Predict Your Competitor’s Next Strategic Move via Porter’s Four Corners Model

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Four Corners Model is a strategic planning tool developed by Michael Porter to craft your competitive strategy.

Main Benefits of Four Corners Model

1. To understand a competitor’s strategy by assessing its motivations and actions.
2. To foresee the possible future strategies that might be adopted by the competitor.
3. To assess your company’s competitive strategy and spot improvement areas.

Explanation of Four Corners Model

Porter’s Four Corners Model focuses on the competitor’s motivations and actions to predict the competitor’s future strategy. By nature, it solely focuses on the competitor, not on your company/brand.

Motivations

1. Drivers: This is the question of what drives the competitor. To understand your competitor’s main drivers, you should understand the gap between:
   • Its current performance and position in the market
   • Its aspired performance and position.

The bigger the gap, the bolder and quicker the competitor.

2. Management Assumptions: Competitor’s assumptions affect their strategy. To understand their assumptions, you should investigate the areas:
   • Competitor’s assumptions about itself
   • Competitor’s assumptions about its competitors
   • Competitor’s assumptions about external factors.

Understanding your competitor’s false assumptions will give you a perspective about where you can focus on.

Actions

3. Current Strategy: To understand your competitor’s strategy, you MUST identify where it puts resources. It may be a customer segment, it may be a product, or a location or a channel, etc. Additionally, you benefit from comparing your competitor’s intended strategy against its realized strategy.
4. Capabilities: Those are the ability and resources of the competitor to compete and respond to external factors. Analyzing your competitor’s capabilities sheds light on what they can potentially achieve.

How to Apply the Porter’s Four Corners Model

1. Determine the driving forces that motivate your competitor. Compare its objectives with its current position.
2. Analyze the assumptions that the management team of your competitor makes about themselves and the industry.
3. Assess your competitor’s intended and realized strategy. Check whether there is a gap between the two.
4. Look at the resources and capabilities of your competitor.
5. Combine the output you obtain in the above steps to identify the actions your competitor is likely to take in the future.
6. Adjust your own strategy accordingly, if necessary.

Additional Tips and Readings

• You may try to develop Business Model Canvas for your competitor to make sure that you have considered all the available information.
• You can try to identify the gap between your competitor USP vs its current strategy. A strategy with a weakened focus on USP can be an opportunity.
• You may conduct VRIO analysis not for yourself but for your competitor to see its capabilities more clearly.
• You should consider basic Game Theory concepts, such as Prisoner’s Dilemma and Nash Equilibrium to your optimal strategy.
• TOWS Analysis may help you understand your competitor’s strategy more precisely.
• Another tool from Porter (Five Forces) will complement your understanding of the whole competitive environment.

Contact us to analyze your competitive environment, predict your competitors’ course of action and develop your competitive strategy.