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online databases and websites, it is possible to collect information
about self-promotions, annual reports, press releases, and the like. In
addition, information from former employees, the sales force, invest-
ment analysts, suppliers, and mutual clients is extremely useful and
serves to broaden the picture.
Based on the senior managers' understanding of the business, it is
feasible to be able to deduce the competitor's motivation. Motivation
can often be deduced by observing the way the competitor measures
itself. Annual reports are good sources for this information. For
example, a competitor that wants to reap the benefits of investment
in a particular industry will most likely measure success in terms of
return on investment.
Step 5.
Total picture
: By reviewing information on the competitor's
strengths and weaknesses, relative cost structure, goals, and strate-
gies, the total picture of the firm can be created.
Using this information, the group should be able to use individual
insights into the process of running a business in a similar indus-
try to determine the competitor's next likely moves. For example,
analysis shows that a competitor is stronger in direct sales, has a
cost advantage in labor, and is focused on growing from a regional
to a national firm. The group would draw the conclusion that the
competitor will attempt to assemble a direct sales effort nationwide,
while positioning itself on the basis of low price.
Combustion Engineering also devised an approach to dealing
with the situation in which an outsider enters the marketplace. In
this case, the strategy outlined here obviously would not work.
Using the same group of people gathered to analyze competitor
strategy, this exercise requests that the group look at the market as
an objective third party would. The task is to design a fictitious com-
pany that would be able to successfully penetrate the market. Then
compare this fictitious company with the competitor firms in the
industry to see if any of the traditional competitors can easily adopt
this approach.
When Combustion Engineering's phantom analysis uncovers a
strategy that traditional competitors might easily adopt, they adopt
this strategy as a preemptive move. When this same analysis reveals
that an outsider could penetrate the industry by following this strat-
egy, Combustion Engineering attempts to create additional barriers
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