1. Industry and Competitive Analysis

2. Questions to Answer: What are the dominant economic traits?
What are the competitive forces at work?
What are the drivers of change?
Which companies are the strongest and the weakest?
Who will make the next competitive move?
What are the key factors of success?
How attractive is the industry for profitability?

3. Industry’s Dominant Economic Traits
Market size
Geographic scope of competitive rivalry
Market growth rate & growth cycle
Number & size of rivals
Number & size of buyers
Pace of product innovation
Ease of entry and exit
Pace of change of technology
Degree of differentiation
Capacity & demand

4. Industry’s Dominant Economic Traits
Economies of scale offer companies lower costs & competitive advantage
Available economies of scale:
Manufacturing
Research & Development
Purchasing
Transportation
Advertising

5. Industry’s Dominant Economic Traits
Need for high capacity utilization
Whether there exists a strong learning and experience curve
Prevalence of vertical integration
Capital requirements
Industry profitability: above or below average?

6. Porter’s 5 Competitive Forces
Rivalry among competing sellers
Firms with substitute products
Potential entry of new competitors
Leverage of suppliers
Leverage of buyers

7. Competitive Forces at Work: Competitive Rivalry Increases when…
Increase in the number of competitors
Competitor size becomes more equal
Slow growth in demand
High proportion of cost is fixed
Product is costly to hold in inventory
Customer cost to switch is low
Competitor(s) dissatisfied with market position
Size of the payoff for strategic move
Increase in exit costs
Diversity of competitors
Takeovers of weaker firms

8. Competitive Forces at Work: Substitute Products…
Place ceiling on prices and profits
Customers compare:
Price
Quality
Service
Performance features
Other costs

9. Competitive Forces at Work: Substitute Products…
Cost of switching products
Retraining
Additional equipment
Technical help
Testing quality and reliability
Severing old relationships
Establishing new relationships

10. Competitive Forces at Work: Threat of New Entrants Determined by…
Economies of scale
Access to technology
Learning curve
Brand preference & customer loyalty
Capital requirements
Cost disadvantage or access to suppliers
Access to distribution channels
Regulatory, licensing & permit policies
Tariffs & restrictions

11. Competitive Forces at Work: Power of Suppliers Determined by…
Size of the customer
Number of suppliers
Demand for products
Availability of substitutes
Standardization of commodity
Economies of scale: make or buy
Quality

12. Competitive Forces at Work: Power of Buyers Determined by…
Size of the customer
Number of buyers
Demand for products
Cost of switching
Buyer bargaining power is not equal
Threat of vertical integration by buyer
Discretion over when to purchase

13. Drivers of Change Internet Globalization
Long-term industry growth rate
Who buys the product and how it is used
Product innovation
Technological change
Marketing innovation

14. Drivers of Change Entry or exit of major firms Diffusion of technology
Changes in cost and efficiency
Emerging buyer preferences
Regulatory, social and political influences
Reduction in uncertainty and risk
“Flattening” of the world

15. Key Success Factors Technology Manufacturing Distribution Marketing
Skills
Organizational capability
Miscellaneous

16. Strongest & Weakest Companies
Strategic Group Mapping
Identify competitive characteristics
Plot firms on a 2-variable map
Assign firms to strategic groups
Circle groups proportional to size
Variables
Not correlated
Expose differences in rival strategies
Need not be quantitative or continuous
Multiple pairing may provide several maps

17. Who Will Make the Next Move?
Identify competitor strategies
Which are strong & which are weak
Evaluate who will be the major players
Predict competitors’ next moves
Strategic changes
Moves into new markets
Acquisition- targets or movers

18. Competitor Strategies: Competitive Scope
Local
Regional
National
Multi-country
Global

19. Competitor Strategies: Strategic Intent
Dominant leader
Overtake the leader
Among the top 5
Among the top 10
Move up a notch, or two
Overtake a rival
Maintain position
Just survive

20. Competitor Strategies: Market Share Objective
Aggressive expansion via:
Internal growth
Acquisition
Expansion via internal growth
Expansion via acquisition
Hold on to present share
Give up share if necessary

21. Competitor Strategies: Competitive Position
Getting stronger
Well entrenched
Stuck in the middle of the pack
Seeking different market position
Struggling, or losing ground
Retrenching

22. Competitor Strategies: Strategic Posture
Mostly offensive
Mostly defensive
Combination of offense and defense
Aggressive risk-taker
Conservative follower

23. Competitor Strategies: Generic Competitive Strategies
Low-cost leadership
Market niche
High end
Low end
Geographic
Special needs buyers
Other
Differentiation based on:
Quality
Service
Technological superiority
Breadth of product line
Image and reputation
Value
Other attributes

24. Attractiveness of Industry
Growth potential
Impact of prevailing driving forces
Potential entry or exit of major firms
Stability of demand
Trend of competitive forces
Severity of problems confronting industry
Future risk or uncertainty
Potential for impact on profitability trend