Market Competition &

Competitors’ Analysis
 Analyzing organization’s competitors helps an organization to
discover its weaknesses, identify opportunities and threats in
industrial environment as organizations do not exist in vacuum. .

 For strategy, managers must consider the strategies of

competitors’.

 Competitor analysis is a driver of an organization’s strategy and

effects on how firms act or react in their sectors.

 The analysis will also assess its own standing amongst the
competitors.
 Competitor analysis begins with identifying present as well as
potential competitors

 An industry analysis gives information regarding probable

sources of competition. The analysis includes all the possible
strategic effects on profitability for all organizations competing
in the industry.
 Competitor analysis – why?

1. To study the market for forecasting company’s demand/ supply

2. To formulate strategy for organizational growth
3. To increase the market share
4. To study the market trend / pattern in the industry.
5. To pave way for planning diversification and expansion.
6. To analyze competitors along various dimensions - their size,
growth and profitability, reputation, objectives, culture, cost
structure, strengths and weaknesses, business strategies, exit
barriers, etc.
7. To suggest opportunities and threats that will merit a response
after understanding competitors’ strengths and weaknesses.
8. Insight into future competitor strategies that may help in
predicting upcoming threats and opportunities.
What are the top tools used for business environment analysis?

Tools used for business environment analysis :

• B) SWOT Analysis
• C) Porter's Five Forces Model
• D) PESTELE Model
• E) Growth Share Matrix

But before that we must determine

• A) What type of Competitors we are going to face/ facing n the
market?
Types of competitors

 For building a decisive advantage over the competition and

marketing strategies, competitor analysis is essential

 There are 4 types of competitors in the market environment, the

firm can respond with the right strategies and decide how to
position itself.

1. Market leader
2. Market challengers
3. Market followers
4. Market nichers
Market leader

 The market leader is the most powerful among the four types of
competitors with the largest market share.

 It usually leads other firms in price changes, new product

introductions, distribution coverage and promotion spending. In
other words, it is the firm that dominates a market.

 Examples of market leaders include Nescafé, Chanel, Johnnie

Walker, Coca-Cola, McDonald’s, Marlboro, and LIC of India.
Market challengers

 The market challengers can be the most dangerous ones due to

their aggressiveness.

 A market challenger is a runner-up firm in an industry that is

fighting hard to increase its market share. It aggressively
attacks competitors to get some of their market share

 Examples, Lexus challenges Mercedes, Adidas challenges Nike,

and Airbus challenges Boeing, Pepsi challenges Coke in cola-
drinks, Samsung - iPhone.

 The challenger might attack the market leader and other firms
of its own size, or smaller local and regional competitors.

 Some runner-up firms will choose to follow rather than challenge

the market leader.
Market followers

 Market followers are firms that just play along; though are
capable to challenge but they prefer to follow.

 They seek stable market shares and profit by following

competitors’ product offers, prices and marketing programs.

 In some capital goods industries like steel, cement, chemical,

fertilizer, etc., product differentiation is low, service qualities are
similar, and price sensitivity is high. So, followers provide similar
offers by copying the market leader.

 The Market followers too require specific market strategies. They

cannot be simply passive or a carbon copy of leaders. They must
know how to hold current customers and win a fair share of
new customers. Followers must keep manufacturing cost low
and offer better quality products with satisfactory services,
enter new markets as and when there are opportunities.
Market nichers

 Market nichers are firms in an industry that serve small segments

that the other firms overlook or ignore.

 Market nichers are often smaller firms in a market, but can even
be larger firms that lack established positions.

 Market nichers avoid direct confrontations with the big

companies by specialising along market, customer, product or
marketing-mix lines.

 However, through clever niching, low-share firms in an industry

can be as profitable as their large competitors.
Market nichers

• Nichers understand their niches’ needs so well and minutely that

their customers are willing to pay a premium price. They design
special products with distinctive features, qualities, uses, and
value for special group of limited customers.

• A footwear company can create niches by designing shoes for

different sports - cricket, hockey, athletes, golf, etc. For exercises
like cycling, running, jogging, waking, etc. In the same way, niches
can be created in hotels, cosmetics, cloths, airways and hospitals.
Nichers can gain comparatively high returns/ high margin while
large companies can achieve high volume.

• Nichers have to perform three main tasks – creating niches,

expanding niches, and protecting niches. They have to remain
alert for all the time as they can be invaded any time by the large
competitors.
B) Strategic Planning to Actionable Items

• SWOT analysis is one of the first steps in the strategic

management process, a technique developed at Stanford in the
1970s, frequently used in strategic planning.

• SWOT is an acronym for Strengths, Weaknesses, Opportunities,

and Threats and is a structured planning method that evaluates
those four elements of an organization, project or business
venture.

A SWOT analysis is a simple, but powerful, framework for:

• leveraging the Organization’s Strengths
• Improving Weaknesses
• Minimizing threats
• Taking Advantage of Opportunities.
• SWOT analysis process helps the management to identify of what
is happening internally and externally, for planning and
managing business in the most effective and efficient manner.
C) Porter’s Five Forces - When to use?

• Porter’s Five Forces is a framework that examines the competitive

market forces in an industry or segment. It helps you evaluate an
industry or market according to five elements: new entrants,
buyers, suppliers, substitutes, and competitive rivalry.

• According to Michael Porter’s model, these are the key forces that
directly affect how much competition a business faces in an
industry.

• Looking at the five forces can provide insights into how attractive
it is to enter a new market, which will help if you are considering
to expand your product offering to reach new customers.
Benefits of Porter’s Five Forces analysis

 The forces analysis helps organizations to understand the

factors affecting profitability in a specific industry, and can
help to inform decisions relating to:

 whether to enter a specific industry;

 whether to increase capacity in a specific industry; and

 developing competitive strategies.

 Porters 5 forces model

Competitive environment within an industry depends on:

A. Bargaining power of suppliers,

B. Bargaining power of buyers,
C. Rivalry among current competitors.
D. Threat of substitute product/services,
E. Threat of new potential entrants,

These five forces should be used as a conceptual background for

identifying an organization’s competitive SWOT for the environment
Porter's 5 Forces of Competitive Position Analysis

 Developed in 1979 by Michael E Porter of Harvard Business School

 It’s a simple framework for assessing and evaluating the

competitive strength and position of a business organization.

 This theory is based on the concept that there are five forces that
determine the competitive intensity and attractiveness of a
market.
(i) Supplier power

 An assessment of how easy it is for suppliers to drive up prices.

 This is driven by:

 number of suppliers of each essential input
 uniqueness of their product or service
 relative size and strength of the supplier
 cost of switching from one supplier to another.
Bargaining Power of Suppliers (example)

• Porter points out that when there are only a few sources of
supply but many buyers, suppliers will dominate a greater share
of profits.

• China’s strategy for solar panel cells is an example of a

business strategy based on the expectation of driving prices
down far enough that suppliers in countries with higher
labour costs can’t compete.

• Eventually this leaves China’s solar industries as predominating

major supplier, whereby China will be able to control profits.
(ii). Buyer power

 An assessment of how easy it is for buyers to drive prices down.

This is driven by

 number of buyers in the market

 importance of each individual buyer to the organization

 cost to the buyer of switching from one supplier to another.

 Bargaining Power of Buyer (example)
• Situations where there are only a few buyers and many suppliers,
buyers will dominate and will control supplier’s profits. Apple has
more than 200 Chinese component suppliers for its iPhone.
Competition among these suppliers for this single buyer compels
supplier to low-low prices – even to the point where workers have been
forced to work long hours without breaks in difficult condition.

• Apple’s largest Asian supplier, FoxConn (Hon Hai Precision Industry),

has been caught using student interns and forcing them to work
overtime without overtime pay in an effort to maintain market share.

• Apple has been criticized for the situation and has made some
attempts to ensure equitable working conditions for workers there.
But as Porter might have predicted, when the supplier/buyer imbalance
shifts in favour of the buyer to such an extreme, the resulting
competition will drive prices down to a point where suppliers may
believe that their survival depends on lowering prices below the
point at which keeping the workplace equitable and humane for its
workers is possible.
(iii) Threat of substitution

 Where close substitute products exist in a market, it increases the

likelihood of customers switching to alternatives in response to
price increases.

 This reduces both the power of suppliers and the attractiveness of

the market.
Threat of Substitutes (examples)

• Another competitive threat comes from the availability of

substitutes for a company’s existing product.

• Pharmaceutical industry’s attempts to devise strategies that hold

off the entrance into the marketplace of generic drugs are an
instance of a strategy opposing this threat. (Even Indian drugs
who holds the acceptance of FDA, USA with a pinch of salt)

• Sometimes, however, the substitute can come from an

unpredictable place.

• The volume of Speed Post and other mails at the Post Offices
have declined since the introduction of email. Suppliers of
components for gasoline and diesel-powered automobile engines
may soon find that the coming proliferation of electric cars over
the next decade or so threatens their industries with substitution
of components for electric vehicles.
(iv) Threat of new entry

 Profitable markets attract new entrants, which erodes profitability.

 Unless incumbents have strong and durable barriers to entry –

patents, economies of scale, capital requirements or govt policies
– profitability will decline to competitive rate.

Arguably, regulation, taxation and trade policies make government

a sixth force for many industries.
Threat of Entry (example)

• Strategic decision to enter can be for any number of reasons:

because the area is under-served, because profit margins are
unusually high or because the entering company benefits from a
patented process or product that gives them a unique advantage.

• Advantages are not permanent. The shape of the competition

changes nearly continuously. Porter observes that when
Polaroid’s instant photography patents expired, Kodak was well-
equipped to enter the market. Writing in 1979, Porter couldn’t
have known that in a few years digitization would drive one
company out of business.

• Porter’s analysis indicates that Apple’s security is no greater than

Polaroid’s. Threats can come from anywhere, and are difficult to
anticipate. In fact, Porter maintains that concentrating on future
sources of competition rather than on present products is key for
company survival.
(v) Competitive rivalry

 The main driver is the number and capability of competitors in the

market.

 Many competitors, offering undifferentiated products and services,

will reduce market attractiveness.
Competitive Rivalry (examples)

• (Porter’s fifth force is the cumulative effect of the first four).

• Competition can come from anywhere, from innovative new

products, from the emergence of powerful new suppliers or
buyers who control the marketplace, or from product
substitutions made possible by deregulation, innovation or more
cost efficient industrial processes, relying on innovative
technology, a lower-cost labour force, or both.
D) PESTLE

PESTEL Analysis
• PESTLE or PESTEL Analysis is a tool which helps companies have a
view of the macro environment it is operating in.

• PESTEL is an acronym and the letters stand for Political, Economic,

Social, Technological, Environmental and Legal.

• Also, this framework helps to keep track of all the changes

happening in the environment.

• Previously it was only PEST analysis. Then the legal environment

was included later. At the present time, a debate is going on about
including Ethics in the framework.
• It aids management in the decision-making process and urges
firms not only reacting to the changes in the environment but
also is converting opportunities into results.
D) PESTLE

PESTEL Analysis now also includes another E: PESTELE

• Ethical Factors: E stands for ethical

• It includes ethical principles and moral or ethical problems that

can arise in a business.

• It considers things such as fair trade, slavery acts and child

labour, as well as corporate social responsibility (CSR), where a
business contributes to local or societal goals such as volunteering
or taking part in philanthropic, activist, or charitable activities.
(E) Growth Share Matrix?

 The Growth Share Matrix is an analysis framework that classifies

the products in your company’s portfolio against the
competitive landscape of your industry.

 Developed by the founder of the Boston Consulting Group

(BCG) in 1970, the model gained widespread acceptance for
helping companies decide which products to invest in based on
competitiveness and market attractiveness.

• According to BCG, products fall into one of four quadrants in

the matrix, each with a corresponding strategy:
When to use the Growth Share Matrix?

• Question marks are high-growth but low-market-share

products, often new products with high potential. These should
be invested in or let go, depending on how likely a product is to
become a star.

• Stars are products that are likely to achieve high growth and
high market share. Your firm should invest heavily in these
products.

• Cash cows are low-growth but high-share products. These are

products that bring in cash and can fund investment in your
stars.

• Pets are low-share, low-growth products considered failures.

Your business should reposition these products or stop
investing in them.
When to use the Growth Share Matrix?

• It helps large firms to determine their product portfolios —

which products to invest in further and which to cut, based on
expected cash flow produced.

• However, it holds other uses, too.

• It can also be applied to analysis of digital marketing strategies.

By plotting channel growth against ROI of the channel and
evaluating similar to how you would evaluate products, a
marketer can see which channels to invest in or stop using, for
example.
BCG of Coca Cola
BCG of Samsung
BCG of Nestle