Analysing Markets and Competitors

Chapter 3 Analysing markets and competitors
Lynch: Corporate Strategy, 4th edition, Lecturers Guide Richard Lynch 2006
Sustainable competitive advantage

Advantages over competitors that cannot easily be imitated Sustainable over time by being deeply embedded in the organisation Sources include:

Differentiation Low costs Niche marketing High performance technology Superior quality Superior service Vertical integration Synergy Culture, leadership and style of organisation.
Intensity of competition in an industry

Measured by: Degree of concentration of companies in the industry Range of aggressive strategies of competitors in the market place Degree of concentration often summarised in the concentration ratio: The percentage of industry value added or turnover controlled by the largest four, five or eight firms in an industry: C4, C5 or C8 respectively
Growth-Share Matrix 1
Basic logic: many companies such as BLL are involved with products in many markets. Each market will bring its own strategic opportunities and problems: e.g. attractions of fast market growth, difficulties of a company with a small market share. Assumed that the two most important factors in such analysis are:
Market growth: high growth is attractive for the company, but needs to be supported by investment uses cash. Market share: high share is usually associated with high profitability generates cash.
Plot these two factors in a matrix against competitors to explore strategic issues the Growth-Share Matrix (BCG Matrix).
Growth-Share Matrix 2
High: 10% p.a.
Star products
Market growth
Growth: 5% p.a.
Problem children
See Lynch for more: pages 174178 and page 653
Cash Cow products

Low: starting at 0% p.a.
Dog products
Over 1.5
1.5 (Log scale)
Below 1.5
Relative market share

Distributor analysis
How the product or service is distributed to the customer and the costs that are involved:

Strategic opportunity: distribute the product differently Strategic problem: obtain significant distribution for the product at all.
Distributor objectives: beyond price, they will specify a level of service, quality and technical support. They will also seek to meet their own profit objectives. Service levels. Technical and quality specifications. Distributor support for the product: the product is not sold until it has moved off the distributors shelf. Promotion can help.
Distributor analysis will cover:
Five political trends that have affected corporate strategy

Decline of the centrally directed command economies of Eastern Europe coupled with the move towards democracy and freer markets The absence of world wars and the more recent end of the Cold War The relative weakness of African and South/Central American economies The rise of international trade, global companies and new trading nations Emergence of supportive international finance and economic institutions such as the World Bank and International Monetary Fund.
Government and industrial policy 1

Basic policy:
Laissez faire: free-market approach Dirigiste: centrally-directed approach.
Broader analysis of government policy and state institutions:

Public expenditure Competition policy Taxation policy Regional policy.
Government and industrial policy 2

Analysis needed at two levels:
National economy: macroeconomic level to determine growth, inflation and policies for many organisations Industry-level studies: to establish government attitudes to specific industries in areas such as competition policy, support, employment.
Case 3.3 - Pan-European Steel copes with the strategic environment 1

Companies in 1996 Country UK France Italy Luxembourg Germany Belgium Netherlands Germany Poland Spain Output Tonnes mn 16 15 13 11 9 6 6 5 4 4
Companies in 2003 Arcelor Corus Riva Thyssen Krupp Salzgitter Voestalpine Huta Katovice
Country France, Lux and Spain UK and Netherlands Italy Germany Germany Austria Poland
Output tonnes mn 43 19 16 16 6 6 5
British Steel
Usinor Sacilor Riva Arbed Thyssen Cockerill Sambre Hoogevens
Krupp Hoesch
Huta Katovice CSI

Main environmental changes and their impact on corporate strategy: Economic cyclicality: job losses and workers retrained Aggressive customers: large buyers of steel like Ford, Volkswagen demand low prices Increased competition from outside Western Europe: important threat to company. Responses included:
Negotiations through national governments with foreign governments Launch new specialist steels with higher value added.

Sustainable competitive advantages of main steel companies? Difficult to identify beyond their low costs and specialist products the essence of the strategic difficulty? However, will also have some special links with national governments and with customers who will help Is merger strategy the answer?
Certainly one answer But need to consider in the context of the individual circumstances of a particular steel company.

Analysing Markets and Competitors

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Analysing Markets and Competitors

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Chapter 3 Analysing markets and competitors

Sustainable competitive advantage

Intensity of competition in an industry

Cash Cow products

1.5 (Log scale)

Relative market share

Distributor analysis will cover:

Five political trends that have affected corporate strategy

Government and industrial policy 1

Broader analysis of government policy and state institutions:

Government and industrial policy 2

Case 3.3 - Pan-European Steel copes with the strategic environment 1

Huta Katovice CSI

Case 3.3 - Pan-European Steel copes with the strategic environment 2

Case 3.3 - Pan-European Steel copes with the strategic environment 3

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