Know Thy Caffeinated Competition

15 May 2007

Starbucks, a true corporate success story, had its stock hit a 52-week low yesterday. Don’t go feeling too sorry for shareholders though. Those who have held Starbucks for over a couple of years are still handsomely in the money. 2-year returns for Starbucks are 7%, 4-year returns are 150%, 7-year returns are 256%, and those who have held on for a cool decade are up 698%. So, why the recent slide in share price? One theory, which I don’t necessarily agree with when it comes to Starbucks, is intensified competition.  That brings up the topic of competitive intelligence and how it can be an IR department’s best friend.

Competitive pressures are always on the minds of the investment community, and therefore, should always be on the minds of IR professionals.  IR needs to be armed with the most up to date competitive ammunition to combat those skeptical investors/analysts (and they are always calling).  Be armed with specifics on product/service differentiation, customer satisfaction rates, market penetration versus the competition, and growth rates versus the competition. These are just a few examples of key data points that enhance your competitive argument.  There’s also nothing wrong with throwing some competitive FUD around (after all, you know the competition is doing it to you).

So, know thy market and know thy competition…it will go a long way in enhancing the credibility of your IR department.

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