Competitive Analysis

Analisis Kelayakan Pabrik TKI-403

Business plan outline

Executive Summary Company Description

Industry Analysis & Trends Target Market Competition Strategy/Business Model Marketing and Sales Plan Production/Operations Plan

Including product/service & technology/core knowledge

Technology Plan Management & Organization Social Responsibility Development & Milestones Financials

Including Capital Requirements & Financial Statements

Appendix

Strategy funnel industry side

Environmental Trends
Customer & Benefits Industry Structure Competitive Space Competitive Dynamics Strategic Positioning

Market

Segment,Size Channels Perceptual Space Value Proposition

Industry

Industry-side goal
Busine ss Landscape
70 60 50 Return on 40 Equity (%) 30 20 10 0

Describe, in detail, the competitive, industry, and environmental landscape in which your firm will operateto find a defensible space you might occupy.

Business as supply chain

Dig clay Throw clay into pots Sell pots

R&D Technology People Management Infrastructure & Logistics

Financial Management

The supply chain traces processes and transformations. As these become more complex, they tend to differentiate into various functions.

Business as value chain

Dig clay Throw clay into pots Sell pots Margin

The value chain maps value added and captured onto the supply chain. Each step in the supply chain contributes different amounts of value. Effective management involves both identifying new sources of value and tying together pieces to create more than the sum of the parts.

From value chains to markets

Dig clay Throw clay into pots Sell pots Margin

As underlying processes become more complex, supply chains often evolve into chains of firms that interact through negotiated transactions or markets - rather than chains of functions managed internally Note how the margin divides (and multiplies)

Markets & industries

Each cluster of competitors is an industry, industry segment or strategic group Supply chains and industries evolve over time as do their rules, cultures, technologies and sources of value

Book selling commerce chain

Packager Author Agent Publisher Sales groups Wholesaler Retailer Reader

Direct marketing

Book selling value chain

$0.375

Promotions
$0.375 $0.50

Sales groups
$3.50 $1.00 $5.50 $10.00

Packager
Author
$0.50

Agent
$0.05

Publisher
$1.25

Wholesaler

Retailer

Reader

From trade sales, a publisher might keep 7% for salaries etc though the amounts and percentages do increase with print runs and cover prices. From direct mail, a publisher might keep 12.5% or so, but without as many economies of scale (since so much goes to logistics).

Book selling industry structure

Packager Author Agent Publisher Sales groups Wholesaler Retailer Reader

Direct marketing

Harper & Row Borders Consortium Bertelsmann Amazon Bookpeople or Ingram

Exercise: Draw the chain, identify your industry

Who sells what to whom?

Draw what you see Circle your industry

Ask industry informants Look at customer and supplier lists Look at industry magazines

Identify sources of competition Note the supply market Note the demand market

The related functional cluster of firms direct competitors from within the industry indirect competitors from related supply chains

I. Environmental Scanning: STEEP analysis

Macroenvironment
Operating Environment
Communities

Socio-cultural Forces

Firm/
Structure Culture Competencies Resources

Political Forces

Organization
Regulators Stockholders Creditors

Union/ employees Trade Association Competitors

Technological Forces

Suppliers Customers

Economic Forces

Ecological Forces

Stakeholders shape the operating environment

Macroenvironment
Operating Environment
Communities

Socio-cultural Forces

Firm/
Structure Culture Competencies Resources

Political Forces

Organization
Regulators Stockholders Creditors

Union/ employees Trade Association Competitors

Technological Forces

Suppliers Customers

Economic Forces

Ecological Forces

Stakeholder analysis
Who matters, how much

What matters, why and when

Customers, suppliers, owners, workers, community groups, government At core, strategic, or environmental levels What is at stake for the stakeholders? Why do they care? When and how might they act? What is at stake for the firm? What are the likely impacts on the firm? Why? When? Cooperate, compete, coopt, cut out...

Response options

Stakeholder management
Influence on Initiative
High

SH3
Averag e

SH1

SH2
Low Low

Importance to Firm

Average

High

Exercise: STEEP or stakeholder brainstorm

Macroenvironment
Industry
Communities

Socio-cultural Forces
Union/ employees Trade Association Competitors Suppliers

Political Forces

Regulators Stockholders Creditors

Firm/
Structure Culture Competencies Resources

Organization

Technological Forces

Economic Forces

Customers

Ecological Forces

II. Industry structure

Industries are clusters of firms that serve the same function in a commerce chain. These sets of firms operate in the same space and compete to control enough space to capture value. Industries all have structure, history, trajectories and competitive dynamics that constrain entry options and are shaped in part by macro-environmental conditions.

Industry power
Threat from New Entrants

Suppliers Power

Rivalry of Firms

Buyers Power

Threat from Substitutes

Power of other Stakeholders

Industry power: Bookstores

Threat from New Entrants Minimal at scale eg. warehousing, leases

Suppliers Power: Reduced but still significant

Rivalry:
Oligopoly

Buyers Power: Mild local monopoly but options

Threat from Substitutes: High: multimedia, web distribution

Other Stakeholders:
Minimal domestic, some international, financial concerns

1. Entry
Industries that are hard to enter are cozy for insiders, but also often attractive to outsiders longing for the value being shared by so few. Barriers to entry make it harder for newcomers to play.
Fierce reaction by incumbents. Size of payoff/relation of supply to demand. Economies of scale: minimum efficient scale of production distribution or sales networks Pioneering brand advantages. Experience curve. Licenses or patents. Cost of exit.

2. Substitutes
Industries with few substitute products are more attractive than those with many substitutes. Effective substitutes can often provide ways in for upstarts. The threat of substitutes is often the weakest of the forces -- except during times of high demand or fast change, when interlopers may see opportunities.

3. Buyer power
Attractive industries feature disorganized, small customers, with little purchasing and negotiating power. Buyers gain power when:

They are large, relative to the seller (superstores). They are organized (eg., a coop). It is easy to switch to another supplier (eg., when products are standard). They could integrate backwards and so take over a supplier.

4. Supplier power
Attractive industries feature small and disorganized suppliers. Suppliers gain power when:
They are large, relative to the buyers. (Alcoa). It is difficult for buyers to switch to competing suppliers. (Custom products, proprietary information). They pose a credible threat of integrating forward and taking over the buyers functions.

5. Rivalry
Attractive industries are controlled by monopolies or gentlemanly oligopolies.

Rivalry is reduced when:

On the other hand, the more the players, and the more equally matched, the closer the industry approximates perfect competition and minimum profits. Power is concentrated (C4 Index ) Competitors can truly differentiate. It is easy to exit. Demand is stable and predictable. Regulation takes the edge off.

6. Stakeholder power
Governments (if not in the environmental scan), unions, creditors (if not a supplier), advocacy groups (eg., environmentalists) can all constrain industries.

Rivalry is reduced when governments or other stakeholders limit access to the industry and so limit competition.

Regulated industries Unions Institutional investors Bottle bills

Profit pools
20%

Banking

20%

Banking

Operating Margin

Operating Margin
0

Acquisition

Funding

Servicing

100%

Acquisition

Funding

Servicing

100%

Share of Industry Revenue

Share of Industry Revenue

Operating margin: Industry reports, interviews Share: Profit amount x total sales in sub-segment

Industry dynamics
While useful, the five forces, value chain and profit pool models are essentially static. It is critical to make guesses about the future -- especially about when trends might stop and the existing power structure shift. STEEP and technology life cycle analyses can help with this. If you need a more dynamic model, ask me later about the 4 Arenas analysis.

Exercise: Industry power structure

Threat from New Entrants

Suppliers Power

Rivalry of Firms

Buyers Power

Threat from Substitutes

Power of other Stakeholders

III. Competitive Analysis

Competitors are the firms that compete to serve the same customers in the same marketplace. Competitors can compete directly (cars) or indirectly (bicycles, mass transit). Competition happens on two levels:
1.

Product or service competition

2.

Company competition

Competition at the level of the value proposition and marketing (covered in the first workshop)
Competition at the level of company strategy

Company competitive analysis

How does each firm compete?
How effective is each? How powerful?

Quality, service, low price, something else? How well designed are they to compete as they do? What resources do they control? Money, people, influence... How hard do they compete? Whats their trajectory?

How aggressive?

Competitor response profile

Drivers
Future Goals Vision statement Managerial behavior

Abilities
Current Strategy Price, quality, distribution, resources

Response Profile
Satisfied or ambitious? Likely next moves? Vulnerabilities? Sensitive spots? (What will provoke retaliation?)

Critical Assumptions Key beliefs Blind spots

Capabilities Strengths & weaknesses

Competitors table
Organizes competitors using crucial dimensions of competition, plus effectiveness, power, trajectory, likely changes...
Market Share Competitor1 Competitor2 Competitor3 Competitor4 Competitor5 15% 25% 5% 20% 15% Quality Cost Effective- Power ness H L M L M H L M L M M H L H H Aggressiveness

M
H L H L slipping very

Strategic groups
Upscale Chains

Price

Diners/Family Style

Fast Food

Selection

Groups of firms that pursue similar strategies with similar resources

Example: Variation on Gartners Magic Quadrant

Dynamic competitor analysis

While useful, the competitor table and the strategic groups are essentially static. It is critical to make guesses about the future -- especially about when trends might stop and the ground might shift, and when new competitors might rise, or existing ones die. If you need a more dynamic model, ask me later about the CCSI index.

Exercise: Competitor analysis

Make a competitors table, including:

Note any natural groupings Note any likely changes

market share how they stack up on crucial dimensions of value effectiveness (star the most competent ones) resources (underline richest ones) aggressiveness (arrows to indicate trajectories)

New entrants, mergers, exits?

Bibliography
Andersen Business Consulting interview, Summer 2001. Richard DAveni, Hypercompetition (Free Press: 1994). Craig Fleisher & Babette Bensoussan, Strategic & Competitive Analysis: Methods & Techniques for Analyzing Business Competition (Upper Saddle River, NJ: Prentice Hall, 2003) Jay Galbraith, Strategy & Organization Planning in Human Resource Management (SpringSummer 1983) for Supply Chain. Pankaj Ghemawat, Strategy and the Business Landscape (Prentice Hall, 2001). Robert Hamilton lecture notes, 1998. Robert Hamilton, E. Eskin, M. Michael, "Assessing Competitors: The Gap between Strategic Intent and Core Capability", International Journal of Strategic Management-Long Range Planning, Vol. 31, No. 3, pp. 406-417, 1998 TL Hill lecture notes, 1999, 2001, 2002. J. D. Hunger & T.L. Wheelan, Essentials of Strategic Management (Prentice Hall, 2001). Philip Kotler, Marketing Management, 9th Edition, (Prentice Hall, 1997). Sharon Oster, Modern Competitive Analysis, 2nd Edition (Oxford University Press, 1994), for Porter and other economics-based strategy. Henry Mintzberg & James Brian Quinn, Readings in the Strategy Process, 3rd Edition (Prentice Hall, 1998). Michael Porter, Competitive Advantage (Free Press, 1985). Michael Porter, What is Strategy? Harvard Business Review (November-December 1996).