In a competitive response case, you either need to analyze your client's or its competitors’ moves
In a competitive response case, your job is either to analyze what your client should do in response to a major competitor's strategy or to anticipate what competitors will do in response to a strategy implemented by your client.
Just as with M&A cases, competitive response cases by themselves are rare. Instead, these case types will come disguised as part of a larger business problem. In competitive response cases, it is important to get a good understanding of the current situation and how it can be addressed.
1. Understand the status quo and changes in order to assess the relevance of competitive response
Here too, make sure you fully understand the current situation and how it has changed compared to the past. If, for instance, the case is about the main competitor having introduced a new product, then you will want to know the following:
- What is the nature of the product and how does it differ from what the client offers?
- How important are the new different features to customers?
- What will the new features enable the competitor to do? In general, there are two possibilities: a competitor can either charge a higher price for the competing product or take customers away from our client by pricing the product with the differentiating feature competitively against the clients' products.
- Why is the competitor introducing it? For instance, have customer preferences changed (need pull) or is there an availability of new technology (technology push)?
- Which market segment is addressed with the new product and how do we expect these market segments to react?
- Does the client possess resources that could be used in the context of the new product (expertise, funds, M&A options, production facilities, etc.)?
2. Possible recommendations
There is a variety of potential answers to new product introductions. Often, what an interviewer is trying to assess here is your creativity and ability to produce realistic solutions. Potential answers could be:
- Make the current product more attractive:
- Redesign, repackage the current product.
- Change the market segment of the current product (move upmarket or downmarket).
- Increase the marketing activity (i.e., increase perceived attractiveness).
- Build customer loyalty or increase switching costs (e.g., by adding a loyalty scheme).
- Make another dimension of the product more attractive (e.g., cut prices).
- Introduce a different product:
- Acquire the competitor or capabilities for the new product.
- Copy the competitor with the client's available resources.
- Do nothing:
- Doing nothing can indeed be a recommendation.
- Doing nothing can be a strategy if you want to wait for more information so that you are in a better position to make a decision.