2. Competitive Analysis
Most widely used technique for analysing competitors was developed by Michael Porter
He believed that when formulating strategy the organisation had to consider competitive rivals
Porter argued that five factors shape the degree of competition

3. Fig. 3.2 (class handout)

4. 1. The degree of rivalry among existing competitors
Competition is most intense when there is slow growth and many direct competitors (e.g. supermarkets, soft drinks etc)
When ad industry matures there is a slow down in growth, profits fall and there is an industry shakeout

5. Rivalry dependant on: Number and relative size of competition
Rate of industry growth
Cost conditions
Degree of product differentiation
Exit barriers

6. 2. The threat of substitutes
If there are many easily substitutable alternatives then the situation is serious (e.g. sugar and sweeteners, air travel and sea travel, butter and soft dairy spreads)

7. 3. The threat of new entrants
If there are few barriers to entry then the threat is serious
Barriers:
Government policy
Capital
Brand identification
Cost savings
Distribution channels

8. 4. The bargaining power of suppliers
Suppliers are powerful if the organisation relies on a small number of suppliers and if switching costs are high
Switching costs incurred when changing supplier
Organisations are strong if they are the dominant customer

9. 5. The bargaining power of customers
The organisation is at a disadvantage if it relies too heavily on few customers who buy large amounts, which can be bought elsewhere
When there are many customers who buy small amounts the organisation has strong bargaining power

10. Fig 3.3 (class handout)