The 3 Cs: Analyzing Your Environment

What is the 3 Cs Framework?

The 3 Cs framework is one of the most basic and foundational tools for companies to perform an environmental analysis. Understanding the space that your company occupies is crucial to finding your niche and reaching your target demographic. Although other frameworks, such as Porter’s 5 Forces, are more thorough with their environmental analysis, the 3 Cs are a great place to start.

Kenichi Ohmae created the framework in 1982 to organize what he believed were the 3 factors needed to be optimized in order to create competitive advantage. The model is composed of a 3-factor Venn Diagram that includes Customers, Competitors, and Company (see Figure 1). The intersections of each element each produce a unique scenario.

The 3 Cs Framework
Figure 1: The 3 Cs Framework

The Customer

The first element we recommend analyzing is the customer. In this analysis you would answer the following questions:

  • Who is your target customer?

  • Do you have multiple customer segments?

  • What is the price sensitivity of your target demographic?

  • What does your customer value most out of your product or service? Can you simplify/ pair down the product or service while maintaining this value proposition?

  • Is your customer base growing? If so, at what rate?

By articulating your target demographic and deeply understanding their needs and wants, you will be able to cater to them and realize a competitive advantage. It is also important to note that you should regularly return to these questions. Complacency can kill companies. Customers’ needs are constantly evolving and your business must evolve with them.

The Competition

After you have answered these questions, we suggest analyzing your competitors. In this analysis you would answer the following questions:

  • Who are your key competitors?

  • What is their value proposition?

  • Does a merger or acquisition make sense?

  • What issues does your competitor’s customers have with their product or service?

  • What partnerships does your competitors leverage?

  • Does your competitor leverage monopsony power on any of their suppliers?

Your competitors are one of the largest pressures that your company faces when trying to maximize profits. They are the reason why you can’t exercise monopoly pricing strategies and are forced to reinvest into R&D efforts. As mentioned previously, we recommend returning to these questions regularly. Companies constantly flow in and out of the market, so it is crucial to consistently conduct environmental scans.

The Company

Finally, the third element that you must analyze in the 3 Cs is your company. Now that you have gone through the exercise of understanding your target market and your competitors who are vying to capture the same target market, you are ready to answer the following questions about your position in the market:

  • Do you have a competitive advantage? If so, what is it?

  • How can you minimize costs?

  • How can you maximize your revenues?

  • Is your internal structure set up to be as effective and efficient as possible in generating profits and satisfying customers (if not, see congruence framework)?

  • Is your supply chain efficient?

  • What are the main issues your company currently faces?

Unlike many other frameworks, the 3 Cs is ambiguous. It poses questions rather than provides answers. Although some may consider this frustrating, it provides immense value in shaping your company’s trajectory and leading discussions about your current location in the marketplace. 

Conclusion

Answering the questions listed above is a great starting point to identifying pain points in your business and the overall marketplace. Competition drives businesses and if you can understand your competition, you will be able to react more effectively and innovate more accurately.

 

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