Introduction to Management

MGMT 1100
Competitive Analysis
Generic Competitive Strategies
The 5 Forces-Summary from last week
 An Environmental Analysis should
answer the following questions:

– Question 1: What Components of the firm’s Macro-Environment

are Important?
– Question 2: What Kinds of Competitive Forces Are Industry
Members Facing?
– Question 3: What Market Positions Do Rivals Occupy—Who Is
Strongly Positioned and Who Is Not?
– Question 4: What Strategic Moves Are Rivals Likely to Make
Next?
– Question 5: What Are the Key Factors for Future Competitive
Success?
– Question 6: Does the Outlook for the Industry Present an
Attractive Opportunity?
https://www.iea.org/publications/globalevoutlook_2013.pdf
2021: According to the study, EVs currently make up 3% of global car sales.

2025: (EVs) will hit 10% of global passenger vehicle sales

2030: (EVs) will hit 28% of global passenger vehicle sales

2040: (EVs) will hit 58% of global passenger vehicle sales

NOTE: in 2019, approx. 77.5M cars sold worldwide

Source: Bloomberg New Energy Finance

Q #3: What Market Positions do Rivals occupy? Who is Strongly
Positioned, and Who is Not?
Q#4:What Strategic Moves Are Rivals Likely to Make?

• A firm’s best strategic moves are affected by

– Current strategies of competitors
– Future actions of competitors
• Profiling key rivals involves gathering
competitive intelligence about
– Current strategies
– Most recent actions and public announcements
– Resource strengths and weaknesses
– Efforts being made to improve their situation
– Thinking and leadership styles of top executives
 Competitive Analysis
• Who are our competitors?
• In which markets?
• What share of the defined market does each have? How is it
changing and at what rate?
• Who’s poised to gain market share?
• Who is the market leader?
• Who is the most profitable competitor?
• What are their strengths/weaknesses?
• Which rival has the best strategy?
• Who’s likely to rank among industry leaders five years from
now?
• Which competitor is most like us?
• Who is the fastest growing competitor?
• Who do outside sources consider our competitors to be?
• Which rivals are good candidates to be acquired?
• Who’s likely to expand their arenas (geographically, product
categories)?
 Tesla’s Rivals
• What market positions do they occupy?
(How are they segmented?)
– EVs
– Premium vehicles
• Who is strongly positioned?
• What are the strengths and weaknesses of
the key players?
• How strong is the rivalry?
 Tesla-2013
• Who are our primary competitors? Which Markets?
– Nissan Leaf? (EV, but lower end)
– Fisker? (EV, but massive financial difficulties)
– BMW? (sporty, hi-end auto AND EV under
development!)
– Mercedes? (sporty, hi-end auto AND EV under
development!)
– Hybrids (Chevy Volt, Prius PHV)?
– VW? (sporty, hi-end, low emissions auto )
 Competitive Analysis-2013
Premium Vehicles EV’s (& hybrids)
(BMW/Mercedes/Audi) Chev Volt, Toyota Prius, Nissan
Leaf & potential other new
• Brand entrants
• Reputation • Toyota’s Prius most
• Resources prevalent hybrid car
• Product line • Nissan’s Leaf only fully
• EV (to date)
BMW working on all-
electric series, i3. • Chevy Volt (hybrid) Low
Designed EV motors price point
internally
• Mercedes Benz B Class • Ford, GM clearly
Electric Drive also in interested in EV/hybrid
development! market
Tesla’s Rivals-2020 and beyond
 Q #5: What Are the Key Factors for
Competitive Success?
• KSFs are those competitive factors most affecting every
industry member’s ability to prosper. They concern
– Specific strategy elements
– Product attributes
– Resources
– Competencies
– Competitive capabilities
that a company needs to have to be competitively successful
• KSFs are attributes that spell the difference between
– Profit and loss
– Competitive success or failure
 Identifying Industry Key Success
Factors
• Pinpointing KSFs involves determining
– On what basis do customers choose
between competing brands of sellers?
– What resources and competitive capabilities does a seller need
to have to be competitively successful?
– What does it take for sellers to achieve a sustainable competitive
advantage?
• KSFs consist of the 3 - 5 major determinants
of financial and competitive success
 EV Industry

• As a team, determine what the Key

Success Factors are for the EV Industry
 Q #6: Does the Outlook for the Industry
Present an Attractive Opportunity?
• Involves assessing whether the industry and competitive
environment is attractive or unattractive for earning good
profits

• Under certain circumstances, a firm uniquely

well-situated in an otherwise unattractive industry
can still earn unusually good profits

– Attractiveness is relative, not absolute

– Conclusions have to be drawn from the

perspective of a particular company
 The EV Industry

• Sum it up: How attractive is this market

(from the perspective of Tesla)?
• What are the financial implications of
being in this market
 An Environmental Analysis should
answer the following questions:

– Question 1: What Components of the firm’s Macro-Environment

are Important?
– Question 2: What Kinds of Competitive Forces Are Industry
Members Facing?
– Question 3: What Market Positions Do Rivals Occupy—Who Is
Strongly Positioned and Who Is Not?
– Question 4: What Strategic Moves Are Rivals Likely to Make
Next?
– Question 5: What Are the Key Factors for Future Competitive
Success?
– Question 6: Does the Outlook for the Industry Present an
Attractive Opportunity?
The Five Generic Competitive Strategies
 Successful Differentiation

A product / service with unique, appealing attributes

allows a firm to
 Command a premium price and/or
 Increase unit sales and/or
 Build brand loyalty
= Competitive Advantage
 When Does a Differentiation
Strategy Work Best?

• Buyer needs and uses are diverse

• Few rivals are following a similar

differentiation approach

• Technological change and

product innovation are fast-paced
 Sustaining Differentiation

Areas of differentiation
– New product innovation
– Technical superiority
– Comprehensive customer service
– Unique product attributes
– Product quality
 8 Dimensions of Quality

• Performance (primary product

characteristics)
• Features (“Bells and Whistles”)
• Reliability (frequency of field failures)
• Conformance (match with specifications)
 Quality –cont’d

• Durability (Product Life)

• Serviceability (Speed, courtesy or
competence of repair)
• Aesthetics (fits and finishes)
• Perceived Quality (reputation and
intangibles)
Risks of Differentiation Strategy?
 Achieving a
Low-Cost Advantage
Option 1: Use lower-cost edge to

– Underprice competitors and attract

price-sensitive buyers in enough
numbers to increase total profits

Option 2: Maintain present price, be content with present

market share, and use lower-cost edge to

– Earn a higher profit margin on

each unit sold, thereby
increasing total profits
 Approaches to Securing
a Cost Advantage

•Do a better job than rivals of performing value

chain activities efficiently

•Eliminate cost-producing activities that add little

value from the buyer’s perspective
 When Does a Low-Cost
Strategy Work Best?
• Product is standardized or readily available from
many suppliers
• Price competition is vigorous
• There are few ways to achieve
differentiation that have value to buyers
• Buyers incur low switching costs
• Buyers are large and have significant bargaining
power
Risks of LC strategy?
 Focus / Niche Strategies

• Involve concentrated attention on a narrow

piece of the total market - - Serve niche
buyers better than rivals
– Choose a market niche where buyers have
distinctive preferences, special requirements,
or unique needs
– Develop unique capabilities to serve needs of
target buyer segment
 Approaches to Defining
a Market Niche

• Geographic uniqueness

• Specialized requirements in
using product/service

• Special product attributes

appealing only to niche buyers
The Five Generic Competitive Strategies
 Focus / Niche Strategies
and Competitive Advantage

Approach 1
• Achieve lower costs than
rivals in serving the segment --
A focused low-cost strategy

Approach 2
• Offer niche buyers something
different from rivals --
A focused differentiation strategy
 Best-Cost Provider Strategy (value)

• Matching close rivals on key product attributes and

beating them on price

• A best-cost producer can often out-compete both a

low-cost provider and a differentiator when
– Standardized features/attributes
won’t meet diverse needs of buyers
– Many buyers are price and value sensitive
Risks of a Best-Cost
Provider Strategy?
Which Generic Competitive Strategy?

• Each positions a company differently in its market

• Each establishes a central theme for how a
company will endeavor to outcompete rivals
• Each entails different choices in product line,
production emphasis, marketing emphasis, and
means to sustain the strategy
• ALL FUNCTIONAL DECISIONS NEED TO ALIGN
WITH THE FIRMS OVERALL COMPETITIVE
STRATEGY!