Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword
Like this
9Activity
0 of .
Results for:
No results containing your search query
P. 1
Industry & Competitive Analysis - Lecture 3

Industry & Competitive Analysis - Lecture 3

Ratings: (0)|Views: 241 |Likes:
Published by api-3710170

More info:

Published by: api-3710170 on Dec 04, 2009
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOC, PDF, TXT or read online from Scribd
See more
See less

03/18/2014

pdf

text

original

Lecture: 3
Industry & Competitive Analysis
Introduction
Crafting strategy needs solid analysis of a company\u2019s\u2019 external & internal situation. Two most
important situational considerations are :
\u2022
Industry and competitive conditions
\u2022
Company\u2019s own competitive capabilities, resources, strengths, weaknesses, and market
position.

Industry & competitive analysis refers to assessing the most strategically relevant aspects of a single business company\u2019s macro environment. Accurate diagnosis of the company\u2019s situation is a necessary managerial preparation for deciding on a sound long term direction, setting appropriate objectives and crafting a winning strategy.

Strategic thinking & analysis to lead good strategic thinking
\u2022
Ist step:Method of Industry and Competitive analysis:
\u2022
2nd step: Companys\u2019 own situation:
\u2022
3rd step : What strategic options does the company realistically have?
\u2022
4th step: What is the best strategy?
Ist step: Method of Industry and Competitive analysis:
1. Overview of industry\u2019s dominating economic feature.
2.Discovering the main sources of competitive pressure & strengths of the competitive forces.
3.Identifying the driving forces (causes of changes in the industry\u2019s competitive structure and
business environment).
4.Studying the market position of the rival companies (strongest or weakest position)
5. Monitoring competitor\u2019s strategic moves.
6.Identifying the industry\u2019s key success factors.
7. Assessing the industry\u2019s overall attractiveness and profitability prospects.
The collective answers to these questions build understanding of a firm\u2019s surrounding environment
and form the basis for matching strategy to changing industry conditions and competitive forces.
2nd Step: Companys\u2019 own situation:
1.How well is the company\u2019s present strategy working?

2. What are the company\u2019s resource strengths and weakness and its opportunities and threats?
3. Is the company\u2019s cost competitive with rivals?
4. How strong is the company\u2019s competitive position?
5. What strategic issues need to be addressed?

3rd step:
1. What strategic options does the company realistically have?
2.Is it locked into improving the present strategy or is there any room to make major strategy
changes?
1
4th Step: What is the best strategy?

1. Does it have good fit with the company\u2019s situation?
2. Will it help build a competitive advantage?
3. Will it help improve company performance?

Details of the Steps for Industry & Competitive Analysis.
\u25ba Dominant Economic Characteristics of Industry:
1.
Market size
2.
Competitive rivalry (local, national, international, global)
3.
Market growth & position in the business
4.
Number of rivals & relative size and strength
5.
Number of buyers and size
6.
Backward & forward integration of the rivals.
7.
Distribution channels.
8.
Pace of technological change
9.
Highly differentiated or weakly differentiated products.
10.Economies of scales in purchasing, manufacturing, transportation, marketing etc.
11. Placement of industries in a particular situation.
12.Capacity utilization rate.
13.Capital requirement and entry / exit barriers
14. Industry profitability
\u25ba How strong are each of the competitive forces:
Five forces model of competition by Michael E Porter

1. The rivalry among competiting sellers in the industry
2. The potential entry of new competitors
3. Attempts to win customers for substituted products by companies
4. Competitive pressure generated from supplier-seller collaboration & bargaining.
5. Competitive pressure generated from seller-buyer collaboration & bargaining.

(See Text book page: 81)
Five Forces Model of Competition (In details)
1. Rivalry among competing seller
Rivalry increases:
\u2022
As the number of competitors increase & becomes more equal in size.
\u2022
When demand of the product is growing slowly
\u2022
When there is price cut or other weapons to boost sales volume
\u2022
When customers cost to switch brand is low.
\u2022
When payoff is positive from a successful strategy
\u2022
When cost is more to get out of business than to stay in business.
\u2022
When unrealted diversification move by a company appears to be very strong to takeover
lead in that particular industry.
2
2. Potential entry of new competitors:
A barrier to entry prevails whenever it is hard for a newcomer to break into the market. There are
several types of entry barrier as follows:
\u2022
Economics of scale
\u2022
Cost and resource disadvantages independent of size
\u2022
Learning and experience curve effects
\u2022
Inability to match the technology & specialized know-how of existing firms
\u2022
Brand preference & customer loyalty
\u2022
Capital requirement
\u2022
Access to distribution channels
\u2022
Regulatory policies
\u2022
Tariffs and international trade restrictions
3. Competitive pressure from the substituted products
(Ex: The sugar industry competes with companies producing artificial sweeteners.)
Depend on three factors:
\u2022
Whether attractively priced substitutes are available.
\u2022
When substitutes are viewed as having satisfactory performance.
\u2022
Whether buyers can switch to substitutes easily.
4. Competitive pressure generated from supplier-seller collaboration & bargaining.
Depends on:
\u2022
How supplier bargaining power can create competitive forces
\u2022
How collaborative partnerships between sellers and suppliers can create competitive forces.
5. Competitive pressure generated from seller-buyer collaboration & bargaining.
Depends on :
\u2022
How buyers\u2019 bargaining power can create competitive pressures.
\u2022
How collaborative partnerships between sellers and buyers can create competitive pressure.
Strategic Implications of the Five Competitive Force Model:
\u2022
The model is a powerful tool for competitive insight of the strategy makers.
\u2022
The stronger the collective impact of competitive forces, the lower the combined profitability
of participant firms.
\u2022
When forces are not collectively strong, the industry is \u201cfavourable\u201d or \u201cattractive\u201d for
earning superior profit.
\u2022
Startegies should be crafted that shield the firm as much as possible from competitive forces.
\u25ba Identifying the driving Forces:
Other than life-cycle stage of an industry, the following are the \u201cdriving forces\u201d to bring changes in
the industry:
\u2022
The internet & e-commerce opportunities
\u2022
Increasing the globalization of the industry
\u2022
Changes in the long-term industry growth rate
\u2022
Changes in who buys the product & how they use it
3

Activity (9)

You've already reviewed this. Edit your review.
1 thousand reads
1 hundred reads
Mhar Danao liked this
tabbbu_munshi liked this
fell191 liked this
fell191 liked this
prasadarao2009 liked this
younis3000 liked this
donlucek liked this

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->