Competitive Forces

 An important part of an industry analysis is identifying rival

firms and determining their strengths, weaknesses,
capabilities, opportunities, threats, objectives, and strategies
Competitive Forces
Characteristics of the most competitive companies:
1. Strive to continually increase market share
2. Use the vision/mission as a guide for all decisions
3. Whether it's broke or not, fix it-make it better
4. Continually adapt, innovate, improve
5. Acquisition is essential to growth
6. Hire and retain the best employees and managers possible
7. Strive to stay cost-competitive on a global basis
Key Questions About Competitors

1. What are the strengths of our major competitors?

2. What are the weaknesses of our major competitors?
3. What are the objectives and strategies of our major
competitors?
4. How will our major competitors most likely respond to
current economic, social, cultural, demographic,
environmental, political, governmental, legal, technological,
and competitive trends affecting our industry?
Key Questions About Competitors

5. How vulnerable are the major competitors to our alternative

company strategies?
6. How vulnerable are our alternative strategies to successful
counterattack by our major competitors?
7. How are our products or services positioned relative to major
competitors?
8. To what extent are new firms entering and old firms leaving
this industry?
9. What key factors have resulted in our present competitive
position in this industry?
Key Questions About Competitors

10. How have the sales and profit rankings of our major
competitors in the industry changed over recent years? Why
have these rankings changed that way?
11. What is the nature of supplier and distributor relationships in
this industry?
12. To what extent could substitute products or services be a
threat to our competitors?
Competitive Intelligence Programs
Competitive intelligence (CI)
• a systematic and ethical process for gathering and analyzing
information about the competition's activities and general
business trends to further a business's own goals
Competitive Intelligence Programs
The three basic objectives of a CI program are:
1. To provide a general understanding of an industry and its
competitors
2. To identify areas in which competitors are vulnerable and to
assess the impact strategic actions would have on competitors
3. To identify potential moves that a competitor might make that
would endanger a firm's position in the market
Industry Analysis: Competitive Profile
Matrix (CPM)
 Identifies firm's major competitors and their strengths &
weaknesses in relation to a sample firm's strategic positions
 Critical success factors include internal and external issues
 Table 3-12 An Example Competitive
Profile Matrix
Blank Blank Company 1 Company 2 Company 3
Company 1 Company 2 Company 3

Critical Success Weight Rating Score Rating Score Rating Score

Factors
Advertising 0.20 1 0.20 4 0.80 3 0.60

Product Quality 0.10 4 0.40 3 0.30 2 0.20

Price 0.10 3 0.30 2 0.20 1 0.10
Competitiveness
Management 0.10 4 0.40 3 0.20 1 0.10
Financial Position 0.15 4 0.60 2 0.30 3 0.45
Customer Loyalty 0.10 4 0.40 3 0.30 2 0.20
Global Expansion 0.20 4 0.80 1 0.20 2 0.40
Market Share 0.05 1 0.05 4 0.20 3 0.15
Total 1.00 blank 3.15 blank 2.50 blank 2.20

Note: The ratings values are as follows: 1 = major weakness, 2 = minor weakness, 3 = minor strength, 4 = major
strength. As indicated by the total weighted score of 2.50, Competitor 2 is weakest. Only eight critical success factors
are included for simplicity; this is too few in actuality.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved
Resources
Resources
 Resources cover a spectrum of individual, social and organizational phenomena
 Resources along does not yield a competitive advantage
 Competitive advantage is generally based on the unique bundling of several resources

Example
 Amazon.com combined service and distribution resources to develop its competitive advantage
 Firm started as an online bookseller, but quickly grew large and established a distribution
network through which it could ship different items
 Traditional brick-and-mortar companies such as Borders found it difficult to establish an online
presence
 Borders now has partnership with Amazon for online orders.
Tangible Resources
Tangible Resources
Financial Resources • Firm’s borrowing capacity
• Firm’s ability to generate internal funds
Organizational • The firm’s formal reporting structure
Resources • Firm’s formal planning, controlling and coordinating
systems
Physical Resources • Sophistication and location of a firm’s plant and
equipment
• Access to raw materials
Technological • Stock of technology, such as patents, trade-marks,
Resources copyrights and trade secrets
Intangible Resources
Intangible Resources
Human Resources • Knowledge
• Trust
• Managerial capabilities
• Organizational routines
Innovation Resources • Ideas
• Scientific capabilities
• Capacity to innovate
Reputational • Reputation with customers
Resources • Brand name
• Perceptions of product quality, durability and reliability
• Reputation with suppliers
• For efficient, effective, supportive and mutually beneficial
interactions and relationships
Tangible and Intangible Resources-
Examples
Tangible Resources Intangible Resources

Reliance Industries Cash Reserves Tata Brand Name

Ford Motor Company’s Cash Reserves Dell Computer’s Reputation

Georgia Pacific’s land Holdings Nike’s advertising

Virgin Airlines Plane Fleet Vodfone’s advertising

Coca-Cola’s Coke Formula Wal-Mart’s culture

Resource Imitation

Cannot be imitated
• Patents
• Unique locations
• Unique assets (e.g
Difficult to imitate mineral rights)
• Brand Loyalty
• Employee Satisfaction
Can be imitated (but • Reputation of fairness
many not be)
• Capacity
• Economies of Scale
Easy to Imitate
• Cash
• Commodities
Capabilities
Capabilities
 Capabilities exist when resources have been purposely integrated to achieve a specific task or
set of tasks
 Capability is critical to building of competitive advantage
 Capabilities are often based on developing, carrying and exchanging information and
knowledge through firm’s human capital
 Client-specific capabilities often develop from repeated interactions with clients
 Capabilities are often developed in specific functional areas– manufacturing, R&D, marketing
Examples of Firm’s Capabilities
Functional Capabilities Examples
Area
Distribution Effective use of logistics management Wal-mart, HUL
techniques
Human Motivating, empowering and retaining Microsoft,
Resources employees Facebook
Management • Effective and efficient control of inventories Wal-Mart, HUL,
Information through point-of-purchase ITC
System • Data collection methods
Marketing • Effective promotion of brand-name products Procter & Gamble
• Effective customer service HUL
• Innovative merchandising ITC
McKinsey & Co
Bharti Airtel
Cavincare
Examples of Firm’s Capabilities
Functional Capabilities Examples
Area
Management • Ability to envision the future of clothing Hugo Boss
• Effective organizational structure PepsiCo
Manufacturing • Design and production skills yielding Komatsu
reliable products
• Miniaturization of components and products Sony
Research and • Innovative technology Caterpillar
Development • Development of sophisticated elevator Otis Elevator Co
control solutions
• Digital technology Thomson Consumer
Electronics
THANK YOU