Competitive structure

analysis

Potter's Five Forces

 Threats of new entry

Government Policy-In many cases government policy
and regulation are important entry barriers.
Economic of scale Economic of scale can deter the
new entrant.
Cost disadvantages independent if scale-Economic of
scale enjoyed by the established firms which is not
replicated by new firms.
Product differentiation it may force the new entrant
to spend heavily to overcome this barrier.
Capital Requirement-High capital intensive nature of
the industry is an entry barrier to small firms.

 Rivalry Among existing firms

Number of firms and their Relative market share
.,strength etc
Product standardization and switching cost
different firm have standardized ,price
,distribution ,after sales service ,credit etc become
important strategic variable of competion.absence
of switching costs makes firms vulnerable.
Fixed or storage costs increase sales for improving
capacity utilization or reduce storage costs.

 Threats of substitutes
Substitutes limit the potential return in an industry can
profitability charge.
Bargaining power of buyer
Important determinant of the buyers
The volume of purchase relative to the total sale of the
seller.
The importance of the product to the buyer interms of
the total cost.
Switching cost
The extent of standardization or differentiation of the
product.

Strategic Group
According to Porter, a strategic group is
the group of firms in the industry following
same or similar strategy along the
strategic dimension.eg.price and
performance.

Eg example in the car manufacturing industry, the luxury

car segment and the economy car segment are two
separate strategic groups. When trying to reconstruct
market boundaries, companies should look across strategic
groups within their industry as buyers make trade-offs
between offerings from different strategic groups and not
solely on price.

Implication of Strategic group

Analyzing and identification of
opportunities of threats.
Nature and Intensity of completion.
Changing pattern of strategy.
The competitive standing of the
different strategic groups would be
different with respect to each of the
competitive forces.

Competitor analysis
Competitor analysis seeks to find answer
to certain basic question such as:
1. Who are the competitors of the firm ?
2. What are the current strategies of the
competitors?
3. What drives the competitors?
4. Where is competitor vulnerable?
5. How are the competitors likely to
respond to the strategies of others?

 Competitor Response profileWhat moves or developments will

provoke the competitor and how is
the competitor likely to respond or
retaliate?
Future goals-Knowledge of
competitor goals helps to predict its
reaction to strategic changes.

 Assumption-A firm would have

assumption about the industry and
competitors.
Current strategy
Capabilities-analysis of the strength
of and weakness of the competitors.

Value chain
It displays total value and consists of
value activities and margin.
Primary activity
1. Inbound logistic
2. Operation
3. Marketing and sales
4. Service

 Support activities
1. Procurement
2. H.R.M
3. Firm infrastructure
4. Technology development

Benefits of Structural
Analysis
Structural is to diagnose the competitive forces
that firm can create defendable position against
the five competitive forces.
1. Structural analysis would enable a firm to answer
such question as:
2. How vulnerable is the firm against potential
entrants ?
3. What is the nature of supplier power to combat it?
4. What are the strength and weaknesses and
strategies of the establish competitors and how to
cope with them?

ENVIRONMENTAL
ANALYSIS AND STRATEGIC
MANAGEMENT

Formulation of mission and

objective
Objective should not be static ,they
should be dynamic.
Environment analysis help to find
answer to question
1. What should companys business
be?
. SWOT ANALYSIS

Strategic and Alternatives and

choice of strategy
After identification of environment is
consideration of strategic alternative and the
choice of most appropriate strategy.
ALTERNATIVE
Should company continue with same
business ?
If it should continue in same business ,should
it grow by expanding the existing unit or
acquiring other acquiring unit?
Should it grow by vertical integration?

Implementation
Three level of strategy
Corporate level strategy-where different operation work
together to achieve particular goal.
SBU (strategic business unit)-The SBU operating division is
given the authority to make its own strategic decisions within
corporate guidelines as long it meets corporate objective.
Functional level strategy- Functional business strategy is an
area of operational management based on a specific
department or discipline within an organization, such as
human resources, finance or marketing. To say that a business
has a functional level strategy for product development, for
instance, means that the company has developed a strategy
for selling its goods and services to customers.

 Evaluation of strategy
Failure of strategy may arise from
Improper implementation of the
strategy.
Environmental changes which were
not anticipated while formulating the
strategy.
Inappropriate strategy.