INDUSTRY AND COMPETITIVE ANALYSIS

INDUSTRY AND COMPETITIVE ANALYSIS AIMS AT DEVELOPING INSIGHTFUL ANSWERS TO FOLLOWING i. What are industrys dominant economic features. ii. What is competition and how strong are competitive forces. iii. What causes industrys competitive structure and business environment to change? iv. Which companies are strongest / Weakest position v. What strategic moves rivals are likely to make vi. What are key factors for competitive success vii. Is the industry attractive and what are prospects of above average profits.

INDUSTRYS DOMINANT ECONOMIC FEATURES

Market Size Scope of Competitive Rivalry Market Growth Rate Number of Rivals and Their Sizes Extent of Integration of Industry Rivals Pace of Technological Changes and new product introductions. Economies of Scale Vis-A-Vis Rivals Cluster of Participants In any Location Learning Curve Effects Capacity Utilization Capital Requirements Ease of Entry and Exit

COMPETITION

RIVALRY AMONG COMPETITIVE SELLERS

1. Rivalry intensifies as the number of competitors increases and as competitors become more equal in size and capability. 2. Rivalry is usually stronger when demand for the product is growing slowly. 3. Rivalry is more intense when industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit volume. 4. Rivalry is stronger when customers costs to switch brands are low. 5. Rivalry is stronger when one or more competitors are dissatisfied with their market position. 6. Rivalry increases in proportion to the size of the payoff from a successful strategic move. 7. Rivalry tends to be more vigorous when it costs more to get out of a business than to stay in and compete. 8. Rivalry becomes more volatile and unpredictable the more diverse competitors are in terms of their visions, strategic, objectives, strategies, resources, and countries of origin. 9. Rivalry increases when strong companies outside the industry acquire weak firms in the industry and launch aggressive, wellfunded moves to transform their newly acquired competitors into major market contenders.

POTENTIAL ENTRY OF NEW COMPETITORS

Economics of scale Cost and resource advantage of existing firms Learning curve effects Brand preference and customer loyalty Capital requirements Access to distribution channels Regulatory policies of Government International trade restrictions.

COMPETITIVE PRESSURE FROM SUBSTITUTE PRODUCTS

COMPETITIVE PRESSURE FROM SUPPLIERS BARGAINING POWER

COMPETITIVE PRESSURE FROM BUYERS BARGAINING POWER

Cost of switching Number of buyers Buyers level of information of sellers products Buyers thinking on backward integration.

INDUSTRYS COMPETITIVE STRUCTURE & BUSINESS ENVIRONMENT

CONCEPT OF DRIVING FORCES

COMMON DRIVING FORCES

a. b. c. d. e. f. g. h. i. j. k. l. Internet and new E-Commerce opportunities and threats Increasing globalization Long term industry growth rate Product innovation Technological change Marketing innovation Entry or exit of major firms Diffusion of technological know how Changes in cost and efficiency Growing buyer preferences for differentiated products Government policy changes Changing social concerns.

ENVIRONMENTAL SCANNING

WHICH COMPANIES ARE STRONGEST / WEAKEST Use Of Strategic Group Maps

STRATEGIC MOVES OF RIVALS

Monitoring Competitors Strategies Evaluating who are going to be major players Predicting Competitors next moves

KEY FACTORS FOR COMPETITIVE SUCCESS.

Technology Related Manufacturing Related Distribution Related Marketing Related Skills Related
Organizational Capability

IS INDUSTRY ATTRACTIVE ?

ARE PROSPECTS ABOVE AVERAGE PROFITABILITY?