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Assist. Prof. Dr. Ozge Ozgen
Department of International Business and Trade
Competitive Strategy Positioning a business to maximize the value of the
capabilities that distinguish the company from its competitors.
Competitor analysis is needed to answer:
Who should we pick a fight with in the industry and with what sequence of moves?
What is the meaning of that competitor’s strategic moves?
Variables in Identifying Competitors How do other firms define the scope of their market?
• The more similar the definitions of firms, the more likely the firms will view each other as competitors
How similar are the benefits the customers derive from the products and services other firms offer?
• The more similar the benefits, the higher the level of substitutability between them
How committed are other firms to the industry? • To size up commitment of potential competitors to industry,
reliable intelligence data are needed concerning potential resource commitments
Common Mistakes in Identifying Competitors
Overemphasizing current and known competitors while ignoring potential entrants Firms not in industry but who could overcome entry barriers
Customers and suppliers who may integrate backward or forward
Overemphasizing large competitors while ignoring small ones
Overlooking potential international competitors
Assuming competitors will continue to behave in same way
Common Mistakes in Identifying Competitors (contd.)
Misreading signals indicating a shift in focus of competitors
Overemphasizing competitors’ financial resources, market position, and strategies while ignoring their intangible assets
Assuming all firms in industry are subject to same constraints or are open to same opportunities
Believing purpose of strategy is to outsmart competition, rather than satisfy customer needs
The Components of a Competitor Analysis
Source: Porter,
Michael E. (1980), Competitive Strategy,
The Free Press, p.49
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Future Goals Knowing competitors’ goals will aid in
predicting whether or not each competitor is satisfied with its present position and how likely that they will change their strategy
predicting their reactions to strategic changes
WHICH GOALS?
Financial goals Target market Technological position Social performance Corporate-wide goals Business unit goals Individual function areas
Business Unit Goals Financial goals
Profits
Groth in revenue
What is the competitor’s attitude toward risk?
Does the competitor have values or beliefs which importantly affect its goals?
What is the organizational structure of competitor? Effect of structure on resource allocation, pricing, product changes etc.
What kind of managers comprise the leadership?
How much apparent unanimity is there among management about future direction?
What contractual commitments may limit alternatives?
Portfolio Analysis
When a competitor is a part of diversified company...
Boston Consulting Group (BCG) Analysis
General Electric Matrix
BCG Analysis
GE Matrix Assumptions The competitors’ assumptions about themselves
The competitros’ assumptions about the industry and other companies in it How are companies evaluation theri relative positions?
Cost, product quality, technological sophistication etc.
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Current Strategy
Capabilities
Distinctive Competencies Firm specific strengths that allow a company to
differentiate its products from those offered by rivals
Apple Strong brand name + innovative characteristics
Coca-Cola Strong brand name + formulation of coke
The Role of Resources Resources
Capital or financial, physical, social or human, technological, and organizational factor endowments
Tangible and intangible
A firm-specific and difficult to imitate resource is likely to lead to distinctive competency
Brand name
Reputation
Know-how
Experience etc.
The Role of Capabilities
Capabilities
A company’s skills at coordinating and using its resources
Capabilities are the product of organizational structure, processes, and control systems
To have firm-specific and valuable resources isnot enough!!!
Strategy, Resources, Capabilities, and Competencies
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Areas of Competitor Strengths and Weaknesses Products
Dealer/Distribution
Marketing and Selling
Operations
Research and Engineering
Overall Costs
Financial Strengths
Organization
General Managerial Ability
Corporate Portfolio
Picking the Battleground