Author: Gaurav Sharma
In today’s dynamic business landscape, companies must continually assess their position in the market and optimize their go-to-market strategy to stay ahead of the competition. Competitive benchmarking analysis and portfolio mapping are powerful tools that help organizations understand their market position, identify best practices, and make informed strategic decisions. This article explores these concepts, their best practices, and provides examples of their effective implementation.
Importance of Competitive Benchmarking Analysis and Portfolio Mapping:
Benchmarking involves comparing performance, processes, and strategies with competitors to identify improvements, while portfolio mapping categorizes products or services based on market share and growth potential. Integrating these tools helps businesses align strategies with market realities, prioritize high-impact improvements, and make informed investment decisions. This comprehensive approach ensures sustained competitive advantage and effective resource allocation in dynamic markets.
Competitive Benchmarking:
Competitive benchmarking involves comparing an organization’s performance, processes, and practices with those of its competitors or industry leaders. This practice allows companies to identify areas for improvement, set realistic goals, and develop strategies to outperform their rivals.
3 Types of Benchmarking:
- Performance Benchmarking: Focuses on comparing metrics such as revenue, sales, and customer satisfaction.
- Process Benchmarking: Involves comparing operational processes to identify more efficient methods.
- Strategic Benchmarking: Looks at long-term strategies and approaches that lead to sustained competitive advantage.
Best Practices to Implement the Benchmarking Techniques:
- Choose relevant metrics: Clearly define benchmarking objectives, whether for product/service pricing, customer satisfaction, marketing activity, or sustainability initiatives.
- Identify appropriate competitors: Focus on direct competitors and industry leaders, even if they’re not in your immediate market.
- Conduct regular benchmarking: Make it an ongoing process to track progress and industry trends.
- Act on insights: Develop action plans based on benchmarking results to improve performance.
Core Elements of Competitive Benchmarking:
- Data collection: Gather public and private data on competitors and market trends.
- Analysis: Use SWOT analysis to identify strengths and threats in relation to competitors.
- Insights generation: Derive actionable insights from the data and analysis.
- Team involvement: Engage cross-functional teams for comprehensive analysis.
Example: Toyota’s Lean Manufacturing: Toyota’s benchmarking of American car manufacturers led to the development of its highly efficient lean manufacturing system, now a global best practice and a landmark case study for automotive companies.
Portfolio Mapping:
Portfolio mapping is a strategic tool used to analyze and visualize a company’s product or business unit portfolio. It helps organizations make informed decisions about investment and divestment opportunities.
Types of Portfolio Mapping:
There are several types of portfolio mapping techniques, each with its own focus and methodology. Here are the ones which are most used:
- BCG Matrix (Boston Consulting Group Matrix): This is one of the most well-known portfolio mapping tools. It categorizes products or business units into four quadrants based on market growth rate and relative market share:
- Stars: High growth, high market share
- Cash Cows: Low growth, high market share
- Question Marks: High growth, low market share
- Dogs: Low growth, low market share
- GE-McKinsey Matrix: It is also known as the Nine-Box Matrix, this model is more complex than the BCG Matrix. It evaluates business units on industry attractiveness and business strength. Through GE matrix you can plot business units on a 3×3 grid based on:
- Industry Attractiveness (High, Medium, Low)
- Competitive Strength of the business unit (High, Medium, Low)
- Ansoff Matrix: This matrix focuses on market penetration, product development, market development, and diversification strategies growth strategies, mapping current and potential products against existing and new markets:
- Market Penetration: Existing products in existing markets
- Product Development: New products in existing markets
- Market Development: Existing products in new markets
- Diversification: New products in new markets
- Product Life Cycle Portfolio Matrix: This matrix maps products based on their stage in the product life cycle (Introduction, Growth, Maturity, Decline) against their competitive position.
Each of these portfolio mapping techniques has its strengths and is suited to different strategic questions or industry contexts. Companies often use a combination of these tools to gain a comprehensive view of their portfolio and inform strategic decisions.
Best Practices for Portfolio Mapping:
- Define evaluation criteria: Determine parameters such as market share, market growth, and profitability.
- Choose appropriate model: Select a suitable portfolio management model (e.g., BCG Matrix or GE-Matrix).
- Gather accurate data: Collect reliable information on market growth, market share, and other relevant factors.
- Involve cross-functional teams: Include input from various departments for comprehensive analysis.
- Review and update regularly: Reassess your portfolio map to reflect market changes.
- Align with overall strategy: Ensure portfolio decisions support long-term goals.
Example: General Electric (GE) has long been known for its effective use of portfolio mapping. Using the GE-McKinsey Matrix, the company evaluates its diverse business units based on industry attractiveness and competitive strength, guiding investment decisions in high-potential areas like renewable energy.
Integrating Competitive Benchmarking and Portfolio Mapping:
When used together, these tools provide a powerful means of strategic analysis and decision-making, offering a comprehensive view of both external and internal environments.
Best Practices for Integrating Competitive Benchmarking:
- Use benchmarking data to inform portfolio mapping: Incorporate competitive performance metrics into portfolio analysis.
- Identify synergies: Look for opportunities where strengths in one area can address weaknesses in another.
- Prioritize actions: Focus on high-impact improvements to enhance competitive position.
- Consider future trends: Use benchmarking insights to anticipate market shifts and adjust your portfolio.
Example: One of our clients is a leading consumer packaged goods company and they wanted to do competitive benchmarking and portfolio mapping to maintain their leadership in the consumer goods industry. By benchmarking against competitors across various product categories, our client identified areas for improvement or innovation. This information feeds into their portfolio mapping process, helping them decide which brands to grow, maintain, or divest.
For instance, when our client noticed eco-friendly products gaining market share from competitors, they developed and positioned new sustainable product lines within their portfolio.
Conclusion:
Competitive benchmarking and portfolio mapping are essential tools for modern businesses seeking to optimize their market position and resource allocation. As markets evolve and competition intensifies, mastering these techniques becomes crucial for organizations aiming to thrive in dynamic environments.
By leveraging these tools, companies can gain valuable insights into their target audience, social media reach, and overall market presence. This comprehensive approach enables businesses to identify their cash cows, optimize revenue streams, and make data-driven decisions that support their long-term strategic goals.
