5.0.3 Strategy definition Basics: Competition and competitive reactions

Learning objective: we learn how to recognize and deal with competitive situations and possible competitive reactions.

Reading time: approx. 20 minutes

Exercises: Exercises are in the PDF of all exercises of this course. Download it from here.

Basics

As a company, we are in a competitive environment with our services. In social media, we primarily find ourselves competing for attention and engagement instead. When it comes to the element of engagement at the latest, many companies are actually in uncharted territory. Until now, corporate activities have not been focused on this element of competition. This results in a challenge for many companies that begins with the perception and acceptance of this situation.

The competition

The participants

In social media, we encounter the following types of participants in competition.

Performance Competitor

Service competitors are competitors offering similar or comparable services. It is typical for the competition of the performance competitors (among each other) that this competition is primarily carried out via the company performance. This conventional competitive situation shapes our view of competition and, accordingly, our behavior in competition. In social media, we are also dealing with performance competitors, but not only and our competition is not primarily that of performance competitors. The goal of performance competitors in social media is to generate attention for their services.

Attention competitors

Attention competitors are competitors who do not offer services comparable to ours, but with whom we compete for the attention of the same users. Competition in social media is primarily a competition for attention and for engagement. The goal of attention competitors is also to accumulate attention. Attention competitors are less focused on corporate performance than on the interests of those whose attention they seek to capture. To strive a comparison they act more medial than oriented to a fixed product. For a medium like BILD, it is less important what the content of its headline is about than what effect it achieves.

Social media users

Social media users have left their passive role as participants in the competition and are helping to shape the competition from their own goals. For example, by committing themselves to individual offers and companies on an ad hoc, regular or permanent basis, or by not doing so. As a result, it is not decisive whether this decision is made consciously or unconsciously. Your result counts. Social media users use social media because they define a benefit that is relevant to them.

Platforms

Platforms are companies whose business model is social media and who act as gatekeepers to facilitate the use of social media. The business model of the platforms is to attract and retain social media users and to provide access to these users to others for a fee. Platforms, by the very nature of largely digital competition, tend to become dominant players in the contest for the attention of social media users. For companies, social media platforms are therefore both important access points to social media and the biggest competitors for attention on social media.

The nature of the competition

The nature of competition has been different at least since digitization. Digital-based competition – with digital products and services – works differently than competition based on non-digital services. Digital competition corresponds most closely to what we understand by predatory competition – only somewhat more offensive and dynamic. In order to survive in a digital competition, we either need to become the dominant provider or need niches and competitive advantages that cannot be taken over or neutralized by the dominant player.

Social media operates in a digital business environment, as do search engines, eCommerce platforms, etc. What they all have in common is that sooner rather than later there will be a large dominant provider in the digital competition, followed by competitors operating in niches.

Rules of the competition

Besides the basic character – the type of competition – there are the individual rules of a competition. To understand the rules of our competition, we ask ourselves about which aspects of a performance the competition is fought over.

The conventional perspective

From a conventional perspective, we compete – in social media – primarily on business performance in its versions, facets and aspects. This can be, for example:

  • Price: the decisive aspect in competition is the price of the service
  • Design: the decisive criterion is the design and shape.
  • Convinience: the simplicity of the service or its time saving.
  • Image, trust and brand: trust in the competence of a provider or the quality of the service is a decisive criterion.
  • Innovation: the decisive criterion is the degree of innovation in performance.
  • Emotion: the buyer / user decides in favor of a service according to emotional aspects.
  • Availability: the practical geographical, temporal or economic availability of the service is the decisive criterion.

In most situations of conventional competition, we are dealing with a combination of aspects of this type.

The Social Media Perspective / Competition in Social Media

To understand and shape competition in social media, it helps to understand the types of competition according to their importance. It helps to distinguish the competition in social media more precisely.

Competition for attention
  • Method: we generate situational attention via user interests. To do this, we address the interests of the users we want to reach. This competitive behavior medial content and corresponds more to a traditional medial behavior. However, traditional media companies are finding it difficult to achieve the success they are used to in social media.
  • Benefit: situational awareness that can be consolidated through regularity. If we are competing for the attention of the winners, we attract the most attention from our social media users. This gives us the lion’s share of attention. This method is used for the generation of interested parties for company services.
  • Core risk: this competition – via content for situational attention – is becoming more elaborate by the day. If the competition takes place on external platforms, the success is determined by rules that correspond to the goals of the business models of the social media platforms.
Competition for commitment
  • Method: we generate attention for relationship and engagement. We address social media users on appropriate topics to build a relationship with users as well as among users and enable engagement that is meaningful and beneficial to users.
  • Benefits: we have stable market access, gain valuable information and activate the market to our advantage. Depending on the extent of our success, we become the dominant player or secure a stable niche.
  • Core risk: the claims from this type of social media use and competitive design are actually new territory for most companies and a real challenge. We may have to adapt traditional behaviors and corporate cultures in the short term to succeed at this level. This rarely works out quickly and without problems.

Competitive quality of a strategy

To identify the competitive quality of a strategy, we create a performance profile that maps the performance quality of the strategy components. In it, we recognize the focal points or strengths of competitive quality and can evaluate these focal points in terms of their impact on and in the issues – and thus the support of the business model and corporate goals.

If we look at competitive quality at the issue level, we can see which components of the business model and which business objectives are supported by a particular strategy. In the topics with a high competitive quality of our strategy, a corresponding success of this strategy and a corresponding support in these topics (of business model and corporate goals) can be expected. In topics with low competitive quality, the support for the business model and corporate goal is correspondingly smaller or even non-existent. The performance profile of a strategy version in competition consists of

  • the quality of the competitive positions enabled by the strategy.
  • the risks from competitive reactions to this social media strategy.

Strategy content and competitive positions

The contents of our strategy version serve to build competitive advantages and thus enable competitive positions.

By distinguishing between competitive advantages and competitive position, we make different qualities clearer.

  • Competitive advantage: fundamental advantage or superiority of a behavior in direct comparison with alternative behaviors or behaviors of the competition.
  • Competitive position: competitive advantage realized and secured and relevant to the competitive situation. The company has secured a competitive position that enables it to exploit this competitive advantage to its own benefit. Competitive advantages that we cannot secure at least temporarily do not lead to competitive positions.

From competitive advantage to competitive position: If we identify a potential competitive advantage and successfully implement it in such a way that this competitive advantage secures a superior competitive position in this respect, we have turned the potential competitive advantage into a competitive position.

Not in all cases can we apply recognized competitive advantages. If we can identify but not realize a competitive advantage, there is no competitive position to be formed from it. Examples

  • We recognize a potential structural competitive advantage from the community usage format over competitive audiences. However, we are not in a position to use the usage format in such a way that we can exploit this competitive advantage.
  • We recognize a potential competitive advantage in the weakness of the social media channels used by the competition, but cannot implement our own alternative that exploits this weakness.
  • We recognize potential social media resources from participation, but cannot use them to our advantage because the company is not yet mature enough to do so.

Not all competitive advantages exploited lead to a competitive position. Competitive advantages in which we do not clearly differentiate ourselves in the market in relevant respects or which can be seamlessly replicated by the competition in the short term will hardly enable competitive positions. Example of this

  • our UserBenefit goes beyond the UserBenefit of the competition. Unfortunately, for significant parts of our market / target groups, this additional performance is not relevant enough for it to work to our advantage.
  • our UserBenefit is more convincing than that of the competition. Unfortunately, we are not able to establish it in the market fast enough to exploit this advantage because the most important competitors were able to follow suit “overnight” and equalize our advantage.

Competitive positions are thus characterized by:

  • they are a competitive advantage successfully established in the market.
  • they are relevant, recognized and effective for the market as a distinguishing criterion.
  • they are not seamless and cannot be tracked by the competition at short notice.

The quality of a competitive position is thus defined by the effect of this position in competition and by the security of this position in competition. Competitive positions that cannot be quickly taken over by the competition are of higher value.

Competitive positions

In order to recognize and shape the competitive situation, competitive positions are extremely helpful. Competitive positions were described in the chapter on social media performance potential for companies. Here we use this method to identify existing and potential competitive positions or to work with existing ones.

In order to recognize, understand and, last but not least, shape the competitive situation, it is helpful to define the possible competitive positions (occupied as well as open) and to take them into account according to their importance – in shaping the competitive situation as well as the strategy as a whole.

Recognize competitive positions

Competitive positions are found in

  • Topics
  • Usage formats
  • User benefit
  • Participation.
  • Motivation.

Shaping competitive positions

We shape competitive positions by adopting unused, i.e. open, competitive positions or by taking over used competitive positions.

In the section Social Media Performance Potential for Companies – the Overview you will find more on the topic of competitive positions and how to shape them.

Recognizing the social media potential for your own game

We ask ourselves in which of the described forms of competition we should and can be successful in order to get the best possible benefit from social media.

  • should: the criterion is to secure the opportunities of social media as a contribution to the company’s future. The question is, what do we need to do to make the most of social media’s opportunities for the company and reduce the risks as much as possible? Risks arise not least from the actions of competitors in line with their options. In concrete terms, this means that we assess the risks not only from the current situation but also from the options of all our competitors (performance and attention competitors).
  • can: the criterion here is the company’s capabilities. This refers less to the current as-is state than to the capabilities that the company as a whole can deploy, thus also includes a redistribution of resources, the procurement of additional competencies or manpower.
Recognize playing field, rules and participants

“Knowing the rules is a prerequisite to breaking them.” If we want to actively shape competition, we need to know the competition and the market as well as possible, but also the basis on which the market participants behave the way they do so that we can recognize whether, where and how breaking the rules enables success.

  • Playing field: The market with its needs, the services of diverse providers and the competitive situation between these providers.
  • Rules: the behavior in market cultivation and the competitive behavior as well as the assumptions on which both are based.
  • Stakeholders: the consumers / buyers of the company’s services, the companies / competitors, trade and distribution partners, other players influencing the market and competition (such as platforms, influencers, media, etc.)

The actual state

In every market and every competitive situation, the playing field and participants are variable variables. The first important insight is to recognize the two quantities in their actual state. So understand the playing field of the current competition and those involved.

The conventional change potential of playing field, rules and participants

The playing field, rules and participants move and change under the conditions of conventional action. For example, through activities in marketing, in sales, through new products and services, the development of new markets, the use of new distribution channels, through new competitors and the departure of old competitors.

The general impact of social media’s performance potential on the playing field, rules and participants

Social media has already changed the behavior of market players and is also changing the rules and playing field.

Changing the playing field through social media: a market consists of needs and services. Social media influences needs by, for example, changing priorities, assessments and weightings more quickly. This affects the leisure behavior of consumers as well as the behavior of companies. Hardly any company does without the use of social media to reach its customers, to recruit personnel, to recognize and change the assessment of its services and to receive feedback on its own services and those of the competition. Companies can build and maintain customer relationships via social media where this was previously neither economically viable nor possible. But social media has also changed the competitive playing field. An increasing amount of competition is shifting to social media.

Changing the rules through social media: the information process of the company as well as the consumers has changed through social media. The same is true for b2b markets. The nature of information, but above all the way in which business relationships are established, has changed structurally. Communication and value creation have become key to building relationships with business partners, customers and consumers. Networks are key to the market success of individuals and companies. Attention and relationships are the new standards in competition. Social media enables relationships to be created, but it also sets the rules for them.

Change of stakeholders through social media: Social media is an enabler, i.e. enables an additional behavior, enables an additional capability. We, our competitors, and our partners in the marketplace can and will use social media – where it hasn’t already. Most importantly, we are still discovering new uses that can change the behavior of stakeholders and thus have an impact on the market as a whole. In this case, remember that social media is still often used as an additional channel for established behavior, and the potential of social media that companies use is often limited to this approach – until competition forces a different behavior.

Reshaping the competition

We shape competition with all our measures. Here we address how we can structurally reshape competition. By structurally redesign we mean a fundamental change in one or more levels. I.e. we change the rules of the game. Those who can determine the rules of a game have an advantage. Whether a company can change the rules of its competition is a question of the competitive situation in which it finds itself and a question of strategic competence and, in this case, the ability to grasp and shape a situation. We consider two methods of a strutureal change of competition as an example.

Taking competition to another level

Raising competition to another level means – among other things – to

  • that the new competition is different from the previous competition.
  • the competition cannot respond to this challenge with previous behavior / approach.

This means shaping competition in such a way that a competitor has problems following this competition with his previous behavior. It would be even better if it is not possible for the competition to follow this competitive change in the short or medium term. It would be perfect if it were no longer possible for the competition to track this change in the long term. The prerequisite for this approach is that the competitor cannot ignore the change in competition and is forced to follow it.

One method for doing this is to move the contest to a new content area or change the elements of the contest.

We can work towards this in general in our strategy development by differentiating ourselves from the competition – positively in the benefits for the user – in the approaches as well as in the contents of the strategy, or we can see this approach as a special opportunity and focus on it in our strategy. At pbsm, there are opportunities for this in the type of usage format, in the focus of our social media impact, and especially in the content of the strategy components UserBenefit, Motivation, and Participation.

Making the market work for you

In addition, we can fundamentally change the competitive situation by changing the roles of the market participants. In the classical perspective, customers have a role of a very limited activity. In social media, we can change that role. If we activate the users of the market in becoming active in our favor(participation), this changes the role of the users and the balance of competition in our favor.

In order to let the market play for us in the form of social media users, we need a clear user benefit for social media users that rewards their active role, the appropriate conceptual and technical structure, and competent management that actively promotes participation. This optimally supports a well thought-out motivational structure. Without being able to meet these requirements completely it is

Basics Competitive Reactions

Finding promising content for strategy releases is quite an achievement. Recognizing and accounting for the competitive response possible and expected from this content elevates this performance to a higher level.

We cannot predict with certainty how our competitors will react to our strategy, but we can identify the expected / possible reactions and take their effect into account in our strategy.

It is advisable to think in advance about the possible reactions of competitors to the content of our planned social media strategy in order not to be surprised by predictable reactions. Let’s act like a savvy chess player and think about how and with which moves important competitors can react to a strategy and how these reactions affect our situation / strategy.

Our assessment of competitive reactions is based on the

  • Knowledge of competitors
  • Knowledge of the competitors’ options for action

If we have both bases at our disposal, it is easier for us to recognize possible reaction options/action options and to assess their probability and temporal occurrence. As a procedure for assessing the competitors’ options for action, the following comparison helps

  • the actual situation of the competitor,
  • of our measure and the
  • Competence and experience of the competitor

in each case in relation to the contents of the strategy components. Helpful criteria for the assessment of the options for action and reactions are

  • The requirements for trailing the competitor’s own position in a strategy component – both conceptual and technical.
  • the estimated duration for a follow up in a strategy component

When can we identify and account for competitive responses?

To be able to recognize and take into account competitive reactions, we need to know our competition. Depending on the market structure, this is easy to nearly impossible.

Explanation

  • In a monopoly, we no longer have competition. That’s the end of the matter.
  • In an oligopoly, we’re dealing with a handful of competitors who keep tabs on each other and react relatively quickly to each other.
  • In a polypole, we are dealing with a large number of competitors who neither know each other nor systematically pay attention or react to each other.

Depending on the market(s) in which we are active, we may or may not have to take competitive reactions into account.

How can we identify and account for competitive reactions?

The competitive reactions that we want to take into account in our strategy are the competitors’ options for action in response to their market situation that has been changed by our new strategy. In other words, we look at the competitive situation resulting from our successfully implemented social media strategy from the perspective of the competition and examine what options the competition has for action in the new competitive situation.

To do this, we adapt our method from the Options for Action module accordingly. We take the strategy version we are reviewing and consider what courses of action are available to a competitor in response to this content.

An overview of the core content of a strategy design and the competitive reactions possible to it makes the competitive quality of one’s own content clear. The following is an example of such a comparison .

Strategy Definition Strategy Version Competitive ComparisonDownload

In this example, we distinguish between offensive reactions and defensive reactions.

  • offensive response: the competitive response not only matches this content, it tries to go beyond it and build competitive advantages over the content of our strategy component. Prerequisites for offensive reactions are corresponding options for action. That is, the competition must have options for action that go beyond our content in terms of their competitive quality. This is only possible if our content enables this option for action.
  • defensive reaction: the competitive reaction aims to draw level with the content of our strategy component in order to balance it as much as possible. Defensive responses are the course of action open when no more powerful alternative is available. This is the case when our content is the maximum. Defensive responses have a hard time offsetting an established competitive advantage.

Input for strategy development and strategy evaluation: If we recognize that the content of our strategy draft can be quickly and easily understood and neutralized by the competition, we should revise this strategy draft again or remove it directly from the decision.

If a possible competitive reaction results in a new competitive situation that is recognizably negative for us, we record this and adjust our content in the strategy component(s) to such an extent that we correct the consequences of this competitive reaction. That is, we anticipate possible negative competitive reactions and their impact in our content (our strategy components).

We keep a record of this situation so that – in the event of a competitive reaction – we can review our assessment and, if necessary, adjust our strategy components if the competitive reaction turns out differently or has a different impact than expected.

Conclusion

  1. we should check the contents of the strategy components of our strategy version in advance to see whether they can be neutralized by competitive reactions. If this is the case and cannot be prevented or corrected, the strategy version has a performance problem that makes its implementation inadvisable.
  2. when developing the content of our strategy components, we should reduce the possible courses of action/competitive reactions as much as possible by choosing the courses of action that are most effective for the competition, even if one step less seems sufficient at the moment of strategy development.
Classic strategic mistake

When we work out possible competitive responses, we easily fall into a strategic error.

  • We are guided by the competitive responses we expect from our competitor. In other words, what we think the competitor(s) will do. This is to be avoided at all costs, because it means that we are following a questionable interpretation of incomplete information. Which, as expected, is risky and not recommended.
  • Instead, the competitive responses we consider in our strategy are better guided by what the competition might do in its situation. In this way, we take into account all his options for action and are on the somewhat safe side.

We cannot know for sure what priorities and criteria a competitor will use to respond to a new situation. We may know its past behavior, but that is no guarantee of being able to predict its future behavior with certainty. So let’s avoid the risk of error that results from estimating the expected behavior of the competition. This approach provides more information about how we ourselves would behave in a corresponding situation.