Environmental scanning - competitor analysis - Lecture 3 Flashcards by Matthew MacKinnon

how can competitive advantage be done

by offering lower prices than competitors for similar products and services or by providing more benefits that justify higher prices

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competitor analysis

systematic attempt to identify and understand the key elements of a competitor strategy (porter’s 5 forces)

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what are Porter’s 5 forces *

threat of new entrants, bargaining power of customers, threat of substitute products, bargaining power of suppliers, rivalry among competitors

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what actually is Porter’s 5 forces (not what they are)

the model is a framework for analysing the nature of competition within an industry

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example of threat of substitute

computer over typewriter

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threat of new entry features (Porter’s 5 forces)

time and cost of entry,
specialist knowledge,
economies of scale,
barriers to entry

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power of suppliers features (Porter’s 5 forces)

number of suppliers,
size of suppliers,
uniqueness of service,
ability to substitute

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bargaining power of customers features (Porter’s 5 forces)

number of customers,
size of each order,
difference between competitors,
price sensitivity,
ability to substitute

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rivalry among competitors features (Porter’s 5 forces)

number of competitors,
quality differences,
switching costs,
customer loyalty

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critique of Porter’s 5 forces *

assumes classic perfect market,
best applicable for analysis of simple market structures,
assumes relatively static market structures,
based on idea of competition, created before internet/globalisation/deregulation etc

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marketing myopia d

situation where a company has a narrow-minded marketing approach and focuses mainly on only one aspect out of many possible marketing attributes eg focusing just on quality and not on the actual demand of the customer (failing to recognise threats from other industries such as road-based travel being a competitor of railways in 1930s)

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3 steps necessary carrying out a competitor analysis

identify company’s competitors,
assessing competitor’s objectives strategies strengths and weaknesses and reaction patterns,
selecting which competitors to attack or avoid

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what is a strategic group or cluster

group of firms in an industry following the same or similar strategy in a given target market

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Porter’s generic competitive strategies

cost leadership, differentiation (perception of uniqueness), focus (niche market)

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what are the competitive positions in the market

market leader, market follower, market challenger, market nicher

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example of market challenger

pepsi

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example of market leader

microsoft, mcdonalds

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example of market follower

own brand beans and zara

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example of market nicher

fat lad at the back

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market leader strategies

try to continue winning greater share of the market from smaller rivals, or try to expand the total market (finding new uses or encouraging greater usage)

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market challenger strategies

can attack market leaders, or can attack smaller market followers by out-competing them or by taking them over

market follower strategies

allow market leaders to make most of the investment, and then follow on to pick up any spare segments (which might have been bypassed by the leader)

market nicher strategies

operate on a low-volume, high margin basis

examples of market nichers

organic foods, asian tv, retro style (35mm cameras)

what are market nichers not trying to do

take over the whole market, they are catering for a small proportion of the market

example of threat of new entrants supermarkets (Porter's 5 forces)

Lidl and Aldi to 'the big four'

example of bargaining power of customers supermarkets (Porter's 5 forces)

customers have choice of which supermarket to go too

example of threat of substitute products BP (Porter's 5 forces)

tesla making electric powered cars no longer need petrol

example of bargaining power of suppliers supermarket (Porter's 5 forces)

dairy farmers and suppliers pressing for higher wages

example of rivalry among competitors supermarkets (Porter's 5 forces)

percentage market share of each of the supermarkets

when is the power of suppliers likely to be high (Porter's 5 forces)

power of suppliers likely to be high if the number of suppliers is small and/or the materials, components and services they offer are in short supply

example of a supplier with high bargaining power (Porter's 5 forces)

owners of patented technology such as new medicine that is patented for 20 years

when is the threat of new entrants greatest (Porter's 5 forces)

when there are low barriers to entry

are new entrants from similar markets

new entrants may already be active in a similar market sector but in another geographic market or new entrants may arrive from outside the industry

how can a company prevent against rivalry among competitors

if a company is established as the dominant technology or brand before the industry matures then they will have a strong position

when trying to identify a company's competitors should you just be looking at companies in the same industry

no, threats could come from any related sector (railway companies in 1930s saw main competitors as other railways so overlooked most serious competition of road-based transport)

what are direct competitors (Porter's 5 forces)

similar in form and satisfy customer's needs in a similar way

what are indirect competitors (Porter's 5 forces)

may appear different in form, but satisfy a fundamental similar need

what do you ask once you have identified the main competitors

what does each competitor seek in the marketplace, | what drives each competitor's behaviour

do companies always have the same emphasis on short term versus long term profits

no companies differ in the emphasis they put on short term versus long term profits, and some competitors are orientated towards satisfying rather than maximising profits

what does knowing a competitors objectives reveal

reveals whether it is satisfied with its current situation and how it might react to competitive actions

what is an example of a strategic group or cluster

waitrose and m and s producing higher range groceries at a premium price

are strategic groups completely independent from each other

no there is also rivalry among groups as strategic groups may appeal to overlapping customer segments

example of strategic groups mixing

waitrose's essential waitrose product line challenge sainsburys taste the difference

how does a company gather data on competitor's business

through secondary data, personal experience and hearsay

how can a company know how another company will react to an assault

by seeing previous reactions for example might react strongly to price cuts but not to advertising increases as they believe these to be less threatening

what does cost leadership involve (porter's 3 generic competitive strategies)

having a cost advantage over competitors

what does differentiation involve (porter's 3 generic competitive strategies)

creation of product/service that is perceived as being unique (when achieved extremely effective strategy for defending market position

what does focus involve (porter's 3 generic competitive strategies)

deliberately selecting, focusing on a narrow group of customers rather than the whole market

what does retaining a position in the market involve

requires firms to attack competitors or defend themselves from attack

why is trying to expand the total market a better option for a market leader than trying to continue to win a greater market share

easier to attract more customers than to steal from competitors, less likely to attract the attention of monopoly regulators

example of market follower

zara and other clothes brands