Competior and Industry

7/30/2019 Competior and Industry

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Strategic Marketing VITBS 1

Competitor Analysis

Competitor Identification can be done by

Customer Choices

-Brand- Industry Form- Generic

Product Use associations:- Situations ,applications and

contexts/Appropriateness ( Gifting ..? restaurant Hanging out or Home delivery ?)

Aircel,Tata Docomo and ITC s Bingo,Ezee from Godrej,Crack by Paras,Tetra

food

Strategic group

- grouping of firms that pursue similar competitive strategy

- Similar chs: size/intensity/

- similar assets and competencies

Mobility barriers?( Pvt label to national brand )

Intensity


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Evaluation

Size /Growth/Profitability - how attractive is market ?Growth market have strong strategic groups

Access to capital is an indicator of profitablity

Crude markets estimation

Image and positioning strategy

Competitor objectives and commitment

Market share ,sales growth and profitability

What are non financial objectives

What are objectives of competitors parent company?

Current and past strategies of competitor Pattern of new products/ new market moves

cost ,differentiation or focus

Competitor organisation and culture Where are CEOs from ?structure ? People?Innovation ?

Cost structure and exit barriers


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Indian Mobile service providers market

Strategic Marketing Saju,VITBS 3

Company Market share

Bharti 19.74

Reliance 16.14

Vodafone 15.92

BSNL 12.43IDEA/Spice 12.13

Tata Docomo 8.46

Aircel 6.72

Unitech 4.72

MTNL 0.93

Videocon 0.58

Others 0.5


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Number of employees ,variable labour cost

Relative cost of raw materials

Investment in inventory

Fixed costs

Sales level and number of plants

Break even levels

Competitor evaluation

Identify assets and competencies

What assets and competencies successful firms have over time ?What unsuccessful

lacks?

What are key customer motivations ?What is really important to customers

What are large cost components?What are large value added parts of offering

Does Value chain offer SCA?


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Arthur D Little competitive position /Industry maturity matrix

Companys

Competitive

Position

Stages of Industry maturity

Embryonic

(Latent)/Emergent

Growth Maturity Ageing

Dominant

Strong

Favourable

Tenable

Weak

5Strategic Marketing Saju,VITBS


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Competitor SWOT Analysis

Innovation

Patents ,R&D, New product capability

Manufacturing

Cost structure,Flexible systems,access to raw materil,vertical integration

Management Finance

Marketing

Customer base

Size and loyalty,market share,growth of segments


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Michael Porters Value chain analysis


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Reaction Pattern/ Response profile

Laid back competitor

Selective competitor

Tiger competitor

Stochastic competitor

Maggi vs Yippee (30% growth rate )

Competitor relationships

Conflict

Competition

Co existence

Cooperation

Collusion



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The Nirma story

The original Price warrior

Affordable price ,adequate quality value proposition and the promisewas to deliver a detergent powder at 1/3 of the price of the marketleader.

Lowest cost detergent manufacturer in the worldadopted backwardintegration to reduce costs by 25%

Self sufficiency in key raw materials ad expenditure used to 2%

50% margin to retailers

Volumes and economies of scale .Non mechanised production process till1985 to gain tax and excise benefits

Initially dumped large quantities of product at a central point in whole

sale market and asked retailers to come and collect stock at a fixed rateper kilo and not as percentage of price

Current situation is not good-changing customer attitude,risingincome,increased rivalry

Current competitive secnario- HUL,Rohit surfactants,Henkel,Jyothi labs



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Competitive cycle

source:John B Frey (1982),Pricing over the competitive cycle,Conference

board ,NewYork

PoM , Saju, VITBS 10


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Develop a competitive strength grid by scaling

the firms Assets and competencies against

competitors or strategic groups

Plot Primary and secondary KSF(Key success

factors)



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Source:(Dekimpeand Hanssens,95)Marnik G Dekimpe and Dominique M Hassens , Empirical Generalizations about market Evolution and Stationarity, Marketing Science,14,no .3,pt.1,(1995)

PoM , Saju, VITBS 12


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Market and industry analysis

Market forces: Market size,Market growth rate,Buyer power

Market attractiveness

Market profitability

Porter(1979)

Kim and Mauborgne (1999)



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Market or industry analysis

Market attractiveness profit potential measured by long

term RoI

Actual and potential market size

Market growth

Profitability

Cost structure

Distribution systems


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Market size/Market share

Total sales

Market submarket levels

Potential market-user gap(New user/frequent usage)

Niches

Market share (Share of preference/voice and distribution)

Growth

-more sales and profits

-driving forces- rate of growth by which factor?Automobile sales ?

-Forecasts- Demographics/sale of related equipments

- Detect maturity and decline

price wars by overcapacity/buyer sophistication andknowledge/substitutes/No of first time buyers decline

---Growth submarkets


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Threat of Entry put pressure on price,cost ,profitability and shakes up competition

(Pepsi into bottled water segment)

Depends on Entry barriers

1)supply side economies of scale

2)network effectsdemand side (e-bay ?)

3)customer switching costs

4)capital requirement

5)incumbency advantages 6)Unequal access to distribution channels

7)restrictive government policy

8)expected retaliation



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The power of suppliers Microsoft and PC makers

suppliers serving many industries

industry faces switching costs in switching suppliers

suppliers threat of forward integration

Supplier offering distinct products

The power of Buyers few buyers ,volume buyers

undifferentiated products

buyer has few switching costs

buyers threat of backward integration



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The threat of substitutes

Rivalry among existing competitors

Will be high if ,

growth rate is low,exit barriers are high,committed competitors,

Forms of rivalry: price discounting,ad competition, service

improvements ,new product launches

affects profitablity if it gravitates solely to price competition

Price competition occurs if products are identical,low switching costs,if

fixed costs are high and marginal costs are low and if the product isperishable

Competition on other factors (eg:product features,brand image,service) is less

likely to erode profits ,it enhances customer value and support higher prices



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Industry growth rate,Technology and innovation,complementary

products and services,government regualtions are just factors and not

forces that shape industry profitability

Implications for strategy

Positioning the company

Exploiting the industries change (Music industry,Xerox,)

Shaping industry structure

Redivide profitability vs expanding profit pool

Redivide to keep suppliers ,substitutes or new entrants at bay

Redefining the industry



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Typical steps in Industry analysis



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Indian Tyre Industry

What is the structure of tyre industry in India?

What is the structure of competition?

Is this industry and various segments attractive to existing and

new entrants?


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Submarkets : 40 players , 70 Mn tyres

OEM (34%), Replacement (58%), Export(6%) Depends on automobile growth Major buyers / margin squeeze(40%) Customer bargaining

power

Replacement Vertical integration ,JK ,CEAT

Technology

Cross ply , Radial

Segments CV (19 % share ,5% growth projections

60% ,Rs. 90 Bn ( Coss ply ) ; Buyers : Transport companies /truck drivers ; retreadingmarket , Overload capacity

Cars: 17% share 10% growth projection Value chain analysis: Marketing and branding ; Tubeless high growth @20%(6% of total

market); Profitable (Goodyear ,28%. Bridgestone 28%,MRF)

, Two wheelers (29% share 7% growth): Overcapacity : Price drops ;intense competition,High growth market

Three wheelers:19%

LCV: 6% ; Agri: 10 % (niches)


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Entry costs : 500 1000 crore

5 forces model?

Does it make sense for a new firm to enter the market?

Takeovers ?? Joint ventures ??


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Competitor SALES(Rs)

CV&LCV

Cars Two and Three Export

MRF6 FACTORIES,2500 SALESOUTLET,

21%

29,754 mn(60% inreplacement market)

18%24% 42 % 14%

tubeless tyre

JK ,20% market4 factories,110 own

sales outlets;MultipleSBUS,Conglommera

te

20,785 mn 85% ofradial

market/

25%

18% No presence Tie up withContinenta

l

CEAT ,(14%)3+1 Srilankan

FACTORIES,100 Ceat SHOPPES,Multiple SBUs ,

14,998MN

18%,22% 11% Planning newfacilities

1 1%

17%of

totalsales

Cross ply in17 variants ,

CEAT Italy

(16%

market

share ofAgrivehicle

s)

Birla, 75 marketOne factory,(1.5 mn

capacity)

Conglommerate

11%,

68% ofproduction +LCV

5.6% 30%of

sales

Lateentrant,

Pirelli(32% +tractors)

Appollo (20%)4 factories,188 ownoutlet,2500

exclusive

dealers,2000 MBOs,

22,358 mn 26%,26% 13% No presence 8% Cross Ply,AcquiredGoodYear

SA(Radial

includingBus andTruck)

(agri 23%)

TVS Srichakra

One factory ,20exclusive ,2000+MBO

1,991 mn Leader (21%) (

tyres and Tubecategory)

Inputcost of

rubber 25%Replacement market

interestBackwardintegration

Falkon 1936 mn19%OEM Mfoe

Hero,Baja,Yamaha

DunlopdistributorCrossply


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How to create New Market space thruValue

innovation? (Kim and Mauborgne,1999) Look across substitute industries

Looking across strategic group within industries Look across Chain of buyers

Look across complementary products and services

Look across functional or emotional benefits to buyers

Look across time


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External environment analysis

TechnologyDisruptive tech vs sustaining techGolden Goose syndrome

- innovation- impact of new tech-forecasting. Does old tech have substantial time in theevent of emerging tech? ( Electric razor vs safety razors /quartz watches/ .

DTH industry/Music industry/MR/pacakging/banking/Travel /mobile ad

Government

Regulatory frameworks/Product standards/international politics Economics

Inflation /general economic health- unemployment-economic growth/investmentclimate/currency valuations/heavy investments

Culture Lifestyletrends/fitness and nutrition/

Demographics- Anti ageing industry/migratory patterns/teens/gender ratio/marriage rate/family

formation

PEST/SLEPT ANALYSIS


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Internal analysis

Necessary to gain insights into Real STRENGTHS , Weaknesses and

Objectives

Similar to competitor analysis, but has a greater focus on performance

assessment and much deeper and richer

Can be done at Firm level, SBU groups level ,single SBU level or area

level

A) Value Chain analysis

B) Financial performance: Sales and Profitability

C) Other measures of Performance: Beyond profitablity

D) Core Competence Analysis


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Performance analysis

Measure success of past strategy and evaluates current or past performance needsstrategic change

Sales and Market share

Profitablity RoA = profits/ assets

DuPont Model

RoA = Profit margin X Assets turnover =Net income/Sales x Sales/Total Assets

RoE = Net profits/equity

Du Pont Model

RoE = Profitability xOperating EfieciencyxFinancial levaerage

=Net proifts/salesx sales /Assets xAssets /equity

RoE = Tax Burdenxinterest burdenxoperating proft margin(Ro Sales)x Assetsturnoverxleverage ratio (debt equity ratio)

RoE =Net profit /Equity=Net profit/Pretax profit xpretax profit/EBITxEBIT/SalesxSales/Assetsx Assets/Equity



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Strategic Marketing Saju VITBS 35

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