Date post: | 14-Dec-2015 |
Category: |
Documents |
Upload: | steven-johnston |
View: | 213 times |
Download: | 0 times |
MBA 671MBA 671
Dr. S. BornaDr. S. Borna
Induce your competitors not to invest in Induce your competitors not to invest in those products, markets and services those products, markets and services where you expect to invest the most … where you expect to invest the most … that is the fundamental rule of strategy.that is the fundamental rule of strategy. Bruce Henderson, Founder of BCGBruce Henderson, Founder of BCG
There is nothing more exhilarating than There is nothing more exhilarating than to be shot at without result.to be shot at without result. Winston ChurchillWinston Churchill
Industry and competitorIndustry and competitoranalysis analysis processprocess
1. Identify relevant Industry1. Identify relevant Industry and specify strategic and specify strategic groupsgroups
2. Industry structure 2. Industry structure analysisanalysis
3. Examine bases of3. Examine bases of CompetitionCompetition
4. Individual competitor4. Individual competitor analysisanalysis
What is the benefit (s) of industryWhat is the benefit (s) of industry and competitor analysis? and competitor analysis?
Industry attractivenessIndustry attractivenessor unattractiveness and aor unattractiveness and afirm’s competitive positionfirm’s competitive positionwithin an industry have within an industry have profound impact on strategyprofound impact on strategyformulation.formulation.
What do we mean byWhat do we mean bythe term “industry”?the term “industry”?
““Soft drink” industrySoft drink” industry
Firms that produceFirms that producesimilar productssimilar products
(product substitution)(product substitution)
A Definition of IndustryA Definition of Industry
Four Levels of Competition Based on Four Levels of Competition Based on the Degree of Substitutabilitythe Degree of Substitutability
1. Generic competition1. Generic competition2. Form competition2. Form competition3. Industry competition3. Industry competition4. Brand competition4. Brand competition
What desire do IWhat desire do Iwant to satisfy?want to satisfy?
Desire CompetitionDesire Competition
SocializingSocializingExercisingExercisingEatingEating .. ..
What do I wantWhat do I wantto eat?to eat?
GenericGenericcompetitioncompetition
Potato chipsPotato chipsCandyCandysoft drinksoft drink ..
What type ofWhat type ofcandy?candy?
Form competitionForm competition
Chocolate barsChocolate barsLicoriceLicoriceSugar dropsSugar drops .. .. ..
Which brandWhich branddo I want?do I want?
Brand Brand competitioncompetition
HersheyHersheyNestleNestleMarsMars ..
Identification of StrategicIdentification of StrategicGroupsGroups
A strategic group consistsA strategic group consistsof firms pursuing similarof firms pursuing similarstrategies, i.e., employingstrategies, i.e., employinga similar mix of strategya similar mix of strategyelements.elements.
??
??
How to classify firms?How to classify firms?
qualityquality
Markets servedMarkets served
HH
LLDD II
HighHigh
LowHigh
LowLow
Qu
alit
yQ
ual
ity
Vertical IntegrationVertical Integration
Strategic Groups in the Major Strategic Groups in the Major Appliance IndustryAppliance Industry
Strategic Groups in the Major Strategic Groups in the Major Appliance IndustryAppliance Industry
Group A•Narrow line•Lower mfg. cost•Very high service•High price
Group D•Broad line•Medium mfg. cost•Low service•Low price
Group C•Moderate line•Medium mfg. cost•Medium service•Medium price
Group B•Full line•Low mfg. cost•Good service•Medium price
Bases for classification:Bases for classification:
1. Markets served: BMW1. Markets served: BMW Mercedes-Benz etc.Mercedes-Benz etc.2. Products: full line, limited2. Products: full line, limited line etc. Coke and Pepsi, 7 upline etc. Coke and Pepsi, 7 up3. Distribution channels3. Distribution channels Goodrich vs. DunlopGoodrich vs. Dunlop (own retailers vs indp’t R.)(own retailers vs indp’t R.)
(Strategic groups)(Strategic groups)
Identification of PotentialIdentification of Potential CompetitorsCompetitors
1. Firms expanding their 1. Firms expanding their geographical marketsgeographical markets examples: Wal-mart, Meijerexamples: Wal-mart, Meijer
Firms expanding theirFirms expanding theirProduct lineProduct line Example, IBM entering the Example, IBM entering the PC marketPC market
Firms integrating ForwardFirms integrating ForwardAnd backwardAnd backward
SSPPWWRR
A supermarket manufacturingA supermarket manufacturingits own private labelsits own private labels
Firms seeking merger orFirms seeking merger orbuyoutbuyoutHicks and Hass AcquiringHicks and Hass AcquiringDr. Pepper, Seven-up, andDr. Pepper, Seven-up, andA&WA&W
INDUSTRYSTRUCTURE INDUSTRYSTRUCTURE ANALYSISANALYSIS
Michael Porter’s ModelMichael Porter’s Model
Five Forces Determining Segment Five Forces Determining Segment Structural AttractivenessStructural Attractiveness
Five Forces Determining Segment Five Forces Determining Segment Structural AttractivenessStructural Attractiveness
Potential Entrants(Threat ofMobility)
Potential Entrants(Threat ofMobility)
Buyers(Buyer power)
Substitutes(Threats ofsubstitutes)
Suppliers(Supplier power)
Suppliers(Supplier power)
IndustryCompetitors
(Segment rivalry)
Potential CompetitorsPotential CompetitorsAnd Industry attractivenessAnd Industry attractiveness
Experience effectExperience effect (economies of (economies of scale and experience effect)scale and experience effect)
Capital requirementsCapital requirementsProduct differentiationProduct differentiationDistribution channelsDistribution channels((Retailer reluctance, Mature products etc.)Retailer reluctance, Mature products etc.)
Switching costsSwitching costs ((ex. new softwareex. new softwarefor new computers)for new computers)
Present CompetitorsPresent Competitors
Investment intensityInvestment intensityProduct differentiationProduct differentiationSwitching CostsSwitching CostsIndustry growthIndustry growthIndustry structureIndustry structureExit barriersExit barriers
Investment IntensityInvestment Intensity
By investment intensity, weBy investment intensity, wemean the amount of fixedmean the amount of fixedand working capital requiredand working capital requiredto produce a dollar sales.to produce a dollar sales.
A Note on Industry StructureA Note on Industry Structure
MonopolyMonopolyOligopolyOligopolyMonopolistic competitionMonopolistic competitionPure competitionPure competition(in pure competition there(in pure competition thereis no competition!)is no competition!)
Less Less differentiated differentiated an industryan industryless attractive is that industry!less attractive is that industry!
Switching costsSwitching costs, or the costs, or the costsof changing suppliers-of changing suppliers-inhibit competition.inhibit competition.
Threat of SubstituteThreat of SubstituteProductsProductsActual or potential substituteActual or potential substituteproductproduct
GASGASMARGARINEMARGARINEPLASTICPLASTIC
ELECTRICITYELECTRICITYBUTTERBUTTERGLASSGLASS
Bargaining StrengthBargaining Strengthof Suppliersof SuppliersSUPPLIER CONCENTRATIONSUPPLIER CONCENTRATIONNO. OFNO. OF suppliers suppliersSupplier product is a largeSupplier product is a largepart of buyer’s value addedpart of buyer’s value addedSWITCHING COSTSSWITCHING COSTS
SUBSTITUTE RAW SUBSTITUTE RAW MATERIALS (soft drink:sugarMATERIALS (soft drink:sugarcans etc)cans etc)THREAT OF FORWARD THREAT OF FORWARD INTEGRATIONINTEGRATION
Suppliers Cont.Suppliers Cont.
Bargaining Power of BuyersBargaining Power of Buyers
Buyers ConcentrationBuyers ConcentrationThreat of backward integrationThreat of backward integrationProduct importanceProduct importanceBuyer profitabilityBuyer profitabilitySubstitutesSubstitutesSwitching costsSwitching costs(e.g. food, beer, soft-drink & metal cans)(e.g. food, beer, soft-drink & metal cans)
Analyzing CompetitorsAnalyzing CompetitorsAnalyzing CompetitorsAnalyzing Competitors
CompetitorCompetitorActionsActions
ObjectivesObjectives
Strengths &Strengths &WeaknessesWeaknesses
ReactionReactionPatternsPatterns
StrategiesStrategies
Individual Competitor AnalysisIndividual Competitor Analysis
Competitor CharacteristicsCompetitor Characteristics
Competitor ObjectivesCompetitor Objectives
Competitor StrategyCompetitor Strategy
Competitor Success TodayCompetitor Success Today
Competitor Strength and weaknessCompetitor Strength and weakness
Competitor Future BehaviorCompetitor Future Behavior
Competitor CharacteristicsCompetitor Characteristics
Information related to:Information related to:•Size of SalesSize of Sales•ProfitabilityProfitability•Market ShareMarket Share•GrowthGrowth•Relation of SBU to the parentRelation of SBU to the parent Company, etc.Company, etc.
Competitor ObjectivesCompetitor Objectives
•Market Growth ObjectivesMarket Growth Objectives•Price ObjectivesPrice Objectives•Product Technology ObjectivesProduct Technology Objectives•Human Resource ObjectivesHuman Resource Objectives•etc.etc.
Competitor’s StrategyCompetitor’s Strategy
Review of past and presentReview of past and presentstrategiesstrategies
Company’s current marketingCompany’s current marketingmix strategymix strategy(BIC as an example: strategy of(BIC as an example: strategy oflow cost, mass produced andlow cost, mass produced anddisposable products)disposable products)
Competitor’s Strengths andCompetitor’s Strengths andWeaknessesWeaknesses
Marketing:Marketing: Product QualityProduct Quality Brand NamesBrand Names DistributionDistribution Promotion skillsPromotion skills SalesforceSalesforce
cont.cont.
Innovation:Innovation: R&DR&D TechnologiesTechnologies New Product CapabilitiesNew Product Capabilities
Management:Management: Quality of top managementQuality of top management Loyalty-turnoverLoyalty-turnover Quality of Middle-Quality of Middle- managementmanagement
How to Develop a ResponseHow to Develop a ResponsePolicy?Policy?
Estimating the Competitors’Estimating the Competitors’Reaction PatternsReaction Patterns
The laid-back competitorsThe laid-back competitorsThe selective competitorsThe selective competitorsThe tiger competitorsThe tiger competitorsThe Stochastic competitorsThe Stochastic competitors
Designing the CompetitiveDesigning the CompetitiveIntelligence SystemIntelligence System
1. Setting up the system1. Setting up the system What type of information?What type of information? What is the best source ofWhat is the best source of information?information? Who will manage the system?Who will manage the system?
2.2. Collect InformationCollect Information
Sales forceSales force Channel membersChannel members Trade associationTrade association etc.etc.
Other sources of InformationOther sources of Information
1. Company Financial:1. Company Financial: 10-k, annual reports10-k, annual reports Moody’s, State FilingMoody’s, State Filing Published articlesPublished articles
2. Company Background2. Company BackgroundStandard & Poor’sStandard & Poor’sF & S IndexesF & S IndexesNewspaper IndexNewspaper Index
3.3. Management PersonnelManagement Personnel Who’s whoWho’s who Local NewspapersLocal Newspapers College alumni associationCollege alumni association
4.4. Foreign InformationForeign Information ConsulatesConsulates EmbassiesEmbassies International Trade International Trade CommissionCommission
3. 3. Evaluate and analyze theEvaluate and analyze the informationinformation
check validity and reliabilitycheck validity and reliabilityof the informationof the information
4. Dissemination and 4. Dissemination and ResponseResponse
ReviewReviewReviewReview Identifying CompetitorsIdentifying Competitors Evaluating CompetitorsEvaluating Competitors Competitive Intelligence SystemsCompetitive Intelligence Systems Competitive Strategies (Competitive Strategies (not not
discussed)discussed) Customer vs. Competitor Customer vs. Competitor
OrientationOrientation