Trade Secrets

Trade Secrets: Seven Key Details You Must Know About Your Competition


Dilip Chandwani
Senior Vice President, Process Industries & Manufacturing Competitiveness
July, 2013

Competitive knowledge is critical for every business in order to maintain market positioning, develop and fine-tune new product, business, and pricing strategies, improve cost position, and make capacity decisions. Knowing what your competitors are doing right now—or planning to do in the future—enables your company to make smarter, more proactive decisions to stay ahead, rather than constantly playing catch-up.

The Internet has certainly made a tremendous wealth of company data readily accessible, but the most salient and important details simply aren’t available by searching Google or dissecting annual reports, and most common sources fall short of delivering the most valuable bits of information. Even analyst reports and company financials lack business unit specificity.

Obtaining the most valuable information requires a thorough competitive assessment to reveal the important details, and doing so takes deep industry knowledge, well-positioned contacts and resources that simply aren’t readily available to just anyone. Of course, ethical and legal practices must be maintained in conducting the assessment, and the results can be incredibly eye-opening, revealing strategic opportunities that can change the course of your business and the industry.

Understanding your competitors’ positioning on industry cost curve and key success factors can uncover your own strengths or vulnerabilities and help you decide on actions to exploit those opportunities to close the gaps. Here are seven key issues you must know about your competition, and how these details can give you a competitive edge.

  • Manufacturing capabilities and investments. Understanding your competitors’ manufacturing capabilities, capacity, and investments are an indicator of the commitment to the business and can forecast steps they are likely to take in supplying the marketplace and to generate profits on their investments.
  • Technology and equipment assets. Most details in press releases, company websites, and annual reports address technology and plant parameters only at the highest level—often going no deeper than basic information. In a company with multiple facilities under each unit, this leaves most of the valuable information untold. Not to mention these sources typically cover only the “good news,” keeping your competitors’ critical business challenges (i.e., potential weaknesses you can exploit) under lock and key. Understanding process details, plant capacity, age, utilization, yields, by-products and waste issues can reveal tremendous insights. For example, in one tire manufacturing assessment, the research uncovered innovative practices around the reuse of “fines” – a byproduct of the tire finishing process—that the company was able to turn from a disposal and cost item to a profit opportunity.
  • Product-specific volume and market share. Obtaining unit volume, market share, and captive use data at the granular level can reveal valuable insights when it comes to developing new product launch and pricing strategies, understanding regional/global demand and key target market demographics. Discovering how much of your competitors’ production is consumed internally through downstream integration vs. merchant sales enables you to understand the competitors’ behavior and actions in the marketplace.
  • Organization structure and fixed costs. Information about organizational structure, union contracts, maintenance issues, outsourcing agreements and quality control issues can reveal incredible insights and opportunities to capitalize on competitors’ weaknesses. Plant operation practices and regional workforce factors vary greatly not only between the western world and Asian countries, but also across different states in the United States and countries in Europe. In most situations, it is critical to understand the competitors’ manufacturing assets in low cost Asian regions.
  • Raw materials and utilities. Supplier contracts, vertical and horizontal integration, alliances and partnerships and unit cost details can reveal insight about overall cost structure and the relative stability or volatility of supply. In the case of over-the-fence arrangements with raw materials suppliers, your competitors may enjoy a comfortable security of supply and favorable long-term contracts that may convert commodities into fixed costs, locking in pricing that gives your competitors an advantage. This information helps identify gaps in key cost items in the cost structure.
  • Logistics. Understanding your competitors’ storage, inventory and shipping practices can reveal detailed insights about operational costs and margins. For example, companies with facilities located closer to the customer market or that run a tight ship when it comes to logistics efficiency can minimize inventory requirements and delivery time to the end user, which reduces product loss, especially in cases where shelf-life is short.
  • SAR: Discovering your competitors’ sales and marketing, general administration, and R&D expenses can illustrate a clearer picture of customer relationships and future plans. This can clarify how some companies with a low manufacturing cost position are able to make bigger investments in sales and marketing to gain larger market share, and looking at R&D activities—such as new patent filings and increase in research spending—can point to new product innovation and potential new launches. For example, Vistakon/Johnson & Johnson can and has outspent nearly every other contact lens manufacturer to promote its Acuvue brand due to its massive low-cost manufacturing position in the market.

How to Develop the Competitive Details, and Are Your Secrets Safe?
Doing business in a competitive marketplace without this critical knowledge about other players in the space is the equivalent of “flying blind.” There are many elements of a systematic approach to developing competitive information, and it’s a safe bet that your competitors are gathering these details about your company to use to their advantage. That’s why it’s also important to protect your vital information. Look for future KMC Growth Insights to learn more about the methods and sources for developing competitive information, as well as tips for keeping your secrets safe from probing competitors.

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