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Understanding Competitive Blind Spots

Faculty Contributor: Seema Gupta, Assistant Professor
Student Contributors: Arvind Kumar Choudhary and Akanksha Singh

To gain a competitive advantage by formulating effective strategy, competitive analysis is mandatory for any organisation. Competitive analysis helps a firm in identifying its competitors, their strategic moves, the segments that they are targeting, technologies and future radical moves. There should be a dedicated team in the organisation to perform the competitive analysis. Moreover, this team should be creative and have the capability to come up with new perspectives. It should be able to identify new opportunities by evaluating the industry trends. Effective competitive analysis requires adequate staff, adequate fund allocation and clear mission. Even after having all these resources, sometimes such analysis leads to flawed insights, which in turn lead to ineffective strategies. Competitive Blind Spots are nothing but these unidentified, undetected mistakes or flaws in competitive analysis.

Competitive blind spots are the "areas where a competitor will either not see the significance of events at all, will perceive them incorrectly, or will perceive them very slowly."ⁱ They may result in a firm’s slow response to its competitors’ actions or a firm’s possible wrong strategic decisions. They may also result in the underestimation of competitors’ capabilities and resources. These competitive blind spots lead to a firm having flawed competitive-analysis thereby weakening its ability to seize the new opportunities in the market or interact effectively with its competitors. Ultimately, it leaves a firm with eroding market share, decreasing market position and decreasing profitability.ⁱⁱ The first section of the article explains the competitive blind spots with the help of a simplified framework and then details the reasons and consequences of each blind spot. The article ends with the conclusion of the study.

Competitive Blind Spots: A Simplified Framework

There are four main aspects of competitive-analysis while analysing the Competitive Blind Spots: Industry, Customers, Competitors and Organisation. (Please refer to Exhibit 1).

Misjudging industry boundaries & trends, misjudging customers’ changing needs, poor identification of the competitors & their strategies and weak organisational structure & culture are the broad reasons that lead to competitive blind spots in the competitive analysis of a firm. (Please refer to Exhibit 2 for the detailed list of competitive blind spots within each of these four aspects). Following sections describe all of these aspects in detail.

Industry

It includes misjudging industry domains, trends, boundaries and failure to identify critical technologies. A detailed description is given below:

Misjudging Industry Domains & Trends

Industry domain signifies the starting and the ending point of the industry definition. The industry definition may change over a period due to product expansions, geographical expansions, line extensions and other evolutionary changes that industries undergo. Hence, the definition of the competition and industry boundaries should change with the trends in industry thus adjusting the managerial perception and organisation’s view to reflect the present state of the industry. Misjudging industry domains and trends can lead a firm to have devastating flaws in its competitive analysis. It may happen because of the managers’ flawed perceptions about the environment and failure to streamline a firm’s view along with the present state of the industry.

Failure to Identify Critical Technologies

Failure to identify critical technologies implies incomplete consideration of alternate and emerging technologies employed in production and distribution (marketing and administrative) of the product or service. With this failure, executives consider only those companies as competitors who use similar technologies to offer a product that meets the needs of their target market. A firm may end up misjudging its industry boundaries if it fails to identify and cope up with the changing technologies resulting in radical changes in the industry.

Customers

It includes failure to identify customer’s changing needs, buying behaviour, purchasing patterns and failure to identify target segments. The following section describes these competitive blind spots.

Failure to Identify Changing Customer-Needs & Buying-Behaviours

Customers’ needs and preferences change over time. Firms sometimes fail to identify the changing needs of the customers, their buying behaviours and their purchasing patterns within a particular segment and across various segments. These firms stick only to those customers, which they had identified as their potential customers initially. This leads to blind spots in their competitive analysis.

Misjudging Customer Groups or Target Segments

By misjudging target segments, executives consider the customer-groups of interest to their company, thus focusing the analysis on a smaller set of viable competitors who define their target market(s) in the similar way. This leads to ignoring the segments, which can become potential target segments with the passage of time.

Competitors

It includes failure to identify potential competitors, their strategies, their culture and their organisational structure. The following section describes them in further detail.

Failure to Identify Potential Competitors

Sometimes firms exclusively focus only on well-known companies and as a result, they ignore other potentially significant competitors. The firms typically focus on the existing resources of the presently viable competitors. This leads to erosion of the competitive position of a firm in the target market. It also results in the firms ignoring foreign competitors and other potential competitors. In this era of industrial-globalization, it is extremely difficult to identify potential and relevant competitors and analyze their strategic moves. Another serious flaw in the competitive analysis occurs when firms over-emphasise on the identification of regional competitors instead of keeping a national or international focus. Hence, sometimes some firms believe that they have no competitors because of their exclusive focus on the regional market. This may happen if the strategists or the executives overlook the changing competitive environment.

Failure to Analyze Competitors’ Organisational Structure & Culture

Occasionally firms do not pay much attention to their competitors' hidden-aspects e.g. organisational structure and culture. This results in an incomplete analysis of their strengths and weaknesses. Although the data about competitors’ visible functions is readily available in the industry, usually it is quite difficult to gather data about competitors' invisible functions. It may be one of the reasons for this blind spot.

Failure to Analyze Competitors’ Strategies in Economic Downturns

It is very important to take strategically correct moves at the time of economic slow-downs. Firms should also keep an eye on the actions of their competitors in the same situation. Competitors may expand or diversify their operations, some companies may enter into the firm’s target segment, they may come up with innovative market strategies or they may undertake various strategic mergers and acquisitions because of the slowdown. Failure to analyse these radical moves of the competitors may result in decreased market share, decreased profitability and overall a flawed competitive analysis.

Failure to Analyze Competitors’ Strategic Intent

Firms sometimes fail to analyse their competitors’ strategic intent. Although, it is quite difficult to predict the future moves of the competitors but firms should analyse the possible moves or actions of their competitors. Competitive analysis should not focus just on the possible extensions of competitors’ present actions; rather it should focus on all possible radical moves and potentially revolutionary changes in competitors’ strategies. Some firms also fail to identify the advertising strategy, branding strategy and pricing strategy of the competitors, which are very important from the point of view of the competitive analysis. Firms that do not consider these issues in their competitive analysis may end up having potential competitive blind spots.

Organisation

It includes poor managerial cognition, organisational culture, structure and branding. They are further impounded upon in this section.

Poor Managerial Cognition

Poor managerial cognition is the result of managers’ poor thinking patterns and perceptions. It may result in the incorrect definition of the industry, its boundaries, its target segments and its competitors, hence leading to faulty competitive analysis. Sometimes managers focus only on those competitors whose goals, mission, vision and resources are same as their own organisation thereby ignoring the potentially viable competitors.

Poor Organisation Culture

A firm’s strategy is also affected by the culture of the organisation. If the firm is shareholder oriented then its strategies and actions will always be for the benefit of the shareholders. Hence, its strategies will be sounder than the firm whose strategy is influenced by its founders and other board members. Hence, poor organisational culture may also result in potential competitive blind spots in a firm’s competitive analysis.

Poor Organisation Structure

If most of the competitive analysis units of an organisation are not at their proper place within its formal structure and if the competitive analysis team is not fully skilled, then it may result in the competitive analysis receiving no support from the organisation, lack of resources and flawed strategies. Thus, poor organisational structure may leave potential competitive blind spots in a firm’s competitive analysis.

Poor Brand Positioning

It includes the brand-misconception and poor branding of co-products. Sometimes it happens that a firm changes the brand name of its products frequently or used different names for the same kind of products at the same time. It leads to confusion among its customers’ minds, also known as brand misconception. On the other hand, a firm may not properly sub-brand its co-products along with the main product. It may result in lesser brand recognition of these co-products. At the same time, competitors may benefit a lot if they have proper branding strategy as compared to a firm not having a good branding strategy. Ignoring this fact in the competitive analysis may result in serious competitive blind spots.

Failure to Capitalize Own Strengths

Failure to capitalize on firm’s strength occurs when firms are not aware of their own strengths or when they do not know how to capitalize on these strengths. This failure gives competitive advantage to other competitors. Potential competitors who operate in same target market and same technology will leverage their strengths and will have a stronger position if the firm fails to leverage its own strengths. This may be due to a firm’s poor pricing strategy, poor expansion strategy and less attention to its adjacent or complementary businesses.

Conclusion

Analyzing competitors and their strategic moves, is one of the cornerstones that is critical for effective strategic decision-making. When companies fail to analyze these radical moves of the competitors, it leads to potential Competitive Blind Spots. Due to the presence of these blind spots, executives fail to identify their competitors and predict their actions in future. Blind spots in competitive analysis occur when executives are not able to define the industry boundaries, evolving target segment and changing buying behaviour within the target segment, poor identification of competitor’s and their strategies and weak organisational structure and culture.

To remove these competitive blind spots, executives are required to have a formal unit for competitive analysis, which focuses on competitor’s strategic intent, studies competitor’s response patterns, analyse the industry from the point of view of a new entrant and creates awareness about competition to employees. The competitive analysis should be integrated into the organisation’s culture and the decision making of the firm. With effective competitive analysis and following the given recommendations, companies will be able to track their competitors, competitors’ strategic moves and change the perception of their management. All these put together will result in harnessing new opportunities and designing of a new sustainable strategy to gain a sustainable competitive advantage.

Keywords

Marketing, Competitive Strategy, Competition Analysis, Competitive Blind Spots

Contributors

Seema Gupta is an Assistant Professor in the Marketing Area at IIM Bangalore. She holds a Ph. D. from Mohanlal Sukhadia University, Udaipur, India. She can be reached at seemag@iimb.ernet.in.

Arvind Kumar Choudhary (PGP 2009-11) holds a B. E. in Computer Science & Engineering from Jabalpur Engineering College, Jabalpur and can be reached at arvind.choudhary09@iimb.ernet.in.

Akanksha Singh (PGP 2009-11) holds a B. Tech. in Electronics & Telecommunication Engineering from Maulana Ajad National Institute of Technology, Bhopal and can be reached at akanksha.singh09@iimb.ernet.in.

References

1. Michael E. Porter, ‘Competitive Strategy: Techniques for Analyzing Industries and Competitors’, New York: Free Press, 1998
2. Shaker A. Zahra and Sherry S. Chaples, “Blind Spots in Competitive Analysis”, Academy of Management Executive, 1993, Vol. 7 No. 2