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Three Circles Analysis

Written by the Fiveable Content Team • Last updated September 2025
Written by the Fiveable Content Team • Last updated September 2025

Definition

Three Circles Analysis is a strategic framework used to assess a company's competitive position by examining the overlap and differences between its own capabilities, the needs of its target customers, and the offerings of its competitors. This analysis provides valuable insights to help businesses make informed decisions about their competitive strategy.

5 Must Know Facts For Your Next Test

  1. Three Circles Analysis examines the intersection of a company's internal capabilities, its target customers' needs, and its competitors' offerings.
  2. The areas of overlap and non-overlap between these three circles reveal opportunities for competitive advantage and potential vulnerabilities.
  3. The analysis helps identify the unique value a company can provide to its target customers that its competitors cannot easily replicate.
  4. By understanding the gaps between customer needs, company capabilities, and competitor offerings, businesses can develop strategies to better serve their target market.
  5. Three Circles Analysis is a crucial tool for developing effective competitive strategies and ensuring a company's offerings are aligned with customer demands and industry dynamics.

Review Questions

  • Explain how the Three Circles Analysis framework can help a company identify opportunities for competitive advantage.
    • The Three Circles Analysis framework examines the overlap and differences between a company's internal capabilities, its target customers' needs, and its competitors' offerings. By identifying the areas where the company's strengths and capabilities align with unmet customer needs that competitors are not adequately addressing, the analysis can reveal opportunities for the company to develop a unique and sustainable competitive advantage. This insight allows the company to focus its resources and strategies on delivering superior value to its target market in ways that competitors find difficult to replicate.
  • Describe how the Three Circles Analysis can help a company refine its competitive strategy.
    • The Three Circles Analysis provides a structured approach for a company to assess its competitive position and identify strategic options. By understanding the gaps between its own capabilities, customer needs, and competitor offerings, the company can make more informed decisions about how to position its products or services, where to focus its resources, and how to differentiate itself in the market. The analysis can help the company determine whether to compete on cost, quality, innovation, or a combination of factors, and develop a targeted competitive strategy that aligns with its strengths and the evolving needs of its target customers.
  • Evaluate how the insights gained from the Three Circles Analysis can enable a company to adapt its business model and offerings to better serve its target market.
    • The Three Circles Analysis offers a comprehensive view of a company's competitive landscape, allowing it to identify areas where its current business model and offerings may not be fully meeting the needs of its target customers. By understanding the gaps between its capabilities, customer demands, and competitor strategies, the company can make strategic adjustments to its products, services, pricing, or distribution channels to better align with evolving market dynamics. This can involve developing new products, enhancing existing offerings, or even pivoting the business model to capture untapped opportunities and deliver greater value to the target market. The insights from the Three Circles Analysis empower the company to continuously adapt and refine its strategies to maintain a competitive edge and stay relevant to its customers.