What can the 4 Corners analysis tell you about your competition?

Key information:

• Four Corners Analysis is a tool created by Michael Porter to predict a competitor's future strategy and response to market changes.

• It consists of four corners: Motivation (Drivers), Motivation (Assumptions), Actions (Strategy), Actions (Opportunities).

• Motivation (Drivers): Analyze a competitor's goals and market position, assess whether they are willing to change their strategy.

• Motivation (Assumptions): Assessing how a competitor views its strengths and weaknesses in the context of the market and competition.

• Actions (Strategy): Determine how competitors are implementing their strategy, based on observations of their actions and behaviors.

• Activities (Capabilities): Analyze a competitor's ability to respond to external forces and assess its strengths and weaknesses.

• Advantages of analysis:

  • It helps predict the actions of competitors.

  • Facilitates strategy development and testing.

  • It acts as an early warning of the dangers of competitor decisions.

  • It allows you to better prepare for the actions of competitors, minimizing potential losses.

What is the 4 Corners Analysis?

Four corners analysis is a tool created by Michael Porter to predict a competitor's future strategy and possible changes triggered by market events. This analysis is used to read the possible reactions of competitors in a specific situation. The four corners, are divided into motivation and action sections.

Motivation - drivers

What drives the competition and prompts them to act? This part of the analysis, by understanding a competitor's goals and its current as well as desired market position, allows you to assess whether it is satisfied with its performance. Consequently, whether it is willing to change its strategy. In case a competitor is far from the desired position, it can be expected that it is likely to react soon. For example, a major market player will take care to maintain its position, while not worrying about smaller competitors. However, a start-up will try offensively to gain market share. This section should answer the question, "What drives a competitor?"

Motivation - assumptions

The next part of the 4 corners analysis focuses on determining a competitor's perception of its strengths and weaknesses relative to other players in the industry. If the analyzed entity assesses itself as highly competitive, it is likely to be prepared to counteract potential threats to its position. Regardless of the sector and the specifics of a competitor's business, companies that feel their market share is easily eroded will respond dynamically and offensively to any challenges. Entities that feel stable in their market position set a kind of example for other players in the industry and their operations are not disturbed by external factors. When conducting this part of the 4 corners analysis, answer the question, "What are the competitor's current assumptions about the market, the competition and its capabilities?"

Activities - strategy

The competition's strategy dictates its actions and decisions in the market. In this part of the 4 corners analysis, you need to determine how your competitors are doing in relation to your own strategy. Data on this subject can be obtained by observing a competitor's behavior, affiliations or geographic coverage. Useful information can also be found by reviewing industry articles or the company's annual reports. When you manage to collect the necessary data, it is worth putting together the company's goals. The conclusion of this section should be the answer to the question, "How is the competitor doing and to what extent is it successfully implementing its current strategy?".

Activities - opportunities

This corner of the analysis concerns the competitor's ability to respond to or initiate external forces. Despite the fact that a company is highly motivated and expresses a desire to act strategically, its effectiveness may be limited due to insufficient capabilities. We can understand capabilities as marketing skills, patents held or even managerial qualities. Concluding this part of the analysis, it is necessary to determine in which areas the competitor is strong, and what are its weaknesses.

Why use the 4 Horns Analysis?

The analysis allows you to systematize certain information, which, thanks to the analysis of the competition, makes it easier to predict its actions. It is mainly used during strategy development and testing. The tool is also used in the form of early warning, against threats caused by certain decisions of competitors. Knowing the party's plans allows you to prepare properly for its actions, while minimizing losses from it.

And does your company know how the competition will react?