How would you structure this case? Competitor launches new product...

Question

I'm not sure how to structure this case - there's a lot of things to think about e.g. short term reaction vs long-term reaction, shareholder response etc.

You are the CEO of a major phone company e.g. Samsung. You wake up to a phone call in the middle of the night and hear that one of your main competitors has just released a game-changing new product. What do you do?

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My framework:

1. What is the aim of the competitor?

a. What is the new product, core value proposition and user base?

b. What is the key strategic objective of the competitor and along what time-frame? Entering new market, attracting new customers, gaining market share, loss-leader, long-term, short-term? etc.

2. How does this affect our top-line/bottom-line - projected impact?

a. Does this product overlap with any of our offerings in terms of functionality? i.e. Will we lose customers/sales due to product-related reasons?

b. Does this product overlap with any of our offerings in terms of brand? i.e. pricing, marketing message?

c. What is the response of the other competitors?

3. What is our response?

a. Do nothing (completely different audience, different product, no impact to our main strategic focuses).

b. Make plans for launching rival product (long-term).

c. Make changes to existing products (short-term) e.g price drop/rise, marketing message change.

Answer 1

Hey there,

You have a fantastic structure in place already. You're hitting all the key points: analysis of the competing product, impact on your company, and response.

There are a few key questions I would add:

You want to gain an understanding of how this product fits in to your company's existing hold on the market - so I would add the following:

1. Overview of the product:

- What consumer need is this product responding to? How important are these features to consumers?

2. Impact on your company

- Which segment of the market is the competitor targeting with this product? Is it the same as yours or different?

This will help you decide whether or not to enter this market. Essentially, you should frame it as:

A. Let's understand what this product is, how it was made, and what consumer need it answers.

B. Once we understand the product, let's look at the impact it will have on our company. Will it eat into our sales because of product similarity, overlapping market segment, or other factors?

C. If it does affect us, let's respond by revamping our products or launching a competing one. And if it doesn't affect us, let's see if we want to not respond or if we want to get into their market share with a competing product.

Answer 2

Hi there,

I agree that this is a strong framework! Ultimately, with competitive response, we're figuring out how does the competitor's actions affect us (normally negatively and in terms of profits) and how can we respond.

You've pretty much covered that. One thing to consider adding (or another framework approach) is what you will look at. So, in assessing #2 and #3 what are the key areas of investigation (product, customer, company, etc.). This could be another framework option for you.

Answer 3

You have a great structure there.

Another way to think about the problem (it's just a variation):

1. How will this impact me?

2. How can I minimize negative impact (in the short term)

3. How should I react on the long term (i.e. how to protect my business and how to capture a part of that opportunity).

Finally, one thing you are not considering is cooperation strategies. You can partner with some competitors to defend your common business. Or you can partner with that new player to grab a piece of the pie as well.

Did you know that Samsung manufatures several parts (e.g. chips) used by iPhones, and that they worked together to be able to stream videos from the iphone into your Samsung TV? There are win-win strategies out there! ;)

Answer 4

Hi there, and thanks for asking, Indeed, setting up the framework for a profitability case can be a bit confusing, ho... (read entire answer)

Hi there, and thanks for asking, Indeed, setting up the framework for a profitability case can be a bit confusing, however, I would advise you not to think of “THE” framework wh... (read entire answer)