PART 2: REVIEW CURRENT BUSINESS PERFORMANCE AND CAPABILITY

Core activities, customer bases, values and directions

The nature and quality of core business defines market positioning and the ability of an
organisations to be competitive.
Companies need to confirm their core activities—the activities’ functions, processes and
capabilities—that drive and support the business—their current business performance and
capability. This understanding will contribute to the forecasts that are made. Market intelligence
and forecasts relating to relevant markets will contribute to the ways in which organisations plan,
develop and implement the core structures of the organisations now and into the future. This will
impact on the organization’s business values—the values and vision that structure and drive
performance requirements.
By confirming what the organisations currently does well the organisations can be flexible
and will be more able to develop strategies for moving in new directions while still supporting its
valuable customer base and core activities. If organisations wishing to move into new areas or new
markets, ignore their current customer base they risk alienating customers and losing their main
income stream.
Core activities
Core activities are the critical functions that closely align with strategic plans. They might
be expressed in terms of customer service, marketing, product design and development, operations
etc. They describe the primary area/s or activity/ies on which a company was founded and on
which it focuses its business intentions.
A business will examine its various products/service offerings to determine the ones that
complement each other in terms of capital needs, structure, customer base, revenue streams, and
manufacturing. They will then pare down those offerings to determine which ones are the most
strategically viable - the ones that will provide optimum return, over defined periods of time – the
core.
If they can sustain core functions they can then start considering ways of exploiting new
international business opportunities.
They can also develop and implement procedures that will carry the organization’s core
business over into the forecast future.
Defining and maintaining the core processes of a business is critical for survival in a
competitive market and for a sustainable business.
Economies and markets change with time and organisations can expand their core functions
in order to achieve new levels of growth. The core is not necessarily static; it will keep changing
with time, however when, in particular, expanding into new markets -for example international
markets - the organisations must be very aware of what its core business is. This will impact on
marketing strategies, business goals, organizational structure, product and service design,
marketing techniques etc.
Functions that align with core business strategies will include:
 customer service strategies
 employee development
 quality and change management
 financial analysis and reporting
 capital management
 management responsibility
 product/ service development- research and development
 customer acquisition
 accounting and technology management
(cleverism.com)
To develop forecasts and to accommodate business needs organisations needs to be aware of:
 its percentage share of the market
 current market demographics
 degree of penetration
 level of market coverage
 current sales and profitability ratios
 production and productivity figures
 product/ service faults (variation)
 product returns/ repairs
 warranty returns and repairs
 customer complaints
 supplier feedback
 input from other shareholders
Business values and current direction
The values, vision and mission of the business are important for determining how the business
should be run and the direction in which it should go. Values, vision and mission impact on core
business, customer bases and prospective expansions – into new markets or into the development
of new products and services for current (and possibly new) markets.

They impact on:

 the way the organisations is currently run
 hierarchies within the organisations
 relationships with suppliers, staff, customers/consumers
 sales and marketing ethics
 legislative compliance
 opportunities or change needs that might be identified as a result of:
o market intelligence
o market forecasts

Forecasts
The forecasting process requires input data relative to an organization’s values and current
direction, their core business, customer base and the target market for their products and services.

On a conceptual level forecasting follows six steps:

1. ‘A problem or data point is chosen. This can be something like "will people buy a high-
end coffee maker?" or "what will our sales be in March next year?"
2. Theoretical variables and an ideal data set are chosen. This is where the forecaster
identifies the relevant variables that need to be considered and decides how to collect the
data.
3. Assumption time. To cut down the time and data needed to make a forecast, the forecaster
makes some explicit assumptions to simplify the process.
4. A model is chosen. The forecaster picks the model that fits the dataset, selected variables,
and assumptions.
 5. Analysis. Using the model, the data is analyzed and a forecast made from the analysis.
6. Verification. The forecaster compares the forecast to what actually happens to tweak the
process, identify problems or in the rare case of an accurate forecast, pat [themselves] on
the back’ (investopedia.com)
All these aspects of the business will impact on forecasts, which allow businesses to plan
production, financing, marketing, relationship development etc.

Current and past performance comparisons

To identify the effectiveness of international marketing and positioning it is advisable to
establish a direct connection between marketing activities, investments and business outcomes.
Analyze inputs and outcomes to determine whether past and current marketing results align with
the organization’s international marketing plan/s. If performance does not meet expectations it is
necessary to determine and address the root causes or to consider moving in new directions.

Current performance and past marketing or positioning

Market positioning refers to the methods by which a business organisations presents, to
customers/ consumers, its product/ service offering. It is the process of establishing, in relation to
competing brands or products, the image or identity of a brand or product so that consumers
perceive it in a certain way.
Positioning relates to product/ service characteristics: e.g. luxury, long lasting, best quality,
premium, cheap/ low prices, innovative etc. etc. It can be based on costs/ cost leadership (providing
what consumers want at a lower price than competing products/ services), or on differentiation
(being unique because comparable products cannot be found). It is the process of developing,
within a target market, competitive advantage.
‘The positioning of a brand or product is a strategic process that involves marketing the
brand or product in a certain way to create and establish an image or identity within the minds of
the consumers in the target market. Market positioning of a brand or product must be maintained
over the life of the brand or product. Doing this requires ongoing marketing initiatives intended to
reinforce the target market’s perceptions of the product or brand’ (strategiccfo.com)
Analysis is needed in order to make a decision about the past and current positioning of an
organization’s products/ service/ brand - is the positioning correct or should re-positioning be
considered – in order to increase success rates?
However, repositioning a brand or product/ service means altering its place in the minds of
the consumer, or essentially changing the brand’s or product’s image or identity. Repositioning or
trying to change the consumers’ perception of a brand or product after it has already been
solidified, could confuse or alienate consumers in the target market. (strategiccfo.com)

Repositioning is, sometimes, necessary. For example:

‘The Coca-Cola Company launched Mother Energy Drinks in 2006 into the Australian
market. The launch campaign was professionally executed, and Coca-Cola was able to leverage
its distribution channels to get the product in major retailers. However, the taste of Mother Energy
Drink was subpar and repeat purchases were very low. Coca-Cola was faced with a decision: to
improve and reposition the product or withdraw it and introduce a new brand and product. The
company ultimately decided to reposition the product due to an already high brand awareness. The
biggest challenge faced by Coca-Cola was to persuade consumers to try the product again. The
company changed the packaging, increased the size of the can, and improved the taste of the
product. The relaunch of the product featured a new phrase – “New Mother, tastes nothing like the
old one.” Ultimately, Coca-Cola was able to successfully reposition Mother Energy Drinks and
the brand today competes with the two leading energy drinks in the market – V and Red Bull’.
(corporatefinanceinstitute.com)

Analysis of performance and of the effectiveness of past international marketing or

positioning requires that the organisations:
 define the market
 divide total industry demand into its main components
 define the target market
 collect and analyses marketing data
 collate response and sales results
 attribute demand - sales and sales activity - to specific target markets
 identify or develop relevant KPIs and any other measurement criteria
  measure performance against the KPIs
 identify the competition and the performance of the competition

Current and past performance results (measures of performance against KPIs) can be compared
to determine:
 the most effective marketing strategies
 what marketing activities have changed and how they have changed
 why the changes were necessary
 whether any changes were forced or voluntary
 whether any changes were initiated by internal or external factors
 the success rates of any changes
 whether the organization’s pricing, positioning and distribution strategies are still
achieving objectives
 what promotional activities were or are successful
 whether other changes or innovations are needed or would be beneficial
 whether any positioning changes were made or are necessary
 the effectiveness or successes of past international marketing or positioning
 the ways in which these successes will impact on current and future marketing and
positioning
 how past and current performance will relate to market forecasts
 how market forecasts will affect operations/ production and marketing and sales

Comparisons between past and current performance will take into consideration, over the
periods nominated for evaluation:
 the market area, how many people live there and how the population has changed
 changes in customer/ consumer needs
 buyers and any special characteristics that contribute to company/ brand loyalty
 the number of direct competitors and their market share
 similarities and differences between the organization’s product/service offering and that of
competitors
 cultural differences or issues that affect:
 o positioning
o pricing
o marketing costs
o promotion, marketing and sales
o relationship building
o customer needs and expectations
o responses to the marketing message
 trends and changes that have affected business outcomes including those affecting
o the economy
o technologic advances and applications
o imports / exports
o resources – changes in resource needs or changes in resource availability
o political or legislative conditions
 customer/ consumer satisfaction
 product/ service quality and returns
 numerical and financial factors - profit margin, liquidity and solvency ratios and any
discrepancies between past and current performance

Armed with this information it is possible to:

1. Perform qualitative and quantitative analysis of comparative international market
information and review business performance in international settings.
2. Forecast the drivers of demand in each segment and project likely or possible changes.
3. Conduct sensitivity analyses to understand the most critical assumptions and to gauge any
risks to the baseline forecast (hbr.org).

Performance
The key operational variables for evaluations relating to past and current performance are
sales and profitability. The percent profit margin indicates how much of each dollar earned from
sales is kept by the organisations and this is a good indicator of overall performance.
Considerations when identifying current international marketing performance and the
effectiveness of past international marketing or positioning:
 whether the planned and predicted sales volume (revenue/ inputs) was achieved
 whether there are differences between past and current performance
 how effective different positioning, pricing and marketing strategies have been
 how any changes in sales volume compare with changes to the sales of competitors

By identifying current international marketing performance and the effectiveness of past

international marketing or positioning in international markets the organisations might decide
that it is necessary to:
 reduce the price of products to at least match competitors
 sacrifice some of the high quality features, if consumers are not prepared to pay for them
 target a different, maybe higher income, market sector and either leave prices the same or
even increase them
 up-date or make changes to the business plan
 business plans need to be up-dated
 adapt to specific market changes
 change marketing process to accommodate the advantages and disadvantages of current
locations
 implement new marketing strategies and procedures for communicating with customers/
consumers
 move to another level or in a new direction
 address efficiencies – improve cost cutting and waste management procedures
 change resource acquisition procedures
 develop and implement new methods of measuring success (new KPIs, KRAs)
Performance assessment takes into consideration the organization’s past, current, expected and
desired competitive position, in order to select strategies for on-going business success.
Strengths, weaknesses and critical success factors
Performance data reviews can be used to examine and quantify the performance of an
organisations over a given period of time. Reviewing performance data from all areas of the
business, and using data from both internal and external sources, will help the organisations
identify its strengths and weaknesses plus any critical success factors relevant to international
business activity.
SWOT, PEST or STEEP (or similar) analyses can be initiated, to explore marketing and
performance strengths and weaknesses and to consider brand/ product/ service function and
viability. Strategy maps, shareholder value analyses and event planning maps might also be useful
tools.

Other tools or processes could include:

 comparative analysis
 competitive analysis
 life cycle models
 product portfolio analysis
 value chain analysis
The results of these analyses will contribute to the forecasting process.

SWOT
A SWOT analysis examines the business environment to determine what things affect
performance and whether there are new opportunities to exploit. They will, therefore, contribute
to the forecasting process.
In a traditional SWOT analysis strengths and weaknesses are the internal elements focusing
on the business or organisations while opportunities and threats have an external focus.
Opportunities can include alliances, co-operative ventures and extending, expanding or
otherwise changing an existing business to fit with the requirements of international marketing
processes.
Threats could include a new competitor entering the market, new products or services being
launched by existing competitors and reduced average order value resulting in reduced average
lifetime value etc. They can also include changes in the ways in which customers/ clients here or
abroad perceive the organization, its brand, image, products and services –positioning.

The SWOT analysis might point to opportunities including the potential for:
 greater penetration of existing markets with existing products or services
 new products or services for existing markets
 marketing new products or services in new markets
 extending, expanding or otherwise changing an existing business
 viable repositioning
 joint and co-operative ventures
 strategic alliances
 franchising and exports to new countries/ expanding the international market

Failure to act on opportunities could result in a business stagnating and falling victim to more
aggressive competitors.
‘All businesses benefit from a SWOT analysis, and all businesses benefit from completing a
SWOT analysis of their main competitors, which interestingly can then provide some feed back
into the economic aspects of the PEST analysis.’(businessballs.com)

STEEP
The STEEP (Socio-cultural, Technological, Economic, Environmental and Political
factors) model can be used to take a step back from the business, and look at the big picture.
The tool can be used to scan the external (contextual) macro environment. STEEP analysis
helps stimulates thought about wider issues that have an impact on international marketing.

Information categories: potential topics for consideration

Target market:
Socio-cultural  age range
impacts  income bracket
 gender
  culture
 lifestyle and leisure patterns
 social trends
 shopping/ spending trends
IT for business management and communicating with other businesses and
clients:
Technological
 equipment and materials
impacts
 quality, cost and new developments/ new applications
 staff training
Trends
Economic Interest rates
conditions Tax and insurance
Funding sources and requirements
Legislation—updates/ changes/ compliance
Sustainability measures:
 resource use
 recycling
Environmental  waste disposal
requirements  energy efficiency
 fuel
 footprint
 environmental ethics
Community expectations/ perceptions
Policies relevant to particular parties (commonwealth, state, local),
government stability, legislation including taxation, industrial, health and
Political factors
safety, equity and social justice, property and corporations law etc. Current
government focus and possible changes of government.
PEST
A PEST Diagram can also be used to help analyses international market factors through an
understanding of environments factors affecting the business:
Political
 ecological/environmental issues
 current legislation home market
 future legislation
 international legislation
 regulatory bodies and processes
 government policies
 government term and change
Economic
 home economy situation
 home economy trends
 overseas economies and trends
 general taxation issues
 taxation specific to product/services
 seasonality/weather issues
Social
 lifestyle trends
 demographics
 consumer attitudes and opinions
 media views
 law changes affecting social factors
 brand, company, technology image
 consumer buying patterns
Technological
 competing technology development
 research funding
 associated/dependent technologies
 trading policies
 funding, grants and initiatives
 home market lobbying/pressure
groups
 international pressure groups
 wars and conflicts
 market and trade cycles
 specific industry factors
 market routes and distribution trends
 customer/end-user drivers
 interest and exchange rates
 international trade/monetary issues
 fashion and role models
 major events and influences
 buying access and trends
 ethnic/religious factors
 advertising and publicity
 ethical issues
 replacement technology/solutions
 maturity of technology
 manufacturing maturity and capacity
  information and communications  innovation potential
 consumer buying  technology access, licensing, patents
mechanisms/technology  intellectual property issues
 technology legislation  global communications
(businessballs.com)
Other performance analysis tools (and software) that can be useful include:
1. Tools such as A/B testing tools that help a business evaluate the validity of something; for
example a tactic, hypothesis or creative design. Organisations can use testing tools to
compare different tactics in order to understand which is a better fit.
2. Data visualization tools that help the organization create business analysis reports that are
easy to understand and potentially automated. With certain tools, users can interject
consistently updated data to show real time performance.
3. Regression analysis tools that rely on statistical methods to understand the relationship
between two independent variables. For example, correlations between an increase in sales
and a newly implemented marketing strategy. Understand these relationships and help
management in the organization decide whether certain aspects of the business are effective
and valuable.
4. Scenario analysis (horizon analysis or total return analysis) that is an analytic process
allowing an organization to investigate a variety of possible future events or scenarios by
considering ‘what if’ questions and alternative possible outcomes.
5. Forecasting/time series analysis that utilizes data that is collected at uniformly spaced
intervals and explores the data to extract meaningful statistics or data characteristics. This
can be valuable when assessing changes over time or predicting future events, based on
what has happened in the past.
6. Pricing optimization tools that enable marketers to better understand the market and keep
up with trends and competitors.
7. Data mining that is an analytic process designed to explore data, usually large business-
related data sets (big data), looking for commercially relevant insights, patterns or
relationships between variables that can improve performance.
Current capabilities and resources
Business organisations must be able to achieve their specific, agreed and articulated
objectives and goals with regard to international marketing. If they do not have the capacity or the
capability to do so they set themselves up for failure.
Every organization has a set of capabilities or core capabilities that when properly
leveraged support business success.
Capabilities might be defined as the ability - skills, knowledge, resources (including human
resources), infrastructure, technology, capital / financial basis, leadership and management
processes - to perform successfully, satisfy stakeholder expectations and achieve goals.

A capability and resources assessment might involve evaluating:

 situational factors
 operating hours
 the age and life of business equipment, production machinery and technology
 the capacity of equipment relative to current output
 staff numbers - the capacity of staff relative to current output
 staff skills and knowledge
 compliance with industrial relations requirements in the different countries
 the location/ position of the organization’s operations and any factors related to import/
export activities
 transport and distribution channels
 communication channels and efficiencies
 social factors - social responsibility; social acceptability
 service provided to customers and consumers
 organizational image and brand acceptance
 supply and demand
 compliance with legislation – Australian and that of the country in which the organization
is conducting business
 capabilities in terms of cultural fit and cultural acceptance
 Factors relating to IJVs, strategic alliances etc.
A capability assessment will enable measurement of the organization’s strengths, weaknesses,
ability to access and apply the resources they need, and their market understanding.
According to the Victorian Public Sector Commission, capability assessment might include
analysis and evaluation of:
Element Description
The staff and their collective skills, experience, tacit knowledge,
People culture, attitudes, relationships, and needs and expectations
necessary to deliver the desired service
Business practices The documented processes that underpin service delivery
The physical facilities and (non-ICT) equipment required to enable
Facilities and equipment
service delivery
Information and The systems for the communication, capture, classification,
communication documentation, storage, management, retrieval and dissemination of
technologies (ICT) knowledge
The domain-specific knowledge applied in service delivery,
Knowledge
excluding tacit knowledge
Accountability and The framework to determine accountability and governance for all
governance aspects of the entity’s operations

(vpsc.vic.gov.au)
Austrade provides a free report referencing the need for capability assessments
- Organizational Capability Assessment Positioning Austrade for the Future. This can be
downloaded from the internet. In this document Austrade explains how it must accept the challenge
of not standing still.
‘The challenge facing Austrade is to determine how it can continue to deliver in the face
of significant, fast-paced and ongoing change in both the global economy and in service delivery
platforms. Austrade should consider the capability it requires to continue to offer its unique value
proposition.
Consumer needs are rapidly changing with technology creating higher expectations of
accountability, interconnectivity, responsiveness, and effective service delivery. Today,
consumers are empowered, informed, have more choice and better access to information.
 Putting clients at the center of what Austrade does is critical to ensuring it can pivot and
change with time, create mutual value and remain relevant.
In an increasingly complex world and resource-constrained operating environment, it is
important to recognize where the organization can add the greatest value and achieve the greatest
impact.
This will necessarily involve gathering and analyzing intelligence to identify emerging
trends and inform a new integrated, forward-looking strategy. The strategy will assist in
prioritizing resources and effort to achieve identified and measurable outcomes over time’.
(austrade.gov.au)
This applies to all organisations operating in international markets. Businesses need to be
aware that standing still, or supporting the status quo, will not lead to sustainable business,
particularly in rapidly changing international market. They must constantly identify and evaluate
their capabilities, resources and competitive position, with a view to improvement.

Capabilities
In the Harvard Business Review:
‘What people respect about … companies is not how they are structured or their specific
approaches to management, but their capabilities—an ability to innovate, for example, or to
respond to changing customer needs. Such organizational capabilities, are key intangible assets.
You can’t see or touch them, yet they can make all the difference in the world when it comes to
market value.
These capabilities—the collective skills, abilities, and expertise of an organization—are
the outcome of investments in staffing, training, compensation, communication, and other human
resources areas. They represent the ways that people and resources are brought together to
accomplish work. They form the identity and personality of the organization by defining what it
is good at doing and, in the end, what it is. They are stable over time and more difficult for
competitors to copy than capital market access, product strategy, or technology.’
(hbr.org)
Products and services
Capabilities (and capacity) relate directly to competitive position. When considering
capabilities it is also necessary to identify any issues related to competitive position and to assess
individual products and services being offered to the market.
The organization must identify under-performing products or services.

These must be assessed in terms of:

 market suitability
 viability/ongoing viability
 possible viability in other contexts
 fit with customer needs
 cultural fit
 the need for adaptations or adjustments
 the need for withdrawal from the market

Any products or services that are not providing a suitable ROI need to be closely examined in
order to determine what action to take. Persevering with products and services that are not
performing adequately means that the organization will lose money and possibly credibility and
the marketplace.

Capabilities and resources

Capabilities and resources can be assessed in the context of:
 strategic assets
 core competencies
 competitive advantage
 competitive capabilities
 existing product/ service offerings
 response and decision-making times
 communication and information sharing within the organization
 communication and information sharing with customers and other stakeholders
  entrepreneurial, innovative or creative skills
 organizational flexibility and agility
 market forecasts
 product strengths
 customer loyalty
 distribution costs—import/ export
 new product and service development capabilities—how fast your products and services
can be developed and delivered
 pricing/ pricing options
 financial viability and stability
 access to capital
 profitability
 capacity to meet demand—machinery, equipment, staff, competencies, operational
practices, facilities, lead and turnaround times, access to supplies
 liquidity
 resilience
 responsiveness
 ability to integrate technology

The assessment can be used to:

 identify the resources that are currently available to provide client centric services
 identify potential new products, services or markets
 identify new areas for exploitation within international markets
 determine the degree to which the organization will be able to meet the needs of
customers/consumers and meet or exceed the needs of other stakeholders
 identify areas for improvement
It could point to the need for:
 new resource acquisition procedures
 participation in joint ventures
 partnerships
  improved supplier relationships
 improved organizational learning
A range of online diagnostic tools can be purchased or accessed via the Internet.

Competition
Competition must be considered in the context of performance, function, communication
with customers, cultural fit, technical improvements or their ability to penetrate new markets.
Analysis of competitors’ market performance, products and services can provide information that
will help the business expand, overtake, undercut or outflank a competitor.
An organizational capability assessment can identify what the organization has, what it
needs and what it needs to do in order to operate successfully in a future context in local or
international markets.

Current competitive position

Successful organisations know their own market position and that of all competitors. They
will have processes in place for monitoring competitor activity and for confirming their own
strengths and competitive position within their international markets.

Competitor profiling
“… Competitor profiling will allow the firm to anticipate the strategic response of their
rivals to the firm’s planned strategies, the strategies of other competing firms, and changes in the
environment. Third, this proactive knowledge will give the firms strategic agility. Offensive
strategy can be implemented more quickly in order to exploit opportunities and capitalize on
strengths. Similarly, defensive strategy can be employed more deftly in order to counter the threat
of rival firms from exploiting the firm’s own weaknesses.
An appropriate analogy is to consider this advantage as akin to having a good idea of the
next move that your opponent in a chess match will make. By staying one move ahead, checkmate
is one step closer. Indeed, as in chess, a good offense is the best defense in the game of business
as well.
A common technique is to create detailed profiles on each major competitor. These profiles give
an in-depth description of the competitor’s background, finances, products, markets, facilities,
personnel, and strategies.

This involves:
 Background
o location of offices, plants, and online presences
o history - key personalities, dates, events, and trends
o ownership, corporate governance, and organizational structure
 Financials
o P-E ratios, dividend policy, and profitability
o various financial ratios, liquidity, and cash flow
o profit growth profile; method of growth (organic or acquisitive)
 Products
o products offered, depth and breadth of product line, and product portfolio
balance
o new products developed, new product success rate, and R&D strengths
o brands, strength of brand portfolio, brand loyalty and brand awareness
o patents and licenses
o quality control conformance
o reverse engineering or deformulation
 Marketing
o segments served, market shares, customer base, growth rate, and customer
loyalty
o promotional mix, promotional budgets, advertising themes, ad agency used, sales
force success rate, online promotional strategy
o distribution channels used (direct & indirect), exclusivity agreements, alliances,
and geographical coverage
o pricing, discounts, and allowances
  Facilities
o plant capacity, capacity utilization rate, age of plant, plant efficiency, capital
investment
o location, shipping logistics, and product mix by plant
 Personnel
o number of employees, key employees, and skill sets
o strength of management, and management style
o compensation, benefits, and employee morale & retention rates
 Corporate and marketing strategies
o objectives, mission statement, growth plans, acquisitions, and divestitures’
(liftconversions.com)

Organisations that are not aware of competitor performance and the ability of competitors
to penetrate international markets could be taken by surprise when competitors launch a new
product or open up a new market. They must regularly scan and analyze the market so they can
spot the gaps they can enter – preferably before a competitor does. Understanding what their
competitors are doing helps organisations understand their own position in the market.

To determine their own competitive position they must identify the following:
1. Market share –at a local, state, national or international level.
2. Market penetration. Percentage reach with regard to target markets. Identification of
targets that are not being reached.
3. Market coverage. Product/service availability, accessibility, methods for displaying and
selling. Distribution channels
4. Sales. The sales figures over given periods of time and correlations between expected and
actual sales
They need to:
 make cross-cultural comparisons
 judge the fit between strategies and situations
 analyze their own strengths and weaknesses and those of international competitors
  develop a good understanding of the business environment in the relevant countries
 regularly conduct appropriate competitor analyses to determine how strong the competition
is
 know exactly who they will be competing against
 consider:
o market share
o price/ strategy
o product/ service features and benefits

Competitive position
According to Porter there are five forces relevant to competitive position analysis:
1. ‘Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is
driven by the: number of suppliers of each essential input; uniqueness of their product or
service; relative size and strength of the supplier; and cost of switching from one supplier
to another.
2. Buyer power. An assessment of how easy it is for buyers to drive prices down. This is
driven by the: number of buyers in the market; importance of each individual buyer to the
organization; and cost to the buyer of switching from one supplier to another. If a business
has just a few powerful buyers, they are often able to dictate terms.
3. Competitive rivalry. The main driver is the number and capability of competitors in the
market. Many competitors, offering undifferentiated products and services, will reduce
market attractiveness.
4. Threat of substitution. Where close substitute products exist in a market, it increases the
likelihood of customers switching to alternatives in response to price increases. This
reduces both the power of suppliers and the attractiveness of the market.
5. Threat of new entry. Profitable markets attract new entrants, which erodes profitability.
Unless incumbents have strong and durable barriers to entry, for example, patents,
economies of scale, capital requirements or government policies, then profitability will
decline to a competitive rate.
Arguably, regulation, taxation and trade policies make government a sixth force for many
industries’.
(cgma.org)
Porter’s theory is based on the concept that these five forces determine the competitive
intensity and attractiveness of a market and that ability to fit with these five positions helps identify
an organization’s competitive position. If organisations can understand the factors affecting
profitability they can make decisions about where and how to enter the market, product pricing
and positioning, capacity and capability and competitiveness strategies.

Additional Reading
Video Links
 Why Dunkin' Donuts Is Failing in India
https://www.youtube.com/watch?v=BXXdcgchAVw
 Why McDonald's Failed In Iceland
https://www.youtube.com/watch?v=AT-E_eMiwgk
Web Links
 Alibaba shares surge after CFO’s forecast
https://www.cnbc.com/2017/06/08/alibaba-shares-surge-after-cfos-forecast-literally-
causes-investors-to-gasp.html
 Lego builds on strong success in China
https://www.scmp.com/news/china/society/article/1830908/lego-builds-strong-success-
china-playful-children-discover-their
Check your knowledge
True or False statements. Answer True (T) or False (F).
True False
1. Performance in the marketplace influences profitability.
2. The values, vision and mission of the business can be ignored when
identifying international markets.
3. Innovation is not important with regard to regard to product/ service
positioning.
4. Repositioning a brand or product/ service means altering its place in
the minds of the consumer.
5. Market success depends on suitable product/ service pricing, market
reach and positioning.
6. Organizational capabilities describe what an organization is good at.
7. An organization’s core activities are only important in the context of
markets within Australia.
8. Competition in international markets must take into consideration
positioning and performance but not necessarily cultural fit.
Multiple choice questions. Select the answer you think is correct.
1. Repositioning is the process of:
a. Selling product into new markets.
b. Trying to change the consumers’ perception of a brand or product after it has
already been solidified.
c. Designing and developing new products so the organization can exploit new
opportunities.
d. Developing productive relationships with international suppliers.
2. Organisations can conduct capability assessments in order to:
a. Identify what they need to do in order to operate successfully in a future context.
b. Identify the competition.
c. Work out how many staff need extra training.
d. Determine the measurement criteria for performance assessments.