in the process, the firm may gain little. You could argue that the firm also should compete with strong competitors in order to sharpen its abilities. Moreover, even strong competitors have some weaknesses, and succeeding against them often provides greater returns.

A useful tool for assessing competitor strengths and weaknesses is customer value analysis. The aim of customer value analysis is to determine the benefits that target customers value and how customers rate the relative value of various competitors' offers. In conducting a customer value analysis, the company first identifies the major attributes that customers value and the importance customers place on these attributes. Next, it assesses the company's and competitors' performance on the valued attributes.

The key to gaining competitive advantage is to take each customer segment and examine how the company's offer compares to that of its major competitors. As shown in

Figure 18.2, the company wants to find the "strategic sweet spot"—the place where it meets customers' needs in a way that rivals can't. If the company's offer delivers greater value by exceeding the competitor's offer on important attributes, the company can charge a higher price and earn higher profits, or it can charge the same price and gain more market share. But if the company is seen as performing at a lower level than its major competitor on some important attributes, it must invest in strengthening those attributes or finding other important attributes where it can build a lead on the competitor.

# FIGURE I 18.2 Strategic Sweet Spot versus Competitors

Source: Adapted from David J. Collins and Michael G. Rukstad, "Can You Say What Your Strategy Is?" Harvard Business Review, April 2008, p. 89. Copyright © 2008 by the President and Fellows of Harvard College; all rights reserved.

Competitive environment

Competitors'

offerings

Customers'

needs

Company's capabilities

When selecting competitors, the company wants to find the "sweet spot" where it meets customers' needs in a way that rivals can't.

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