MGMT 498

[business policy & strategy]

Professor Ravi Shanmugam

Class 4: External environment
(pt. 2)
Thu 1/26/23

Pre-class slides

© Ravi Shanmugam, 2023

 Today’s plan

Environmental scanning & monitoring

Last time

Competitive intelligence
Today

Industry analysis

Forecasting

[Exhibit 3.1]
 External environment cont’d: competitors
Competitors – companies that satisfy the same (or
similar) customer needs or wants.
 Competitive intelligence
“The act of gathering, analyzing, and distributing information
about the competitive environment.”
 How is (or could) this be done…

[at KU?] [by a company?]

Identifying existing competitors

Existing competitors:
• History
• Proven competitive strengths
• Exit barriers
Assessing potential competitors

Existing competitors:
• History
• Proven competitive strengths
• Exit barriers

Potential competitors:
• Entry barriers
• Attractiveness of market
• Technological landscape
Industry analysis: Porter’s five forces
Industry analysis: Porter’s five forces

Potential competitors:
• Entry barriers
• Attractiveness of market
• Technological landscape
Industry analysis: Porter’s five forces

Price war

Promotion war
Industry analysis: Porter’s five forces

Price war

Promotion war

Product war
[Example:
McDonald’s
vs. Tim Horton’s
in Canada]
Industry analysis: Porter’s five forces

Price war

Promotion war

Product war
[Example:
McDonald’s
vs. Tim Horton’s
in Canada]
 Industry analysis: Porter’s five forces

Why these three things are bad: Price war

If we have: Promotion war

• a mature industry
• lots of competition
Product war
• very little opportunity for anyone to
differentiate themselves… [Example:
McDonald’s
vs. Tim Horton’s
…we end up with several firms getting in Canada]
pulled into:
• an expensive fight
• for a share of a “pie” that’s not
growing.
Industry analysis: Porter’s five forces
Industry analysis: Porter’s five forces
Industry analysis: Porter’s five forces

[Example: universities]
Industry analysis: Porter’s five forces
Industry analysis: Porter’s five forces
 Industry analysis: how-to
How to perform P5F analysis in steps:
 Define the industry
 Identify the key entities in the industry: competitors, customers,
suppliers, producers of substitutes
 Examine the factors that determine the level of each of the
model’s five forces
 Finally….

Analyze external trends

…and whether they may affect any of the five forces
and industry profits.
 Strategic groups
Main idea: grouping competitors based on whether
strategies are similar

Goal: to improve this part of the “five

forces” analysis…
…by not putting all competitors
together in a single list
 Strategic groups
Main idea: grouping competitors based on whether
strategies are similar

Example: sandwich shops

 Strategic groups
Main idea: grouping competitors based on whether
strategies are similar
Gourmet

Example: sandwich shops

Deep-fried Healthy
pork belly

Basic
 Strategic groups
Main idea: grouping competitors based on whether
strategies are similar
Gourmet

Example: sandwich shops

Deep-fried Healthy
pork belly

Basic
 Strategic groups
Main idea: grouping competitors based on whether
strategies are similar

Example: airlines

[Exhibit 3.5]
 Recap

Competitive and industry analysis are also part of

the “external environment analysis” game.

Analyzing an industry means looking at multiple

factors that influence all firms’ ability to compete.

Strategic grouping helps with this analysis, and

there are ways to ID members of such groups.
 Next in-person class
What’s due:
 Due: Nothing