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Competitive Analysis Checklist

Although the following checklist has been created to facilitate managerial analysis of the competitive conditions surrounding the video rental industry, it can be modified to apply to other industries as well.

Instructions: Give each “true” response a score of 1, and then add up the number of “true” scores to determine whether the competitive pressure exercised by that source is weak, moderate, or strong.

I. Bargaining Power of Suppliers

		True	False
01	Video stores are supplied by a few large vendors.
02	Video stores lack bargaining power vis a vis vendors.
03	It is difficult or expensive for video stores to switch vendors.
04	Video stores cannot produce videos themselves.
05	There are few substitutes to what vendors supply.
06	Video stores are highly dependent on reliability of vendor deliveries.
07	Vendors exercise significant control over quality and quantity of videos supplied.
08	Vendors exercise significant control over terms of supply.
09	Vendors have not entered into collaborative relationships with video stores.
10	Supplies to video stores are limited.
	Total
	Score:
	0 to 3 points: Suppliers exercise weak competitive pressure.
	4 to 7 points: Suppliers exercise moderate competitive pressure.
	8 to 10 points: Suppliers exercise strong competitive pressure.

Significance: Armed with the knowledge that suppliers exercise significant bargaining power, video store management can adopt any or all of the following actions to improve the situation:

	Develop strategic partnerships with suppliers
	Seek alternative sources of supply if possible
	Take over a supplier
	Pit suppliers against each other to reduce costs and improve quality
	Become a supplier

II. Bargaining Power of Customers

		TRUE	FALSE
01	There are a few large customers.
02	Customers comprise a significant portion of video store rentals.
03	It is easy or inexpensive for consumers to switch to other video stores.
04	Customers can produce videos themselves.
05	Customers have access to substitute products.
06	Customers are very price-sensitive.
07	Video rentals are not strategically important to customers.
08	Customers are well-informed of video rental costs.
09	Customers can enter into collaborative relationships with video stores.
10	Supply of videos for rent is not limited.
	Total
	Score:
	0 to 3 points: Customers exercise weak competitive pressure.
	4 to 7 points: Customers exercise moderate competitive pressure.
	8 to 10 points: Customers exercise strong competitive pressure.

Significance: Armed with the knowledge that customers exercise significant bargaining power, video store management can adopt any or all of the following actions to improve the situation:

	Broaden marketing efforts to attractive a larger and more diversified customer base
	Institute an aggressive campaign to increase loyalty and repeat business
	Move rental decision away from price
	Provide additional value-added services to enhance video rental experience
	Couple video rentals with other revenue-generating sources of income

III. New Entrants

		TRUE	FALSE
01	There are few barriers to entering the video rental market.
02	Initial investment and fixed costs are low.
03	Rivals are seeking to diversify by entering the video rental business.
04	Video rental stores are making attractive profits.
05	Video rental demand is rapidly increasing.
06	The video rental industry does not require specialized knowledge or expertise.
07	Government laws and regulations promote development of the video rental industry.
08	Economies of scale are not high.
09	Brand preferences and customer loyalty are low.
10	Existing video rental stores are unable to deter new entrants.
	Total
	Score:
	0 to 3 points: New entrants exercise weak competitive pressure.
	4 to 7 points: New entrants exercise moderate competitive pressure.
	8 to 10 points: New entrants exercise strong competitive pressure.

Significance: Armed with the knowledge that the competitive pressure posed by new entrants is high, video store management can adopt any or all of the following actions to improve the situation:

	Create a favorable marketing image with consumers
	Form alliances with other video rental stores
	Lobby government to limit potential pool of new entrants
	Differentiate video rental experience from what new entrants are able to offer
	Improve supply chain management to increase efficiency and make it cost-prohibitive for new entrants to arise

IV. Substitutes

		TRUE	FALSE
01	Sales of substitute products are growing rapidly.
02	Producers of substitutes are increasing plant capacity and expanding business.
03	Profits of producers of substitutes are increasing.
04	It is not difficult or expensive for consumers to switch to substitutes.
05	Substitute products have comparable features or price.
06	Consumer loyalty is low.
07	Substitute products have lower initial investment and fixed costs.
08	There are few barriers to producing substitutes.
09	Social, economic or political trends favor development of substitutes.
10	Customers are well aware of substitute products.
	Total
	Score:
	0 to 3 points: Substitute products exercise weak competitive pressure.
	4 to 7 points: Substitute products exercise moderate competitive pressure.
	8 to 10 points: Substitute products exercise strong competitive pressure.

Significance: Armed with the knowledge that the competitive pressure posed by substitute products is high, video store management can adopt any or all of the following actions to improve the situation:

	Create a favorable marketing image with consumers
	Enter the substitute product market and influence it from within
	Accentuate and enhance the video rental experience to lure consumers away from imitations and substitutes
	Offer discounts and promotions to encourage repeat business
	Create video rental clubs and other inducements to maintain customer base

V. Existing Rivals

		TRUE	FALSE
01	There are many rivals of the same size.
02	The video rental industry is generating significant profits.
03	Barriers for exiting the video rental business are high.
04	Price competition is high.
05	Consumers do not differentiate among rival video stores.
06	The market is sufficiently large to support rival companies.
07	Rivals are undertaking aggressive marketing campaigns to increase market share.
08	Rivals provide a uniquely differentiated product or service.
09	Rivals offer better products at lower prices.
10	Rivals provide a higher level of customer service.
	Total
	Score:
	0 to 3 points: Rivals exercise weak competitive pressure.
	4 to 7 points: Rivals exercise moderate competitive pressure.
	8 to 10 points: Rivals exercise strong competitive pressure.

Significance: Armed with the knowledge that the competitive pressure posed by existing rivals is high, video store management can adopt any or all of the following actions to improve the situation:

	Undertake an aggressive marketing campaign to differentiate itself from rivals
	Abandon a low-cost leadership strategy and differentiate on the basis of quality, service, or convenience
	Alternately, pursue a very aggressive cost-leadership strategy by increasing scale economies and cutting costs
	Target a niche segment of the video rental market
	Acquire or merge with rivals

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