Scanning industry &

Competitors

Why a product like radio

declined and now once
again emerging as an
entertainment medium?

What Were the Drivers of This Change ?

Technology ?
Government policy ?
Other media substitutes ?

Why Market Leaders

Suffered ?

HMT vs. Titan

HUL vs. Nirma

Hero vs. Honda

Dot.com boom, then bust and now resurgence

Market leadership today cannot be taken for

granted. New and more efficient companies are
able to upstage leaders in a much shorter period.
4

ENVIRONMENTAL ANALYSIS
MODEL FOR ENVIRONMENTAL ANALYSIS

Factors
Influencing
Companys
Marketing
Strategy

External Marketing Environment

External Environment
is not controllable

Social
Social
Change
Change

Ever-Changing
Marketplace

Demographics
Demographics

Product
Product
Distribution
Distribution
Promotion
Promotion
Price
Price

Economic
Economic
Conditions
Conditions

Physical / Natural

Competition
Competition

Environmental
Scanning

Target Market

Technology
Technology

Political
Political&&
Legal
LegalFactors
Factors

Tools for Analysis

SWOT analysis
PEST analysis
Five forces analysis
Strategies

S WOT ANALYSIS

STRENGTHS & WEAKNESSES (Internal)

- Based on co. profile.

OPPORTUNITIES & THREATS (External)

- Based on the Environment.

STRENTHS is a resources, skill or other advantage relative to

competitors and the needs of markets a firm serves or
anticipates serving.
WEAKNESSES is a limitation or deficiency in resources, skills and
capabilities that seriously effect performance.
OPPORTUNITIES
is a major favorable situation in the firms environment.
THREATS is a major unfavorable situation in the firms environment.

POTENTIAL INTERNAL STRENGHTS

A distinctive competence
Adequate financial resources
Good competitive skill
An acknowledged mkt leader
Well conceived functional strategies
Access to economies of scale
Proprietary technology
Cost advantages
Product innovation skills
Proper management
A head on experience curve
Better manufacturing capability.

POTENTIAL INTERNAL WEAKNESS

No clear strategic direction

Obsolete facilities
Missing competence/skills
Poor track record in implementing strategy
Faltered within internal operating problem
Falling behind in R & D
Too narrow a product line
Weak mkt image.
Weaker distribution networks
Unable to finance needed charges in strategy.
Higher overhead cost relative to key competitors.

POTENTIAL EXTERNAL OPPORTUNITIES

Serve additional customer groups
Enter new markets or segments
Expand product line to meet broader range of
customer needs
Diversify into related products
Vertical integration
Faster mkt. growth.

POTENTIAL EXTERNAL THREATS

Entry of lower cost substitute products
Slower market growth
Costly regulatory requirements
Vulnerability to recession and business cycle
Growing power of customer or suppliers
Adverse demographic changes

SWOT
Numerous environmental
opportunities

Cell I Supports a
Turnaround
Strategy

Critical
internal
Weakness
es

Cell 2 Supports an
aggressive Strategy

Substantial
internal
strengths
Cell 3 Supports
a Defensive
Strategy

Cell 4 Supports a
diversification
Strategy

Major environmental
changes

PEST ANALYSIS

PEST analysis
Political factors
Economic factors
Socio-cultural factors
Technological factors

Political/legal

Monopolies legislation
Environmental protection laws
Taxation policy
Employment laws
Government policy
Legislation
Others?

Economic Factors

Inflation
Employment
Disposable income
Business cycles
Energy availability and cost
Others?

Socio cultural factors

Demographics
Distribution of income
Social mobility
Lifestyle changes
Consumerism
Levels of education
Others?

Technological

New discoveries and innovations

Speed of technology transfer
Rates of obsolescence
Internet
Information technology
Others?

COMPETITION

A) What is the current strategy of your competition?

1) How do they define their mission?
2) Are their companies being managed for sales, growth, M.S., new income
ROI, cash flow?
3) How vertically integrated are they?
4) How they have defined their business in terms of customer groups,
customer functions & technology?
5) What is their mkt. mix, manufacturing policy, purchasing policy,
physical distribution policy?
6) What size are their budgets & how are they allocated?
7) To what extent are they affecting your cos growth rate, M.S.,
Profitability?
B) How competitors are performing?
Ascertain performance in terms of Sales, Growth, M.S., Profit,
Net Income, & ROI.

C) What are competitors strengths & weakness?

1)
2)
3)
4)
5)
6)

Product & its quality.

Dealers & Distribution channel.
Marketing & Selling capabilities.
Operations & Physical distribution.
Financial capabilities Resources & Outlay.
Costs & How costs are changing.

D) What action can be expected from them in the future?

1) How are they likely to respond to on going changes in the external
environment?
2) How are they likely to respond to specific competitive moves?
3) When & Where are they most vulnerable?
4) When & Where are they strongest?
5) In what markets are they most vulnerable to your competitive
programs?
6) How can you best fight them in there & other markets?

Porters
Five force model

Porter's Five Forces Model

Potential
entrants
Threat of
new entrants
Bargaining power
of suppliers

Industry competitors Bargaining power

of buyers

Suppliers

Buyers
Rivalry among
existing firms

Threat of
substitutes

Substitute
products

Five Forces Analysis: Key Questions and

Implications
What are the key forces at work in the competitive
environment?
Are there underlying forces driving competitive forces?
Will competitive forces change?
What are the strengths and weaknesses of competitors in
relation to the competitive forces?
Can competitive strategy influence competitive forces (eg by
building barriers to entry or reducing competitive rivalry)?

The purpose of the competitor Analysis

1) Determine each competitors probable reaction to the industry & environ- mental changes.
2) Anticipate the response of each competitor to the likely strategic moves by
the other firm.
3) Develop a profile of the nature & the success of the possible strategic changes
each competitor might undertake.
Threat of Entry
It depends on the barriers present & on the reaction from the existing
competitors.
a)
b)
c)
d)
e)
f)

Economies of Scale.
Product Differentiation.
Capital requirements.
Cost Advantage.
Access to Distribution channel.
Govt. policy.

Powerful Supplier
1) Dominated by few companies.
2) Its product is unique or at least differentiated or it has built up
switching cost.
3) It is not obliged to contend with other products for sale to the
industry.
4) It poses a credible threat of integrating forward into the industrys
business.
5) The industry is not an important customer of the supplier group.
Powerful Buyer
1) It is concentrated or purchased in large vol.
2) The products it purchases from the industry are standard or
undifferentiated.
3) The products it purchases from the industry form a component
of its product & represent a significant fraction of its cost.
4) It earns a low profits, which create great incentive to lower its
purchasing costs.

5) The industry product is unimportant to the quantity of the buyers

products or service.
6) The industrys product does not save the buyer money.
7) The buyers pose a credible threat of integrating backward to make
the industrys product.
Substitute Products
The Internal Rivalry
1) Components are numerous or roughly equal in size & power.
2) Industry growth is slow, precipitating fights for Mkt.
3) The product/ service lacks differentiation or switching costs,
which lock in buyers & protect one combatant from raids on its
customers by another.
4) Fixed costs are high or the product is perishable, crating strong
temptation to cut prices.
5) Capacity is normally augmented in large increments.
6) Exit barriers are high.
7) The rivals are diverse in strategies, origins & personality.

VALUE CHAIN ANALYSIS

Human Resource Management

Technological Development

M
A
R

G
IN

Primary Activities

M Service
A
R
G
IN

Marketing
& Sales

Outbound
Logistics

Operations

Procurement
Inbound
Logistics

Support
Activities

Firm Infrastructure

The value chain

Outbound
logistics
Operations

e
em
cur
nt

Inbound
logistics

Pro

inf Firm
ra s
t ru
c tu
re

Marketing
and sales

ical
log
ent
hno
Tec elopm
dev

Hu
ma
ma n res
nag ou
e m r ce
e nt

After-sales
service

Strategic Analysis
Value chain analysis
nature of value chain analysis
sustainable competitive advantage

the value chain

primary activities
inbound logistics
operations
outbound logistics
marketing and sales
service

secondary activities
procurement
technological development
human resources management
firm infrastructure

Strategic Choice
Environment or market-based strategy
types
cost leadership
differentiation
focus

importance of establishing: the basis of a firm's competitive advantages

the nature of the target market

Resource-based strategy
exploiting core competencies
defining and establishing core competencies

Porters Generic Strategies

Strategies v/s Forces

Factors influencing organisational purpose

Corporate
governance

Stakeholder
views

Organisational
purpose

Business
ethics

Cultural
context