EU-w3-Indu-Industryandcompetitorsanalysis.pdf

INDUSTRY, COMPETITOR &

ENVIRONMENT ANALYSIS

Dr Stoyan Stoyanov

– COMPETITOR ANALYSIS

– INDUSTRY ANALYSIS

– SWOT

TODAY’S AGENDA

COMPETITOR ANALYSIS

Breadth of

Competitive

Scope

Source of Competitive

Advantage

Broad

Target

Market

Narrow

Target

Market

Cost

Cost

Leadership

Differen-

tiation

Porter’s Generics

Focused

Differen-

tiation

Focused

Low Cost

Uniqueness

Cost Leadership

▪ A Cost Leadership strategy (CL) is the lowest cost
producer within the industry, enabling it to operate with
higher margins than its rivals providing it prices at/around
the industry average.

▪ Tends to offer no-frills, standardised products

▪ Continuously strives to reduce costs in its value chain by
targeting cost drivers

MacBook Pro

Examples:

Achieving Cost Leadership

▪ Economies of Scale

▪ Experience Curve

▪ Process innovation/ technology to improve
efficiency

▪ Minimisation of Overheads

▪ Reduction of costs in all other areas of VC
consistent with the achievement of a low cost
position

Differentiation

▪ Differentiation is based on unique aspects of the
product or service which enables the company to
charge a premium price and earn higher margins
than its rivals.

▪ Customise as many features as possible to delver
superior customer benefits.

▪ Strive to increase customer perceive value by
exploiting value drivers.

Examples:

Achieving Differentiation

▪ Numerous ways in which differentiation can be achieved:

– Product Features

– After Sales Service

– Reputation

– Image

– Innovation

▪ Nature of differentiation must be conveyed to the
customer

▪ Differentiation adds costs to the product or service

Achieving Differentiation

1. Identify and enhance value drivers

2. Reconfigure value chain to deliver higher value added:

Examples:

improve product innovation through R&D
capabilities

deliver superior quality and service levels

build brand management skills

develop supportive HRM polices and culture

Generic Strategies Compared

Full

CostsFull

Costs

Full

Costs

Profit Profit

Profit

No generic

strategy

Original Price

Original Costs

Cost strategy:

price usually

unchanged but

lower costs

Differentiation Strategy:

costs increased to add

premium features, but higher

price chargeable

Porter’s Prescription

➢ Organisations must follow one of the generic
strategies to achieve competitive advantage

➢ Attempting to achieve both will result in long
term failure as the business will become
“stuck in the middle” (SIM)

Porter’s Exceptions

• You have monopolistic power

• All major competitors are Stuck in the Middle

• Separate SBUs independently follow two different
strategies within the same company

• Some markets are more attractive than others… …but how do you
tell them apart?

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Industry analysis

• What is it?

• What is it used for?

• Why should we care?

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Porter’s Five Forces

Degree of

Rivalry

Within the Industry

er Power

Supplier Power

Threat of

Substitutes

Threat of

New Entrants

17

Degree of

Rivalry

Within the Industry

er Power

Supplier Power

Threat of

Substitutes

Threat of

New Entrants

18

1. Threat of New Entrants

• What makes an industry difficult to enter?

• Regulations

• Proprietary Technology

• High Start-up Costs

• When a Distribution Network is Hard to Create

• Dominant Players with Strong Brands Exist

• What makes an industry the most attractive?

• Example

19

Degree of

Rivalry

Within the Industry

er Power

Supplier Power

Threat of

Substitutes

Threat of

New Entrants

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2. Threat of Substitutes

• How can substitutes pose threat?

• When is the Threat of Substitutes High?

• er’s cost of switching to the substitute is low

• The cost of the substitute is low

• Example

21

Degree of

Rivalry

Within the Industry

er Power

Supplier Power

Threat of

Substitutes

Threat of

New Entrants

22

3. Bargaining power of Suppliers

• Suppliers are Strong when:

• Suppliers are concentrated (labour unions)

• It is expensive to switch suppliers

• ers are not concentrated

(upward pressure on the price)

• Example

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Degree of

Rivalry

Within the Industry

er Power

Supplier Power

Threat of

Substitutes

Threat of

New Entrants

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4. Bargaining power of Customers

• When is the bargaining power high?

• ers are concentrated

• It is not difficult or costly to switch to the product of a different
supplier

• When commodity products are concerned (not specialised)

(downward pressure on the price)

• Example

• What can companies do?

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Degree of

Rivalry

Within the Industry

er Power

Supplier Power

Threat of

Substitutes

Threat of

New Entrants

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5. Competitive Rivalry

• When is the competition high?

• High Industry Concentration

• Low Industry Growth Rate

• Perishable Products

• High Storage Costs

• Little Product Differentiation

• High Exit Barriers

• Example

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Example: Why do industry profits vary so much?

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Example: Why do industry profits vary so much?

29

Why do airlines make so little profit

(and such big losses)?

• Very intensive competitor rivalry

• Low barriers to entry

• Suppliers

• Substitutes

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Why are profits so high in the soft drinks

market?

• Customers and suppliers have little power

• High brand awareness & loyalty

• High barriers to entry

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Limitations

• “Monitor Group” (1983)

• The model assumes a classic perfect market
• Low business uncertainty

• The model assumes static market structures

• ers, competitors and suppliers are unrelated and do not interact

• Hammers are really useful tools

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