Cheat Sheet

Organizational Analysis
Competitive Rivalry:
Clearly a key factor in competitive intensity will be competitive rivalry. So what do marketers
need to consider?

 How many competitors do you have?

 Do you have a solid competitive strategy in place?
 Are you being innovative in order to give you the competitive advantage?
 Do your competitors have more advertising resources?
 Is there a difference in quality?
 Are yours, or their customers loyal?

Threat of New Entrants:

If an industry is perceived as attractive then of course new entrants are highly likely to appear. If
too many new entrants appear then profitability across the industry will be lowered and the
attractiveness will decline. The threat of new entrants can be lowered or even blocked by the
largest companies that have somewhat of a monopoly over the industry. Marketers will need to
consider:

 Are there many entry barriers? High entry and low exit barriers makes for an attractive
industry. Entry barriers may include rights, patents, technology protection etc.
 Do you have customer loyalty?
 Do you have specialist knowledge that can be used to differentiate you?
 Is there evidence of economies of scale in play in your industry?
 Is there any Government policy in place to either encourage or discourage new entrants?

Threat of Substitution:
Customers may choose to substitute your product or service for another. This is not the same as
switching to a different company to use the same product but switching products entirely. For
example switching from a regular phone to a smartphone, or from a sugary snack to a healthy
alternative snack. The more products that continue to appear, the higher the chances your
customers will be drawn to an alternative from their usual choice. How can marketers confront
this?

 How many substitute products to your own are there?

 Is there a perceived level of differentiation?
 Is there a cost to the buyer for switching?
 How easy is it for the buyer to switch?
Supplier Power:
We all have suppliers, whether it is raw materials, knowledge support or physical staff labour.
Marketers know that a great deal of research and consultation will be done in order to attain the
best suppliers at the best price. But what if there is very little choice of suppliers? The fewer
suppliers there are, the more power they have over you and the prices they charge. Marketers
should consider:

 How many suppliers are available to you?

 What are the sizes of the suppliers available to you?
 What are the costs to both you and them for switching suppliers?
 What is the strength of your distribution channel?

Buyer Power:
When the buyers themselves have power they can apply pressure to companies, in particular
pressure to lower their prices. If the buyer has many choices of products and companies then
their power is high. If buyers decide to join together so that a large portion of the market share
is putting pressure on companies then they again have high power. How can marketers prepare
for this?

 How many buyers do you have?

 How price sensitive are your buyers?
 What information is available to you on your buyers?
 What differentiates you from your competitors?