What Is The Four Corners Analysis And Why It Matters In Business

Developed by American academic Michael Porter, the Four Corners Analysis helps a business understand its particular competitive landscape. The analysis is a form of competitive intelligence where a business determines its future strategy by assessing its competitors’ strategy, looking at four elements: drivers, current strategy, management assumptions, and capabilities.

Understanding the Four Corners Analysis

In a rapidly changing global market, business analysts are often required to make important decisions on how a business will not only adapt but gain a competitive advantage.

The Four Corners Analysis is one such tool that can be used to collect and analyze information on competitors to guide future strategy. As a result, the business can then use the tool as a form of self-analysis – identifying parts of its strategy where there is room for improvement.

Ultimately, Porter’s framework gives all businesses a frame of reference with which they can judge their competitive success. We will look at how this frame of reference is created in the next section.

Implementing a Four Corners Analysis

The analysis involves identifying four factors that give a business valuable insight into their competitors.

Motivation – Drivers 

What drives the competition and impels them to act? How do their motivations impact on their strategy, and vice versa? When a business understands the drivers of competitor behavior, it will be able to better predict future drivers of success.

For example, a market leader will work hard to defend their position and be largely unconcerned by smaller rivals. A start-up, on the other hand, will take a more offensive approach in their attempt to gain market share.

Motivation – Management Assumptions 

This corner involves determining how a business perceives itself in the market. This may be hard to ascertain externally, but actions speak louder than words. For example, a business can make assumptions about a rival restaurant by assessing patronage levels, wait times, and subsequent customer loyalty.

Regardless of the industry, management teams who feel that their market share is easily diminished will face challenges quickly and aggressively. Conversely, organizations that feel more secure lead by example and are not perturbed by external disruptions.

 Actions – Strategy 

Is the competition succeeding or failing with respect to its strategy? Again, a detailed strategy may be hard to obtain from a competitor, but there are several areas that when used in combination give clues. These include competitor language, behavior, press releases, product range, partnerships, content production, and geographic footprint.

Once a business has gathered information from these sources, compare their intentions with quantitative data. This will determine whether a competitor strategy has been financially or otherwise successful.

Actions – Capabilities 

This describes the ability of an organization to either initiate or respond to external forces. Capabilities in specific terms include such things as marketing skills, employee training, held patents, and even the leadership qualities of the CEO.

Capabilities (or a lack thereof) tell the competition a lot about a business. For example, a business without the ability to innovate may simply lower its prices when faced with a competing product.

Key takeaways:

  • The Four Corners Analysis allows a business to glean insights on their competitors and position themselves accordingly.
  • The Four Corners Analysis provides a means of independently and holistically assessing a competitor’s current and future actions.
  • Businesses who use the Four Corners Analysis diligently will understand the complex interplay between a competitor’s mission, management, strategy, and capabilities.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"