Competitor Analysis and Accounting Model: Competitor Analysis

Abstract

This is the first part of competitor analysis and accounting model. This chapter attempts to build an analytical framework for competitor analysis. Starting from market analysis with respect to competitive position, competitive scope, market power, and market capacity, a firm gets to know its competitive drivers. However, an in-depth knowledge about competitors requires an interfirm rivalry analysis. The firm has to identify its close and direct competitors and speculate the possible behaviors of those competitors in the competitive dynamics. ML Chen’s awareness-motivation-capability model is very useful to evaluate how the dyadic pair competes at the interfirm level. Market commonality and resource endowment are conceptual dimensions to help evaluate motivation and capability of the competitive dyad. Awareness is increased by market commonality and resource endowment, which is the condition for any market behaviors (i.e., attack, retaliation, or no action). Furthermore, market power moderates the competitive tension of market rivalry. As a matter of fact, proxy measures of market commonality, resource endowment, and market power can be formulated in indices with data obtained from financial information. The chapter explains how the market commonality, resource endowment, and market power index measures are derived and demonstrates how they are employed to evaluate the competitive tension and possible actions of competitive dyads with some guided examples.