Industry and

Competitive Analysis
Questions to Answer:
What are the dominant economic traits?
What are the competitive forces at work?
What are the drivers of change?
Which companies are the strongest and the weakest?
Who will make the next competitive move?
What are the key factors of success?
How attractive is the industry for profitability?
Industry’s
Dominant Economic Traits
Market size Pace of product
Geographic scope of innovation
competitive rivalry Ease of entry and
Market growth rate & exit
growth cycle
Pace of change of
Number & size of technology
rivals
Degree of
Number & size of
buyers differentiation
Capacity &
demand
Industry’s
Dominant Economic Traits
Economies of scale offer companies
lower costs & competitive advantage
Available economies of scale:
Manufacturing
Research & Development
Purchasing
Transportation
Advertising
Industry’s
Dominant Economic Traits
Need for high capacity utilization
Whether there exists a strong
learning and experience curve
Prevalence of vertical integration
Capital requirements
Industry profitability: above or
below average?
Porter’s 5 Competitive Forces
Rivalry among competing sellers
Firms with substitute products
Potential entry of new competitors
Leverage of suppliers
Leverage of buyers
Competitive Forces at Work:
Competitive Rivalry Increases when…
Increase in the number Customer cost to
of competitors switch is low
Competitor size Competitor(s)
becomes more equal dissatisfied with
market position
Slow growth in demand
Size of the payoff for
High proportion of cost strategic move
is fixed Increase in exit costs
Product is costly to Diversity of
hold in inventory competitors
Takeovers of weaker
firms
Competitive Forces at Work:
Substitute Products…
Place ceiling on prices and profits
Customers compare:
Price
Quality
Service
Performance features
Other costs
Competitive Forces at Work:
Substitute Products…
Cost of switching products
Retraining
Additional equipment
Technical help
Testing quality and reliability
Severing old relationships
Establishing new relationships
Competitive Forces at Work:
Threat of New Entrants Determined by…
Economies of scale Cost disadvantage or
Access to technology access to suppliers
Learning curve Access to distribution
channels
Brand preference &
Regulatory, licensing &
customer loyalty
permit policies
Capital requirements
Tariffs & restrictions
Competitive Forces at Work:
Power of Suppliers Determined by…
Size of the customer
Number of suppliers
Demand for products
Availability of substitutes
Standardization of commodity
Economies of scale: make or buy
Quality
Competitive Forces at Work:
Power of Buyers Determined by…
Size of the customer
Number of buyers
Demand for products
Cost of switching
Buyer bargaining power is not equal
Threat of vertical integration by buyer
Discretion over when to purchase
Drivers of Change
Internet
Globalization
Long-term industry growth rate
Who buys the product and how it is
used
Product innovation
Technological change
Marketing innovation
Drivers of Change
Entry or exit of major firms
Diffusion of technology
Changes in cost and efficiency
Emerging buyer preferences
Regulatory, social and political
influences
Reduction in uncertainty and risk
“Flattening” of the world
Key Success Factors
Technology
Manufacturing
Distribution
Marketing
Skills
Organizational capability
Miscellaneous
Strongest & Weakest Companies
Strategic Group Variables
Mapping Not correlated
Identify competitive Expose differences
characteristics
in rival strategies
Plot firms on a 2-
variable map Need not be
quantitative or
Assign firms to
strategic groups continuous
Circle groups Multiple pairing may
proportional to size provide several
maps
Who Will Make the Next Move?
Identify competitor strategies
Which are strong & which are weak
Evaluate who will be the major
players
Predict competitors’ next moves
Strategic changes
Moves into new markets
Acquisition- targets or movers
Competitor Strategies:
Competitive Scope
Local
Regional
National
Multi-country
Global
Competitor Strategies:
Strategic Intent
Dominant leader
Overtake the leader
Among the top 5
Among the top 10
Move up a notch, or two
Overtake a rival
Maintain position
Just survive
Competitor Strategies:
Market Share Objective
Aggressive expansion via:
Internal growth
Acquisition
Expansion via internal growth
Expansion via acquisition
Hold on to present share
Give up share if necessary
Competitor Strategies:
Competitive Position
Getting stronger
Well entrenched
Stuck in the middle of the pack
Seeking different market position
Struggling, or losing ground
Retrenching
Competitor Strategies:
Strategic Posture
Mostly offensive
Mostly defensive
Combination of offense and
defense
Aggressive risk-taker
Conservative follower
Competitor Strategies:
Generic Competitive Strategies
Low-cost Differentiation
leadership based on:
Quality
Market niche
Service
High end
Technological
Low end
superiority
Geographic
Breadth of product
Special needs buyers line
Other Image and reputation
Value
Other attributes
Attractiveness of Industry
Growth potential Trend of competitive
forces
Impact of Severity of problems
prevailing driving confronting industry
forces Future risk or uncertainty
Potential for impact on
Potential entry or profitability trend
exit of major firms
Stability of
demand