What is “Competitive Analysis”?
Industry Analysis
- Competition as a whole
- Competitive on macro level
Competitor Analysis
- The competitors: individual competitors
- Competitive on micro & meso levels
Situational Variable that influence strategy
Context
Customers
Competition
Company
What is the difference between “Industry” and “Market”?
Industry (sellers) - A group of firms that offer a product or class of products that are similar and are close substitutes for one another
Market (buyers)
- Individuals and organisations who are interested and willing to buy a good or service to obtain benefits that will satisfy a particular need or want and have the resources to engage in such a transaction
What is the aim of an “Industry Analysis”?
TWO AIMS
- To arrive at an outlook of market demand based on facts and assumptions (current demands, influences, future size, shape & characteristics of the market
- To arrive at a view about the future attractiveness of the industry (competition, cost to compete, profitability, capacity)
Areas to include in the “Industry Analysis” section
- The Macro Environment
- Aggregated Market Factors
- Industry Structure
Industry Analysis:
The Macro Environment
DESTEP
Demographic Economic Socio-cultural Political-legal Technological Natural
In terms of planning, think relevance. This is a corporate, maybe SBU piece of analysis - how does this knowledge change the plan?
Identify environmental trends or change not just facts about the current situation but what is changing about the situation
Industry Analysis:
Aggregated Market Factors
Market size (volume & value)
Profitability & Variability
Seasonal & Other Trends
Market growth, Diffusion of Innovations & the PLC
Industry Analysis:
Industry Structure
Industry attractiveness (Porter’s 5 forces)
- Industry competitors
- Buyers
- Substitutes
- Suppliers
- New entrants
Competitive structure (economics, monopoly, oligopoly etc)
Channel Structure
Market size & growth
- a calculation!
“Market” will be defined in business definition & scope
Includes all sales in all segments
- Yours & your competitors
Volume & Value
- The number we sell & how much money we make (value in market)
- Value = volume x price
- Keep in mind different prices!
- What is it now & how has it changed?
If you don’t have hard data, what assumptions can you make? (diffusion of innovations, plc?)
MARKET GROWTH CALCULATION:
Current year sales - Previous year sales/Previous year sales
What are the drivers of demand (growth)?
Environmental Factors:
- Product pricing
- Availability of substitute goods
- Consumer income levels
- Nutritional awareness
- Product innovation
- Seasonality
Need to consider the impact on our growth
Are there any seasonal trends & other trends?
Are sales higher at a specific time of the year or month?
- Think about when to capture data so the information is representative
Do some industries or product categories become more popular?
- Consider the impact of this on market growth forecasts
EXAMPLE
- Ice cream
- The block
- Spring races
Use of Porter’s five forces at the “corporate level”
CORPORATE (the natural home)
How attractive/profitable is the industry?
You are making investment decisions so want to assess the attractiveness of the industry
- You do this by calculating each of the forces and a total “attractiveness score”
If you can radically change the nature of the industry (vertical/horizontal integration, new channels, new technologies) you can change the attractiveness in your favour
Use of Porter’s five forces at the “SBU level”
SBU
How attractive/profitable is the SBU ?
This is likely to be different to the overall industry
Based on what your analysis of the forces at this level you can change/use your SBU strategies to change the forces
Can you use different intermediaries? Can you change suppliers, backward integrate
This is very similar to corporate but on a more focused area!
Use of Porter’s five forces at the “functional level”
FUNCTIONAL (an uncomfortable fit)
Use the model as a “map” of the industry/microenvironment provides a structure for your analysis
What is he competitive situation?
Knowing substitutes helps redefine market
Consider the suppliers and intermediary buyers (distributors). This is where you analyse them.
EG. Is there likely to be any future supply or distribution problem that will impact on our marketing strategies?
EG. Product shortages, difficulty in obtaining raw materials, retail pressure etc
Industry Structure: Competitive structure
- If you are in a monopoly or close to a monopoly, you have a lot of choice
- Eg. Setting price, channels, what to do with marketing mix
- When you have a few more options it is an oligopoly
- Homogeneous oligopoly: perceived as being different and has alternatives
- Heterogeneous oligopoly: perceived as the same so it can get more competitive at a price perspective because people think they’re the same. If people perceive a difference in your product, it makes it easier for you to charge a price premium
- Full competition: many of the same but with differences
- Monopolistic competition: many of the same perceived with no differences
What are “Industry Analysis: Critical Success Factors”
Skills & resources that exert the most leverage on positional advantage and future performance
- Usually lower cost or increase value
Industry Specific
All firms need them
- All firms have them to differing levels
- eg. All plan companies need to be safe, but some have better safety records - the higher the level the more advantage
Common Type of “Key Success Factors”
Technology related
- Scientific research expertise
- Product innovation capability
- Expertise in a given technology
- Capability to use internet to conduct carious business activities
Manufacturing related
- Low cost production efficiency
- Quality of manufacture
- High use of fixed assets
- Low cost plant locations
- High labor productivity
- Low cost product design
- Flexibility to make a range of products
Distribution related
- Strong network of wholesale distributors/dealers
- Gaining ample space on retailer shelves
- Having company owned retail outlets
- Low distribution costs
- Fast delivery
Marketing related
- Fast, accurate, technical assistance
- Courteous customer service
- Accurate filling of orders
- Breadth of product line
- Merchandising skills
- Attractive styling
- Customer guarantees
- Clever advertising
Skills related
- Superior workforce talent
- Quality control know how
- Design expertise
- Expertise in a particular technology
- Ability to develop innovative products
- Ability to get new products to market quickly
Organisational capability
- Superior information systems
- Ability to respond quickly to shifting market conditions
- Superior ability to employ internet to conduct business
- More experience and managerial know how
Other types
- Favourable image/reputation with buyers
- Overall low cost
- Convenient, pleasant, courteous employees
- Access to financial capital
- Patent proof
Critical “Key” Success Factor Example: Cafe
- Access to multiskilled and flexible workforce
- Business expertise of operators
- Must comply with government regulations
- Effective quality control
- Effective cost controls
- Optimum capacity utilization
- Receiving the benefit of word-of-mouth recommendations
- Having a clear market position
