A realistic appraisal of each competitor's capabilities - its strengths and weaknesses- is the final diagnostic step in competitor analysis. Its strengths and weaknesses will determine its ability to initiate or react to strategic moves and to deals with environmental or industry events that occur. Identifying strengths and weaknesses is described in more detail in next chapter.
Putting The Four Components Together
After the competitor's future goals, assumptions, current strategies, and capabilities are analyzed, a competitor response profile is developed. This profile, designed to indicate how a competitor is likely to respond in its competitive environment, is based on the answers to four questions:
- Is the competitor satisfied with its current position?
- What likely moves or strategy shifts will the competitor make?
- Where is the competitor vulnerable?
- What will provoke the greatest and most effective retaliation by the competitor? (Michael E. Porter).