SITATION ANALYSIS OUTLINE. Role of Situation Analysis in Strategy-Making Methods of Industry & Competitive Analysis Profiling Industry’s Dominant Economic Traits Analyzing Industry’s Competitive Forces Analyzing Drivers of Industry Change Assessing Competitive Positions of Rivals
Identify features in a firm’s external & internal environment which frame its window of
Open to the
About a Company’s
1. Industry’s dominant economic traits
2. Competitive forces at work in industry & strength
3. Drivers of change in industry
4. Firms in strongest/weakest competitive positions
5. Competitive moves of rivals
6. Key factors determining competitive success or failure in industry
7. Attractiveness of industry
Cost per Unit
When a strong learning/experience curve effect causes unit costs to decline substantially as cumulative production volume builds, a strategy to become the largest volume manufacturer can offer the COMPETITIVE ADVANTAGE of being the industry’s LOWEST-COST producer!
COMPETITIVE FORCES MATTER BECAUSE:
To be successful, strategy must be designed
to cope effectively with competitive pressures -
objective must be to build a strong, market
position based on competitive advantage!
1. RIVALRY among competing sellers in an industry
2. SUBSTITUTE PRODUCTS offered by firms in OTHER industries
3. Potential ENTRY of new competitors
4. Bargaining power of SUPPLIERS
5. Bargaining power of BUYERS
A powerful competitive strategy
launched by one firm INTENSIFIES
competitive pressures on rivals!
Competitive jockeying among rival firms is a dynamic process as
Competitive threat of outsiders entering a market is stronger when
SUBSTITUTESmatter when products of firms in another industry enter the market picture
Competitive threat of substitute
products is strong when
Whether suppliers are a strong or weak competitive force depends on if they have bargaining power to put rivals at a competitive disadvantage based on:
Buyers become a stronger competitive force the more they can exercise bargaining leverage over
Competitive environment is unattractivewhen:
Competitive environment is idealwhen:
The weaker the competitive forces, the GREATER an industry’s PROFITS!
A company whose strategy and market position provide a GOOD DEFENSE against the five forces can earn above-average profits even when some or all of the five forces are strong!
1. Identifying RELEVANT driving forces
2. ASSESSING IMPACT they will have
A broad-ranging effort to monitor & interpret social, political, economic, ecological, & technological events in an effort to spot budding trends & conditions that could eventually impact industry
Managers who fail to study
competitors closely risk being
blindsided by “surprise” actions
on the part of competitors!
Apparel Manufacturing Industry
Tin & Aluminum Can Industry
A sound strategy incorporates industry key success factors!
To review overall situation & develop conclusions about relative attractiveness or unattractiveness of the industry, both near- and long-term
A firm uniquely well-suited in an otherwise unattractive industry can, under certain circumstances, still earn unusually good profits
1. Task of analyzing a firm’s EXTERNAL situation cannot be reduced to a formula-like exercise
2. Sweeping industry & competitive analyses need to done every 1 to 3 years