You are on page 1of 34

Strategic Management and Business Policy

Unit 11

Unit 11

Industry and Competition Analysis

Structure
11.1 Introduction
11.2 Caselet
Objectives
11.3 Definition of Industry
11.4 Industry Types and Structure
11.5 Industry Structure and Competitive Strategy
11.6 How to Conduct Industry Analysis
11.7 Identifying Competitors
11.8 Models of Competition
11.9 Porter’s Competitive Threat Model
11.10 Competitive Advantage Analysis
11.11 Case Study
11.12 Summary
11.13 Glossary
11.14 Terminal Questions
11.15 Answers
11.16 References

11.1 Introduction
Selection of corporate strategy by an organization should be guided by three
sets of factors: organizational mission, objectives or goals (discussed in Unit
5), internal competences and resources and the external environment factors.
Given the mission, objectives or goals based on organizational philosophy or
priorities, the choice of strategy should depend, among other things, on company
competences or capabilities (that is, strengths and weaknesses) and the
environmental factors; or, more correctly, on compatibility or balancing between
the two which is attempted through SWOT analysis. The final selection of
strategy, however, depends on some additional selection criteria including
benchmarking and best practices. These are discussed in the next chapter.
One of the most important components of the environment is competition
or competitors. This would be analysed here. As we talk of competition, we also
imply the ‘industry’ to which the company belongs. Analysis of industry and
competition leads to the determination of competitive advantage or competitive
Sikkim Manipal University

Page No. 279

Strategic Management and Business Policy

Unit 11

disadvantage of an organization. So, industry, competition and competitive
advantage (or disadvantage) become three interrelated fields of analysis in an
interactive cycle or circle as shown in Figure 11.1. These analyses will be
undertaken in this unit.

Figure 11.1 Industry, Competition and Competitive Advantage

11.2 Caselet
There are numerous well-documented reasons why the Japanese
automobile firms were able to penetrate the US market successfully,
especially during the 1970s. One important reason, however, is that they
were much better than U.S. firms at doing competitor analysis. David
Halberstam, in his account of the automobile industry, graphically described
the Japanese efforts at competitor analysis in the 1960s. “They came in
groups. . . . They measured, they photographed, they sketched, and they
tape-recorded everything they could. Their questions were precise. They
were surprised how open the Americans were.”
The goal of competition analysis is insight that influences the development
of successful business strategies. The analysis should focus on the
identification of threats, opportunities, or strategic uncertainties created by
emerging or potential competitor moves, weaknesses, or strengths.
Competitor analysis starts with identifying current and potential
competitors.This is an exercise that was successfully done by the Japanese
automobile firrms.
Source: D Halberstam, The Reckoning (New York: William Morrow, 1986), 310.

Sikkim Manipal University

Page No. 280

Strategic Management and Business Policy

Unit 11

Objectives
After studying this unit, you should be able to:
• Discuss the different industry types and structures
• Analyse industry structure and competitive strategy
• Show how to conduct industry analysis
• Identify and analyse competitors — existing and potential
• Conduct competitive advantage analysis

11.3 Definition of Industry
An industry can be broadly defined as ‘the group of firms producing products
that are close substitutes for each other’.1 There is, however, a great deal of
controversy over an appropriate definition of industry. The debate or controversy
mostly centers around ‘how close substitutability needs to be in terms of product,
process or geographic market boundaries’.2 For example, if we take computers,
desktop computers may be an industry; similarly laptop computers may be
another industry. But, because there is a good deal of substitutability between
desktop and laptop computers, an appropriate industry definition may be
‘personal computer’ which includes both.
An important point in the debate or controversy over industry definition is
about overlooking latent sources of competition which may affect a company.
Any definition of an industry is essentially a matter of choice about where to
draw the line between established competitors and substitute products, between
existing companies in the industry and potential entrants and, between existing
manufacturers of the product(s) and suppliers of inputs and buyers. Drawing
these lines may, many times, be a matter of degree, but, it has implications for
choice of strategy by a company.
Definition of an industry should not be thought to be same as definition of
the business in which a company wants to compete. Industry may be broadly
defined or narrowly defined. If industry is broadly defined, it does not follow that
business should also be broadly defined without focus. If we take the example
of personal computer industry again, some companies like Compaq were
focussing their operations more on the desktop computers; companies like HP
(Compaq merged with HP in 2002) and Dell computer focus on both desktop
and laptop computers; others like Toshiba, Sony, IBM, concentrate more on the
laptop segment. Industry in all such cases sets the product boundaries. Business
Sikkim Manipal University

Page No. 281

Strategic Management and Business Policy

Unit 11

of a company focusses on a specified product or a product category based on
its technology, resources and capabilities, and accordingly, the company
formulates its competitive strategy.

Self-Assessment Questions
1. The group of firms producing products that are close substitutes for each
other are known as_________.
2. Definition of an industry should not be thought to be same as definition of
the ________in which a company wants to compete.

11.4 Industry Types and Structure
Industries can be of various types—each major product group constitutes an
industry (subject to the definition above). Industries can also be classified in
terms of size of the constituent units or companies, state or pace of development
of the industry, spread of the market, etc. These are important ways of looking
at the structure of an industry. Based on such factors, various industries can be
broadly classified into five categories according to Porter:
1. Fragmented industry
2. Emerging industry
3. Mature industry
4. Declining industry
5. Global industry
Fragmented industry
As fragmented industry is characterized by the existence of a large number of
small and medium units, and, no single company has any significant market
share, and, none of these units can individually affect the market or industry
outcome. The uniqueness of a fragmented industry is the absence of any market
leader, and, typically, the market share of the largest unit does not exceed 10
per cent.
Fragmented industries are common in certain sectors of the economy
including services, retailing, distribution and agricultural products. Fragmented
industries in some of these sectors are characterized by product differentiation,
whereas undifferentiated products more commonly exist in fragmented industries
Sikkim Manipal University

Page No. 282

Strategic Management and Business Policy

Unit 11

in other sectors. For example, computer software, television network/programme
and fast food industries are characterized by products or services which are
differentiated; but, agricultural produce, ATMs, dry cleaning, etc., essentially
involve undifferentiated products. Fragmented industries also vary widely in
technological sophistication ranging from high technology operations like solar
heating to non-technological activities like retailing and distribution.
Emerging industry
An emerging industry is a developing or newly formed industry in which market
for products initially exists in latent form, and, becomes visible later. An emerging
industry may be created by technological innovations, new consumers or
industrial needs for economic or sociological changes which create the
environment or potential market for a new product or service. Emerging industries
are being created all the time; or, to put it in other words, most of the existing
industries today were emerging industries at some point of time or the other.
Examples are word processors, photocopiers, computers, VCR/VCP, CTV, etc.
Different emerging industries may have different structures—structural
details always vary. But, most of the emerging industries exhibit some common
structural characteristics.
Mature industry
A mature industry is one which has passed through transition from period of
fast growth to more modest or stable growth. Maturity is an important or critical
phase in the industry life cycle. During this period, fundamental changes often
take place in the competitive environment, and, companies are usually faced
with difficult strategic decisions for survival and growth because competition
becomes very intense. Industry maturity, in some cases, may be delayed or
postponed because of innovations or other events or developments including
environmental changes. This would mean prolonging the industry growth cycle
or the transition to maturity.
Transition to maturity is associated with important changes in the industry
structure and competitive environment. Industry maturity is characterized by
new trends or tendencies for change. Porter (1980) has identified and analysed
nine such trends or tendencies.
Declining industry
A declining industry is one with negative growth, that is, an industry which has
registered absolute decline in sales over a sustained period of time. Such decline
in sales is not because of business cycles or any other short-term factors like
Sikkim Manipal University

Page No. 283

Strategic Management and Business Policy

Unit 11

strike, lockouts or material shortages. Therefore, a declining industry does not
represent a short-term discontinuity, but, a trend expressed in falling industry
output, sales, profitability and dwindling number of competitors. In industry life
cycle, decline follows maturity. Decline sets in generally because of product
obsolescence or emergence of a strong substitute product. For example, demand
for oil-based laundry soaps for cloth washing declined fast because of
introduction of synthetic washing materials.
In-depth study of a wide cross-section of declining industries shows that
industry reactions and the nature of competition during decline vary markedly.
Some industries ‘age’ gracefully; these industries have avoided losses by exiting
either before the decline or in time during the decline. Many other industries in
similar situations have got involved in bitter marketing warfare, prolonged excess
capacity and heavy operating losses.3
Global industry
In global industry, the strategic position of companies in different countries or
national markets are governed by their overall global positions. For example,
IBM’s strategic position in competing for computer sales in France and Germany
has improved significantly because of technology and marketing skills developed
in other countries, and a worldwide manufacturing system which is well
coordinated. To be called a global industry, an industry’s economics and
competitors in different national markets should be considered jointly rather
than individually.4
Distinction should be made between an international industry and a global
industry. An industry in a country may be international if it comprises a number
of multinational companies. But, industries with multinational competitors are
not necessarily global industries. To be a global industry, as explained above
about IBM, an industry should have multi-locational manufacturing facilities,
and, compete worldwide to secure global synergy or competitive advantage.

Self-Assessment Questions
3. The existence of a large number of small and medium units is found in
(a) Mature industry
(b) Declining industry
(c) fragmented industry
(d) Emerging industry
Sikkim Manipal University

Page No. 284

Strategic Management and Business Policy

Unit 11

4. An industry that has passed through transition from period of fast growth
to more modest or stable growth is known as
(a) mature industry
(b) declining industry
(c) Emerging industry
(d) None of the above

11.5 Industry Structure and Competitive Strategy
We have analysed above five types of industries: fragmented, emerging, mature,
declining and global. Each of these industries has its own structure in terms of
companies or competitors and the nature of competition. Let us discuss the
competitive strategy in each type of industry.

11.5.1 Competitive Strategy in Fragmented Industries
Porter has suggested a framework or steps for formulating competitive strategies
in fragmented industries. This is a five-step framework. The steps actually consist
of finding answers to five vital questions relating to strategy formulation in
fragmented industries. Table 11.1 shows the framework or steps for formulating
competitive strategies in fragmented industries.
Table 11.1 Framework or Steps for Formulating Competitive Strategies
in Fragmented Industries
Step 1 ↓

: What is the structure of the industry and position of competitors?

Step 2 ↓

: Why is the industry fragmented?

Step 3 ↓

: Can fragmentation be overcome? How?

Step 4 ↓

: Is overcoming fragmentation profitable? Where should the firm be
positioned to do so?

Step 5 ↓

: If fragmentation is inevitable, what is the best alternative for coping with
it?5

The five steps or the answers to the five questions indicate a logical process
for formulation of competitive strategy in fragmented industry. Step 1 consists
of undertaking a thorough industry and competitor analysis to identify sources
of competitive forces in the industry and positions of important competitors.
Step 2 is to identify cause or sources of fragmentation. Once the causes of

Sikkim Manipal University

Page No. 285

Strategic Management and Business Policy

Unit 11

fragmentation are ascertained, it may be possible to find out if fragmentation
can be overcome. This is analysed in Step 3. Step 3 consists of analysing, in
detail, each of the causes of fragmentation, and, finding out if fragmentation
can be overcome through strategic moves. Less fragmented a market is, more
organized it is, and it becomes easier to analyse various competitive forces.
The objective in Step 4 is to ascertain if fragmentation is profitable, and, if so,
when and/or how a particular company should position itself to take advantage
of industry consolidation or restructuring. If chances of overcoming fragmentation
are remote based on analysis in Step 3, a particular company should select and
adopt the best strategy from among the alternatives available to cope with
fragmentation. This should be done in Step 5, and this should be commensurate
with the company’s resources and capabilities.

11.5.2 Competitive Strategy in Emerging Industries
Due to the structural characteristics of uncertainty and associated risk,
formulation of strategy in emerging industries becomes a very difficult task. As
Porter puts it: ‘The rules of the competitive game are largely undefined, the
structure of the industry unsettled and probably changing and competitors hard
to diagnose.’6
But, these also imply the other side of the emerging industries: lot of
freedom, flexibility and leverage exist for companies in these industries for choice
of strategy because the industry is in the formative stage. And, entrepreneurial
and aggressive companies can exploit these leverages to formulate competitive
strategies for improved operations which can lead to more efficient performance
and better results. The entrepreneurial pioneer can, in fact, design the structural
form, build the structure of the industry in terms of product policy, marketing
approach (pricing in particular) and competition strategy in such a way that it
can secure the strongest position in the long run. This is what companies like
Xerox did when it emerged in the photocopier industry.
The pioneering leader, however, will face problems as the industry
develops, competitors emerge and the course of competition becomes
unpredictable. A common problem in emerging industries is that the pioneer
may spend excessive resources in defending high market share as Xerox did.
It may be generally appropriate to respond to competitors aggressively in the
emerging phase, but, a company should concentrate more on building its own
strength and consolidating its position. In practice, as experiences show, it may
not be feasible to defend a monopoly market share for long because competitors
will emerge and some of them may be very strong like Canon in the photocopier
Sikkim Manipal University

Page No. 286

Strategic Management and Business Policy

Unit 11

market. In such situations, the pioneer leader should be prepared for shifts in
strategy orientation including redefinition of roles of linkage agents like suppliers
and distributors or distribution channels.
Companies which enter emerging industries during the course of their
development also have a choice to make about which industries to enter. Here,
again, they often have a choice between alternative emerging industries. The
choice in such cases would depend on current returns or profitability and likely
future growth of the industry. The best alternative is one which promises highest
long-term growth and profitability.

11.5.3 Competitive Strategy in Mature Industries
Compared to emerging industries, mature industries pose almost the opposite
problem, i.e., of competitive overcrowding and its impact on formulation of
strategy. During transition to maturity there is volatility in the industry in terms of
emerging participants and competitive levels. But, at maturity, the industry is
already overcrowded and competition is intense. In such an environment,
competitive strategies of companies have to adjust to changing priorities.
Focus has to shift to factors which directly contribute to efficiency and
help securing competitive advantage in a low-margin market. Cost reduction,
‘true’ marketing (as opposed to pure selling) in terms of product-price offerings
and better customer service should receive the highest attention. Redefining or
repositioning old products/brands rather than introducing new products is the
recommended strategy. Less attention to creativity and more attention to
improving the existing value chain is required for edging out competitors. For
achieving this, to any significant extent, organizational change —cultural change
in particular—may also be required. There may be resistance to change, but,
this has to be overcome.
This raises a number of issues which companies in a mature industry
have to cope with. Some of these issues relate to business performance; others
relate to organizational change. Three issues or factors which should be
particularly highlighted are: business growth, financial performance and
profitability, and organizational discipline and recentralization.

11.5.4 Competitive Strategy in Declining Industry
In terms of strategic choice in declining industries, companies are confronted
with the decision about whether to continue in the industry or harvest or divest.
There are implications of both in terms of strategic details and their impacts on
organizations.
Sikkim Manipal University

Page No. 287

Strategic Management and Business Policy

Unit 11

Porter has given a perspective on competitive strategies in declining
industries which should be mentioned here. He has suggested four possible
alternative strategies: leadership, niche, harvesting and divesting quickly
(Table 11.2).
Table 11.2 Alternative Strategies in Declining Industries
Leadership

Niche

Harvest

Divest quickly

Seek a leadership
position in terms of
market share

Create or defend a
strong position in a
particular segment

Manage a controlled
disinvestment using
strengths

Liquidate the
business or
investment as early
as possible

Source: M E Porter, Competitive Strategy (1980), 267 (Figure 12.1).

The leadership strategy may work out as below. In a declining industry,
many unprofitable or loss-making units divest and exit. One of the remaining
companies—who are not many in number— may have the potential to achieve
above-average profitability, and leadership position is possible for such a
company. The company strives to be the only one or one of the few competitors
remaining in the industry. Porter suggests a number of strategic steps for
executing the leadership strategy:
• Investment in aggressive competitive actions in marketing (focus
on pricing) and other areas to increase market share;
• Purchasing market share by acquiring competitors or competitors’
business;
• Purchasing and retiring competitors’ production capacity. This also
reduces exit barriers;
• Reducing competitors’ exit barriers in different ways to induce or
force them to exit;
• Demonstrating superior strengths through competitive moves in the
market;
• Demonstrating a strong commitment to continue in the business
through public statements or pronouncements.7
In niche strategy, it may be possible for a company to identify a segment
or a sub-segment in a declining industry which will not only sustain stable demand
but, may also allow high returns or margins. The company then invests to
consolidate its position in this segment or sub-segment. For this, a company
may also adopt some of the leadership strategies mentioned before. The primary
Sikkim Manipal University

Page No. 288

Strategic Management and Business Policy

Unit 11

objective of these strategies is to reduce exit barriers or induce exit of competitors.
The company is then secure in the niche for sometime.
Ultimately, however, companies adopting a leadership strategy or a niche
strategy may have to switch over to a harvesting strategy or divesting strategy.

11.5.5 Competitive Strategy in Global Industries
Competition in global industries poses a different kind of challenge because it
cuts across national boundaries and, international or global forces come into
play. These forces create, among others, two distinctive pressures: cost pressure
because of global competition and, pressure for local responsiveness, that is,
adaptation to local needs or values and consumer tastes and preferences. For
some products, cost pressure may be more: for some others, the need for local
adaptation is more. Guided by these two factors and product type or structure,
companies, which wish to compete globally, generally adopt one of the four
strategies:
International strategy, multi-domestic strategy, global strategy, and
transnational strategy (Figure 11.2).

Figure 11.2 Four Basic Global Competitive Strategies

International strategy can be adopted for those products and services
which are not available in some countries and can be transferred from other
countries. These are standard products with little or no differentiation.
International strategies are not very common or popular. Some examples are:
Kellogg’s, Indian software, and Indian handicrafts.
Multidomestic strategy is almost opposite of international strategy.
Multidomestic strategy involves high degree of local responsiveness or local
content. Products are highly customized to suit local requirements or conditions.
Because of high customization, cost pressure is less; cost effectiveness may

Sikkim Manipal University

Page No. 289

Strategic Management and Business Policy

Unit 11

be also difficult to achieve because of lack of scale economies. Examples :
Asian Paints (paints in general), Indian garments.
Global strategy suits companies which make highly standardized
sophisticated products, and, are in a position to reap benefits of economies of
scale and experience effects. These also include high technology products which
have universal applicability and hardly require any local adaptation. Examples
are: Intel, Motorola, Microsoft, Texas Instruments. Global retail chains like
Walmart and Marks & Spencer also come under this category.
Transnational strategy is the most difficult strategy to follow because this
is based on a combination of two apparently contradictory factors, i.e., cost
effectiveness and local adaptation. But, this may be a ‘true’ global strategy
because, in global business, there is always a price pressure or cost pressure;
and, also the need to make the product as close to a particular country’s
expectation as possible to maximize value offerings. In fact, many, including
Bartlett and Ghoshal (1989), feel that the transnational strategy is the only viable
competitive strategy in global business. Many companies are adopting this
approach to become successful. Some good examples are : Caterpillar (taking
on Komatsu and Hitachi), McDonald’s, Coca-Cola, Pepsi and Domino’s Pizza.
Many multinational FMCG companies like Unilever and Procter & Gamble follow
transnational strategies through their fully owned subsidiaries in different
countries.

Self-Assessment Questions
5. In ________ industry, the pioneering leader faces problems as the industry
develops, competitors emerge and the course of competition becomes
unpredictable.
6. In ________ industries, the problem faced is that of competitive
overcrowding and its impact on formulation of strategy.
7. Global strategy suits companies that make highly standardized
sophisticated products. (True/False)
8. Transnational strategy is quite an easy strategy to follow. (True/F alse)

11.6 How to Conduct Industry Analysis
Understanding industry structure and formulating competitive strategies imply
industry analysis. But, conducting a proper industry analysis is a very big task.
Sikkim Manipal University

Page No. 290

Strategic Management and Business Policy

Unit 11

To conduct such an analysis, the industry analyst has to find answers to many
important questions:
• What should be the starting point?
• Which types of data one looks for?
• Should one look for only published or secondary data?
• Or, should one also generate primary data from industry observers
(participants)?
• What are the analytical techniques to be used for data processing and
analysis?
Answers to these questions would make possible an appropriate industry
analysis. This is about complete or comprehensive industry analysis. If, however,
one is interested in a particular aspect of an industry, say, only industry growth,
one can also conduct a partial industry analysis with respect to the particular
object. In that case, data requirements would be less, and data processing and
analysis also would be much easier.
Porter (1980) has suggested some detailed guidelines for conducting
industry analysis. These are contained in ‘How to Conduct an Industry Analysis’
(Appendix B) in Competitive Strategy (1980). Porter discusses sources of
published or secondary data, generation or collection of primary data, various
categories of data, scheme of data processing and strategy for industry analysis.
He has also suggested a broad framework for industry analysis in terms of
categories of data and competition. The framework is shown in Box 11.1
Industry analysis should follow a number of logical or strategic steps.
These are shown below:
Step 1 : Determine or specify the objective or objectives so that there
is no lack of focus.
Step 2 : Collect and scan through available published or secondary data.
Step 3 : Identify data or information gaps for generation of primary data.
Step 4 : Generate primary data (through survey, interviews, meetings,
etc.,) to fill the data information gap.
Step 5 : Process/tabulate various data as mentioned in Box 11.1
Step 6 : Prepare a general overview of the industry using the processed/
tabulated data/information.

Sikkim Manipal University

Page No. 291

Strategic Management and Business Policy

Unit 11

Step 7 : Prepare specific sectoral analysis—technology, product,
marketing pattern, competition analysis .
Step 8 : Draw inferences or conclusions to complete the analysis.

Box 11.1: A Broad Framework for Industry Analysis
Data Categories

Compilation

Product lines

By company

Buyers and their behaviour

By year

Complementary products

By functional area

Substitute products
Growth
Rate
Pattern (seasonal, cyclical)
Determinants
Technology of production and distribution
Cost structure
Economies of scale
Value added
Logistics
Labour
Marketing and Selling
Market segmentation
Marketing practices
Suppliers
Distribution channels (if indirect)
Innovation
Types
Sources
Rate
Economies of scale

Sikkim Manipal University

Page No. 292

Strategic Management and Business Policy

Unit 11

Competitors—strategy, goals, strengths and
weaknesses, assumptions
Social, political, legal environment
Macroeconomic environment
Source: M E Porter, Competitive Strategy (1980), 370 (Figure B-1)

The real significance of competition or competitor analysis has been shown
by the Japanese companies. There are many reasons why Japanese automobile
companies were able to penetrate the US market successfully in the 1970s.
But, one of the most important reasons is that they were much better at doing
competitor analysis than US companies. The Japanese conducted a careful
and detailed analysis of the US auto matket (See Caselet). They similarly studied
the European market, particularly the design and engineering of the automobile
manufacturers. In contrast, the Americans were late even at recognizing the
competitive threat from Japan and were never so good in analysing the
competitive environment they were going to face.
Competition analysis can be divided into two main parts: one, identifying
the existing and potential competitors, and two, understanding and evaluating
competitors. To properly structure competitor analysis, one can start with a set
of questions on identifying competitors and understanding and evaluating them.
A series of exploratory questions are posed below. The analysis below would
be generally based on answers to these questions and related issues.
Identifying Competitors
• Who do we usually compete against? Who are our most intense
competitors? Who are less intense, but, still serious competitors? Who
are makers of substitute products?
• Can various competitors be divided into strategic groups on the basis of
their assets, skills or strategies?
• Who are the potential competitors or potential entrants? Is there anything
that can be done to discourage them early?8
Understanding and Evaluating Competitors
• What are competitors’ objectives and strategies? What are their levels of
commitment and seriousness?

Sikkim Manipal University

Page No. 293

Strategic Management and Business Policy

Unit 11

• What is competitors’ cost structure? Do they have a cost advantage or
disadvantage or cost neutrality?
• What is their image and positioning strategy?
• Who are the most successful competitors? Who are the unsuccessful
ones? Why?
• What are the strengths and weaknesses of each competitor or competitor
groups?
• What are the leverages competitors have over us (our strategic
weaknesses, customer problems, etc.,) which they can exploit to enter
the market or become stronger competitors?
• What are competitors’ special assets and skills that can be used against
us?
Activity 1
Choose an electronic goods industry (colour TV, cell phone, desktop or
laptop computers) and carry out an industry analysis in terms of the steps
and guidelines given in the text.

Self-Assessment Questions
9. Competition analysis can be divided into two main parts: (1) identifying
the existing and potential competitors, and (2) __________.
10. Japanese automobile companies were able to penetrate the US market
successfully in the 1970s as they were much better at doing _______
than US companies.

11.7 Identifying Competitors
There are two different ways of identifying existing competitors: customer-based
approach and strategic group approach. The customer-based approach analyses
thoughts (likes, dislikes, preferences, etc.,) of customers who make their choices
among competing suppliers of products. This gives a basis for grouping
competitors to the extent they compete for customer’s choice. The strategic
approach for competitor identification attempts to classify competitors into
strategic groups on the basis of their competitive strategies.

Sikkim Manipal University

Page No. 294

Strategic Management and Business Policy

Unit 11

11.7.1 Customer-based Approach
Primary competitors, i.e., competitors in the same product category and, not in
substitute product category, are clearly visible and more easily identifiable. For
example, if one takes the Indian soft drinks market, Coca-Cola and Pepsi are
the most immediate competitors followed by Thums Up, Sprite, Fanta, Limca,
etc. Whenever consumers think of a soft drink, they will first think of one of
these brands. But, secondary competitors, i.e., competitors in substitute product
categories are not so easily visible, and, are more difficult to identify. For example,
lemon soda, canned and packaged fruit drinks (like ‘Frooti’), slush, etc., also
compete with soft drinks. Customers have a choice, and, many times, they ask
for these products/brands in place of soft drinks, and secondary competitors
compete with primary competitors.
The above examples illustrate an important point. In most industries,
competitors can be usefully identified in terms of how intensely they compete
for the business or product which attracts or induces customers. There are
several very direct competitors; others who compete less directly; and, still others
who compete indirectly, but, are still relevant. A knowledge of this pattern can
lead to a proper understanding of the market structure and the competitive
situation.

11.7.2 Strategic Group Approach
Strategic group approach provides an alternative way of identifying competitors
in an industry or market. A strategic group generally exhibits the following
features:
• Possess similar characteristics, (e.g., size, competences, resource base,
etc.)
• Possess similar assets and skills, (e.g., cost efficiency, quality, image,
etc.)
• Pursue similar competitive strategies, (e.g., use of same or similar sales
promotion and advertising methods, aggressive or offensive approach,
etc.)
In many industries or markets, there are a large number of competitors
(like in monopolistic competition) and, it is difficult to analyse each of them
individually. It may be possible to track the leader or one or two large competitors,
but, it may not be very feasible, even cost-wise, to analyse individually, say, 30
or 40 competitors. Reducing such large numbers to small strategic groups makes

Sikkim Manipal University

Page No. 295

Strategic Management and Business Policy

Unit 11

the analysis easy and more usable from strategy formulation point of view. Let
us take the Indian detergents market. In this market, Surf (with brand extensions)
and Ariel may be placed in one strategic group; Tide, Rin, Wheel, Sunlight and
Nirma may be classified into a second strategic group; Ghadi and similar regional
brands can be in a third group; and, many local brands can be put together in
the fourth group. Each of these groups will show some distinct features or
characteristics like resource base, ability to compete, marketing skills, etc., and,
such grouping will give a company a clear strategic perspective to analyse
competition.

11.7.3 Potential Competitors
Existing competitors are the most immediate threats to a company. But, there
are also potential competitors who are potential threats. Companies generally
remain busy with formulating strategies or counter-strategies to meet threat
from existing competitors, and, they tend to ignore potential competitors or
entrants. But, this is a very short-term or short-sighted approach, because, in
due course, potential competitors can become stronger than some of the existing
competitors as Titan has shown to HMT.
Aaker (1995) has mentioned six different types of potential competitors
or potential competing situations.
(a) Market expansion: Any company planning market expansion, that
is, planning to enter into a new market, is a potential competitor for
all those already operating in that market. Walmart, for example,
has decided to enter into the Indian market through a JV with Bharti
Enterprise. This is a big potential threat to the entire Indian retailing
industry.
(b) Product expansion: Product expansion, like market expansion, is a
potential competitive threat. ITC diversified into hospitality business
and agri-business, and during the planning stage of diversification,
was a potential competitor for all those in agri-business and hospitality
business.
(c) Backward integration: Present customers can be potential sources
of competition. General Motors bought many component
manufacturers during the initial years of its operation in a backward
integration move. Many can users like Campbell Soup have
integrated backward by making their own containers. Backward
integration is usually more common in business-to-business products.

Sikkim Manipal University

Page No. 296

Strategic Management and Business Policy

Unit 11

(d) Forward integration: Suppliers or vendors are also potential
competitors. AST, a major computer manufacturer in the US at one
time, started as a component (add-on-boards) manufacturer for IBM
computers. TVS Motors (earlier Lucas-TVS), traditionally a
manufacturer of electrical accessories for automobiles and
motorcycles/scooters, has integrated forward by entering into
manufacture of motorcycles. Like backward integration, forward
integration also is more typical in business-to-business markets.

Self-Assessment Questions
11. While identifying competitors, the ________ approach analyses the
preferences of customers who make their choices among competing
suppliers of products.
12. The ________ approach for competitor identification attempts to classify
competitors into strategic groups on the basis of their competitive
strategies.
13. Primary competitors, i.e., competitors in the same product category and,
not in substitute product category, are clearly visible and more easily
identifiable. (True/ false)
14. Existing competitors are the most immediate threats to a company.
(True/False)

11.8 Models of Competition
In addition to analysing various factors which influence competitor actions, one
can also get insight into competitors or competition through different models of
competition. Competition takes various forms and can be of different intensities.
Different models of competition try to analyse this. We shall discuss three
important models of competition:
1. The Economic Model
2. The Life Model
3. The War Model

Sikkim Manipal University

Page No. 297

Strategic Management and Business Policy

Unit 11

11.8.1 The Economic Model
Industrial or business economists do not look at business strictly in terms of
market forms. They look at business in different ways. In a competitive
environment, businesses can be classified into four different categories:
specialized businesses, volume businesses, fragmented businesses and
stalemated businesses. Such classification is based on two factors; first, the
potential size of advantage a company can derive from a particular business,
and, second, the number of ways such advantage can be secured. In terms of
these two factors, four business categories are shown in Figure 11.3.9

Figure 11.3 Classification of Business Based on Competitive Environment

As shown in the figure, businesses in which potential size of the advantage
is large and approaches to achieve this are many, may be called specialized
businesses. Most consumer products fall under this category. In such businesses,
few large players dominate the market. The dominant players (national-level
products/brands) control about 80 per cent of market share and the balance is
shared by a number of small players—regional and local. Take the market for
detergents. National brands like Surf, Ariel, Nirma, Rin, Tide and Wheel dominate
the market. But there are also many regional and local detergents (branded
and even non-branded) which exist in the market.
Volume business consists of industrial products. Products like basic
chemicals (e.g., caustic soda) and industrial raw materials which are consumed
in large quantities, fall under such business. In these businesses, bigger the
market share, larger is the profitability. Hence, size gives the greatest competitive
advantage and the competition is mostly cost based — cost efficiency through
economies of scale and other factors.
Businesses which have many small players, with the largest ones having
less than 10 per cent market share, are fragmented businesses. In these
businesses, size does not offer any great advantage. These apply primarily to
service products. Hotels and restaurants (except 5-star hotels), studios
Sikkim Manipal University

Page No. 298

Strategic Management and Business Policy

Unit 11

(photographers), dry cleaning, courier services, etc., are good examples.
Competition in these businesses is based on product-price packages.
Stalemated businesses are those which are sort of ‘choked’—potential
size of advantage is small and the number of ways to secure competitive
advantage are also limited. These are businesses which are on the decline
either because of technological obsolescence or changes in consumer tastes
and preferences. Examples of products in the category are radio, music records
(HMV and others) black and white TV, etc.

11.8.2 The Life Model
The life model or the product life cycle (PLC) approach analyses competitive
intensities during different phases of life cycles of a product. Although some
management and marketing academics have raised doubts about the validity
of PLC in real world, it is, nevertheless, a useful tool for analysing competition
and determining appropriate strategies for competitive survival and growth during
different stages of PLC: introduction, growth, maturity and decline.

Figure 11.4 Product Life Cycle (PLC): Sales and Profit

At the introduction stage, that is, when a new product enters the market,
it starts as a monopoly and competition is nil. As the product moves to the
growth stage, competitors start entering the market and competition begins. As
the product matures, competition intensifies and competitive rivalry reaches its
peak. Sales and profit also peak during this period. In the decline phase,
competitive pressure decreases because sales and profit start declining, and
many companies withdraw from the market or close down. Between introduction
Sikkim Manipal University

Page No. 299

Strategic Management and Business Policy

Unit 11

and growth, and, in the decline phase, competitive pressures are low, but,
mortality rates of products or businesses are high (Figure 11.4).
The lifespan of a product, and also speed or steepness in growth, maturity
and decline vary according to its nature or category. (This is what explains the
relative flatness (Figure 11.5) and relative steepness [of different PLC curves.)
Most electronic products have a shorter lifespan and also a steep PLC compared
to electrical or mechanical appliances. During the PLC, most markets witness
one market leader, one or a couple of market challengers and a number of
market followers. During the PLC, some niche players also develop in the market
who stay away from mainstream competition. In the toothpaste market, Colgate
is the leader, Pepsodent and Close-Up the challengers and Promise the follower.
Some say Vicco and Neem are niche players, but, there may be difference of
opinion on this.
Different studies have hypothesized different market structures, particularly
during the maturity phase, in terms of market shares of different players. These
studies indicate different types and levels of competition. The first of these studies
is by the Strategic Planning Institute, Cambridge, Massachusatts, popularly
known as PIMS Study. The second study is by Kotler, and, the third by Boston
Consulting Group (BCG). Buzzel (1981) has done consolidation and a
comparative analysis of these studies. The study results for market structures
in mature industries are summarized in Table 11.3.
Table 11.3 Market Structure in Mature Industries: Market Shares
Market Player

Market Share (%)
PIMS

Kotler

BCG

Market leader

52.7

40.0

50.0

Market challengers

28.8

30.0

25.0

Market followers

11.6

20.0

15.0

6.9

10.0

10.0

Market nichers

Source: R D Buzzel, ‘Are there Natural Market Structures?’ Journal of Marketing, 45
(Winter, 1981).

11.8.3 The War Model
The war model of competition is based on close parallel between military
strategies for war and marketing strategies. Many marketing strategists have
found close similarities between the two. Most common forms of war strategies

Sikkim Manipal University

Page No. 300

Strategic Management and Business Policy

Unit 11

are defensive warfare, offensive warfare, flanking warfare and guerrilla warfare.
Ries and Trout (1986) are among the greatest exponents of marketing warfare
based on military strategies. Principles of marketing warfare enunciated by them
are given in the following:
Principles of Defensive Warfare
1. Only the market leader should adopt a defensive strategy
2. The best defensive strategy is the courage to attack yourself
3. Strong competitive moves should always be blocked
Principles of Offensive Warfare
1. The strength of the leader is the most important consideration for mounting
an offensive attack
2. Find the leader’s weakness and attack it
3. Launch the attack on as narrow a front as possible
Principles of Flanking Warfare
1. A good flanking move is made into an uncontrolled area of the opposition
2. Tactical surprise should be an important element of the strategy
3. The pursuit is as crucial as the attack itself
Principles of Guerrilla Warfare
1. Find a small segment for intermittent attack; avoid confrontation
2. However successful you may be, never act like the leader
3. Be prepared to quit/exit at very short notice
Offensive and defensive strategies signify different competitive moves
and are of almost universal application in strategic business management today.

Self-Assessment Questions
15. According to classical economic theory, markets begin as _________,
move towards ______, then to monopolistic competition and ultimately
towards pure or perfect competition.
16. In a competitive environment, businesses can be classified into four
different categories: specialized businesses, volume businesses,
fragmented businesses and _______businesses.
Sikkim Manipal University

Page No. 301

Strategic Management and Business Policy

Unit 11

17. The Economic Model, Life Model and War Model are models of
(a) Competition
(b) Production
(c) Marketing
(d) Business strategy
18. Music records (HMV and others) black and white TV are examples of
(a) specialized businesses
(b) stalemated business
(c) volume businesses
(d) fragmented businesses

11.9 Porter’s Competitive Threat Model
A vital task of a strategist is to anticipate and/or recognize the nature of
competition and potential threat from competitors and to develop appropriate
response strategies. The most difficult task in this is to properly assess the
magnitude of existing competition and correctly foresee the threat from new
and emerging competitors. Porter (1980) in his pioneering work on competitive
strategy had identified five major types of competitive threats (Figure 11.5),
which are valid even today. These are:

Figure 11.5 Porter’s Five Forces Model
Source: M E Porter, Competitive Strategy: Techniques for Analysing Industries and
Competitors (New York: The Free Press, 1980).
Sikkim Manipal University

Page No. 302

Strategic Management and Business Policy

Unit 11

1. Industry (existing) competitors
2. Threat of substitutes
3. Bargaining power of buyers
4. Bargaining power of suppliers
5. Threat of new entrants
Industry competitors: Various degrees or intensities of competitive rivalry
exist in the market for a product. This is the battle for market share and is the
most immediate concern of a company, particularly if it is a market leader or
challenger. Ongoing battles between Coca-Cola and Pepsi, Surf and Ariel,
Colgate and Pepsodent are good examples. Competitive intensity or rivalry
depends, to a large extent, on the stage of the product life cycle. Competition is
practically non-existent at the introduction stage, then starts growing steadily
and becomes significant till the product enters the decline stage.
Threat of substitutes: Substitute products reduce demand for a particular
product or a category of products because some customers switch over to the
alternatives. Substitution depends on whether an alternative product offers higher
perceived value to the customers. Substitution may take three different forms:
product-for-product substitution, substitution of need and generic substitution,
Product-for-product substitution or substitution for the same use are same; for
example, e-mail substituting for postal service or mobile phones substituting for
landlines. Substitution of need means that a new product or service makes an
existing product or service redundant. For example, IT has provided e-Commerce
as a tool which has generally made secretarial services or printing redundant to a
large extent. Generic substitution takes place when different products or services
compete for a share in the same family income or household income: for example,
air conditioner manufacturers competing with colour televisions or music systems
or home theatres for snatching a share in ‘fixed’ household income.
Bargaining power of buyers: Buyers are generally in a better bargaining
position. But, they can become stronger bargainers or create competition among
suppliers under certain specific conditions. Some of these conditions are: i. the
buyer purchases a very significant proportion of total output of the supplier—
can happen typically in industrial products; ii. the industry consists of a large
number of small operators so that buyers can easily create competition among
them; iii. cost of switching a supplier is low, i.e., substitutes are available or
there is no product differentiation, or, for industrial or service products, there is
no long-term contract; iv. backward integration into supplier’s product—a truck
or car manufacturer beginning to make components or accessories like Tata
Sikkim Manipal University

Page No. 303

Strategic Management and Business Policy

Unit 11

Motors or an air conditioner manufacturer also making compressors like Carrier
Aircon or a colour TV manufacturer also making picture tubes like Sony.
Bargaining power of suppliers: Suppliers, or sellers, generally in a weak
bargaining position, can be strong bargainers under certain conditions. Such
market conditions are : i. no close substitutes available for the product offered
by the supplier ; ii. the product(s) sold by the supplier(s) is an important or
critical input in the buyer’s product; for example, ICs and chips in electronic
products which can be bought only from few or selected suppliers; iii. high
switching cost of changing a supplier—may be because the supplier
manufactures a special product or the product is clearly differentiated; iv. forward
integration into buyer’s product; for example, a carbon black producer entering
into tyre manufacturing and competing with tyre manufacturers or TVS (earlier
Lucas-TVS), traditionally a component or accessories maker, enters into
production of motor cycles (TVS-Suzuki).
Threat of new entrants: Many times, new entrants pose a major threat to
the existing market players. Examples of entry of Toyota and Honda in the US
car market (and also in the global market), Maruti Suzuki’s entry into the Indian
car market, Vimal fabrics in the Indian textile market and Titan in the Indian
watch market are well known. In fact, most of the established products and
brands in consumer and industrial markets today were new entrants at some
point of time. Forecasting the emergence of new entrants is very important for
existing competitors and it is also one of the most difficult jobs. But, companies
which fail to foresee the new entrants or ignore them may even face disastrous
results. We have the examples of Padmini (earlier Fiat) cars, HMT watches,
Weston TV, etc.
Activity 2
Choose any FMCG or consumer durable product or brand.and analyse the
competition for this product in terms of Porter’s five forces model.

Self-Assessment Questions
19. Ongoing battles between Coca-Cola and Pepsi is a good example of
_____ competitors.
20. Air conditioner manufacturers competing with colour televisions or music
systems or home theatres for snatching a share in ‘fixed’ household income
is an example of ________ substitution.
Sikkim Manipal University

Page No. 304

Strategic Management and Business Policy

Unit 11

11.10 Competitive Advantage Analysis
Competitive advantage, also called strategic advantage, is essentially a position
of superiority of an organization in relation to its competitors. A more formal
definition of competitive advantage is:
‘Competitive advantage exists when there is a match between the
distinctive competences of a firm and the factors critical for success
within its industry that permits the firms to outperform competitors.’10

The definition shows that superiority of a company over its competitors
exists because the company has developed some unique competence—core
competence or distinctive competence—which matches the environmental
factors or success factors in the industry in a better way than the capabilities of
competitors. South (1981) has given a definition of competitive advantage which
also gives a good perspective:
‘The process of strategic management is coming to be defined, in fact,
as the management of competitive advantage, that is, a process of
identifying, developing and taking advantage of enclaves in which a
tangible and preservable business advantage can be achieved.’11

11.10.1 Developing Competitive Advantage
Competitive advantage can be secured through two primary routes: product
manufacturing and marketing route. The product manufacturing route reflects
core competences, special capabilities, superior product design, etc. The
marketing route reflects marketing mix application, positioning, offering a bundle
of benefits or value to the customer, etc. The product-making route and the
marketing route are obviously not exclusive to each other; they are, in fact,
complementary to or supporting or reinforcing each other (Figure 11.6).

Figure 11.6 Competitive Advantage: Product and Marketing

Sikkim Manipal University

Page No. 305

Strategic Management and Business Policy

Unit 11

A corporate strategy can consist of various individual strategies like product
strategy, pricing strategy, promotion strategy, distribution strategy, competition
strategy, etc. Many forms of competition exist. But these strategies or the way
a company competes is not the only key to, or the complete course for success.
There are at least three other strategic factors which are essential for creation
of a competitive advantage which can be sustained over time. These three
factors are: how to compete (basics), i.e., business assets and skills, where to
compete, i.e., product–market selection, and whom to compete against, i.e.,
competitor position (Figure 11.8).

Figure 11.7 Factors Contributing to Competitive Advantage (CA)

For securing competitive advantage, corporate strategy should be based
on appropriate assets, skills and capabilities. Important business assets are
customer base, quality reputation, good management or company image, proper
engineering or skilled staff, etc. For example, a product strategy for an industrial
good without proper design, manufacturing and quality control capabilities will
not deliver the results or any sustainability to the product or quality.
Special assets and skills of a company can also be termed as core
competence or distinctive competence of the company. According to Hamel
and Prahalad (1990), advantages of companies and businesses are based on
core competence of these companies, and therefore, developing and managing
core competence are the keys to strategic success. Core competences, however,
are not the only sources of competitive advantage. We shall see this later.
The next important factor is the choice of the target product-market. A
well-planned strategy duly supported by assets and skills may not succeed
because it does not work in a particular market. Procter and Gamble’s Pringle
potato chips had many assets like consistent quality, long shelf life and national
distribution. But, these assets adversely affected the taste perception which
was considered to be the most important factor in the market.
Sikkim Manipal University

Page No. 306

Strategic Management and Business Policy

Unit 11

The third important factor for competitive advantage is competitor position.
The objective or goal here is to employ a strategy to thwart competitors who
may lack strength in relevant assets and skills or is weak in some other strategic
applications. For example, flight safety is important to airline passengers: so, if
an airline is perceived to be strong on safety, then a competitive advantage can
exist in terms of provision of flight safety or better flight security.

Self-Assessment Questions
21. A position of superiority of an organization in relation to its competitors is
called __________.
22. Various individual strategies like product strategy, pricing strategy,
promotion strategy, distribution strategy, competition strategy make up
the ________. strategy
23. According to Hamel and Prahalad (1990), advantages of companies and
businesses are based on core competence of these companies.
(True/False)
24. While securing competitive advantage, the product-making route and the
marketing route are exclusive to each other. (True/ False)

11.11 Case Study
Coca-Cola and Pepsi: Is Coke falling behind in competitive rivalry?
Coca-Cola and Pepsi are intense rivals in the global beverages market. In
some countries, Coca-Cola is the market leader with Pepsi the challenger
(No. 2); in some other markets, it is the opposite. But, competition continues
with fluctuating fortunes.
For quite sometime, Coca-Cola was the best-known brand in the world.
But, since 1998, the company has undergone a number of unsettling
developments which affected its performance and brand image. These
included management mistakes; and also change in the top management.
After unsuccessful, and also controversial, tenures of a couple of CEOs,
Neville Isdell was called out of retirement to become Coke’s CEO in 2004.
During 2000–05, 13 highest-level executives left their jobs indicating chaos
at the top of the comapny.*
Coca-Cola was going flat**. In the first quarter of 2005, Coke reported a
decline of 11 per cent in profits because of continuing poor sales in the US
Sikkim Manipal University

Page No. 307

Strategic Management and Business Policy

Unit 11

and Europe. In contrast, Pepsico registered a 13 per cent increase in profit.
Pepsico attributed the increase to aggressive investments in North American
beverages, international business operations and its plan to increase these
investments in future. This may mean further trouble for Coca-Cola. Both
companies are heavily dependent on their beverages businesses. The
increase in Pepsico’s business in North American and international markets
has, at least partly, been due to Coke’s declining performance, image and
losses.***

Neville Isdell is fully seized with the challenges that his company is facing.
He, however, claims that the ‘system isn’t broken’; but, some analysts may
not agree with him. One analyst pointed out that Coca-Cola has not produced
a successful new soda since 1982. Consultant Tim Pirko has suggested
that the company should invest heavily in developing new brands. He feels
that the company needs to take some new risks, if necessary, to ensure
that the consumers again become excited about Coke products. ****
The company is also aware of it. Coca-Cola has been investing heavily to
rejuvenate the company’s stronger brands, and also in new products/drinks.
During 2005, the company invested in the growing non-calorie soda market
with Coca-Cola Zero; it acquired a stake from Danone in bottled water joint
venture; it bought a majority stake in a milk drink company; it started
distributing the Rockstar energy drink. In response to all this, Pepsi gave a
big push to its new products through Pepsi One, Pepsi Lime and Propel
fitness water.
In this scenario, will Coca-Cola be able to recover lost grounds and fully
rehabilitate itself?
* The Coca-Cola company announces changes to senior management and operating
structure,’www.2.coca-cola.com, March 2005.
** D Faust, ‘Gone Flat,’ Business Week, December 20, 2004.
*** B Morris, ‘Coca-Cola: The Real Story,’ Fortune, May 17, 2004.
**** B Morris (2004).

Sikkim Manipal University

Page No. 308

Strategic Management and Business Policy

Unit 11

11.12 Summary
Let us recapitulate the important concepts discussed in this unit:
• Competition is one of the most important components of business
environment.
• Industries can be of various types—almost each major product group
constitutes an industry. Industries can also be classified in terms of size
of the constituent units or companies, state or pace of development of the
industry, spread of the market, etc.
• Various industries can be classified into five categories – fragmented
industry, emerging industry, mature industry, declining industry and global
industry.
• Competition can be understood better by analysing competitor actions.
More important factors which govern competitive action are objectives or
goals, size and growth, organizational culture, strengths and weaknesses,
cost structure, profitability, image and positioning, and current and past
strategies.
• Various models of competition are mentioned in strategic marketing
literature. Competition takes various forms and can be of different
intensities. Different models of competition try to analyse this. Three
important models of competition are: the economic model, the life model
and the war model.
• Porter’s competitive threat model (Five Forces Model) analyses five major
types of competitive threats a company can face in the marketplace. These
are: industry (existing) competitors, threat of substitutes, bargaining power
of buyers (backward integration), bargaining power of suppliers (forward
integration) and threat of new entrants.

11.13 Glossary
• Competitive advantage: A position of superiority of an organization in
relation to its competitors
• Industry: A group of firms producing products that are close substitutes
for each other
• Monopoly: A condition in which there is single seller with no close
substitute product
• Oligopoly: A condition in which there are few sellers
Sikkim Manipal University

Page No. 309

Strategic Management and Business Policy

Unit 11

11.14 Terminal Questions
1. Describe briefly the various types of industries classified by Porter.
2. What is a fragmented industry? Analyse the main features of competitive
strategy in a fragmented industry.
3. Distinguish the major characteristics of emerging industries and mature
industries. Also discuss the contrasts of competitive strategies in these
two types of industries.
4. What is a global industry? Explain with examples, international strategy,
multi-domestic strategy, global strategy and transnational strategy.
5. Distinguish and analyse the economic model, the life model and the war
model of competition. Are there any similarities among the three models?
6. Explain Porter’s competitive threat model (Five Forces Model). Also explain
forward and backward integration.

11.15 Answers
Answers to Self-Assessment Questions
1. Industry
2. Business
3. (c) fragmented industry
4. (d) mature industry
5. Emerging
6. Mature
7. True
8. False
9. understanding and evaluating competitors
10. competitor analysis
11. customer-based
12. strategic

Sikkim Manipal University

Page No. 310

Strategic Management and Business Policy

Unit 11

13. True
14. True
15. Monopolies, oligopoly
16. Stalemated
17. (a) Competition
18. (b) stalemated business
19. Industry
20. Generic
21. Competitive advantage
22. Corporate
23. True
24. False

Answers to Terminal Questions
1. Porter broadly classified various industries into five categories. Refer to
Section 11.4 for further details.
2. Porter has suggested a framework or steps for formulating competitive
strategies in fragmented industries. Refer to Section 11.5.1 for further
details.
3. Formulation of strategy in emerging industries is very difficult task due to
structural characteristics of uncertainty and associated risk. In contrast,
mature industries pose almost the opposite problem, i.e., of competitive
overcrowding. Refer to Section 11.5.2 and 11.5.3 for further details.
4. In global industry, the strategic position of companies in different countries
or national markets are governed by their overall global positions. Refer
to Section 11.5.5 for further details.
5. There are three important models of competition – Economic Model, Life
Model and the War Model. Refer to Section 11.8 for further details.
6. Porter identified five major types of competitive threats. Refer to Section
11.9 for further details.

Sikkim Manipal University

Page No. 311

Strategic Management and Business Policy

Unit 11

11.16 References
1. Aaker, D A, 1995. Strategic Market Management. 4th ed. New York: John
Wiley & Sons.
2. Day, G S. 1984. Strategic Market Planning: The Pursuit of Competitive
Advantage. St. Paul, Minnesota: West Publishing Co.
3. Day, G S. 1990. Market Driven Strategy. New York: The Free Press.
4. Porter, M E. 1990. Competitive Strategy: Techniques for Analysing
Industries and Competitors. New York: The Free Press.
5. Porter, M E. 1990. The Competitive Advantage of Nations. New York: The
Free Press.
6. Thompson Jr, A A, A J Strickland III, and J E Gamble. 2005. Crafting and
Executing Strategy: The Quest for Competitive Advantage. New Delhi:
Tata McGraw Hill Publishing Co.
Endnotes
1

M E Porter, Competitive Strategy: Techniques for Analysing Industries and Competitors
(New York: The Free Press 1980). 5.

2

M E Porter, Competitive Strategy (1980), 5

3

M E Porter, Competitive Strategy (1980), 255.

4

M E Porter, Competitive Strategy (1980), 275.

5

M E Porter, Competitive Strategy (1980), 213.

6

M E Porter, Competitive Strategy (1980), 229–30

7

M E Porter, Competitive Strategy (1980), 268

8

A Aaker, Strategic Market Management, 4th ed. (New York: John Wiley & Sons, 1995),
65.

9

M J Xavier, Strategic Marketing: A Guide for Developing Sustainable Competitive
Advantage (New Delhi: Response Books, 1999), 213–14.

10

P D Bennett, ed., Dictionary of Marketing Terms, (Chicago: American Marketing
Association, 1988), 35.

11

S E South, ‘Competitive Advantage: The Art of Strategic Thinking,’ The Journal of Business
Strategy, 4 (Spring 1981).

Sikkim Manipal University

Page No. 312