pp 10 competitive

Global Marketing Management

Warren J. Keegan

Chapter 10 Competitive Analysis and Strategy

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Overview

Industry Forces Influencing CompetitionNational Competitive AdvantagesCompetitive Advantage & Strategic ModelsStrategic PositionsCompetitive Innovation

Summary

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Learning Objectives

Understanding the importance of corporate strategies of a company

Appreciating the determinants for selecting, creating & pursuing a particular strategy

Knowing the levels of examining corporate strategy & the competitive position of a firm

Knowing why different companies pursue different strategies

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Industry Analysis

Threat of new entrantsThreat of substitute productsBargaining power of suppliersBargaining power of buyersRivalry among competitors

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Industry Analysis

Five Forces ModelThreat

ofNew Entrants

BargainingPower of

Suppliers

Rivalry AmongExisting

Competitors

BargainingPower of

Buyers

Threat of

Substitute Products

or Services

Source: Michael E. Porter, Competitive Strategy (New York: Free Press, 1980), p.4.

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Dimension of Global Competition

A company`s success in global markets is determined by its ability to establish competitive advantages

Forces influencing competition in an industry need to be examined

Analysis of a firm`s position within an industry is important

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National Competitive Advantage:Determinants of National Advantage

Firm Strategy,Structure, and

Rivalry

Related andSupportingIndustries

DemandConditions

FactorConditions

Source: Michael E. Porter, The Competitive Advantage of Nations (New York: Free Press, 1990),p.72

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National Competitive Advantage: Factor Conditions

Human Resources Physical ResourcesKnowledge ResourcesCapital Resources Infrastructure Resources

Alternative Categorisation of Factors

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Demand Conditions

Important home-market demand conditions: Composition of home demand The size and pattern of growth of home

demand Means by which home demand pulls the

products into foreign markets

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Related & Supporting Industries

Has advantage when it is home to internationally competitive industries that are related or in direct support

Internationally competitive suppliers provide inputs to downstream industries

Contact and coordination give access to foreign markets

Clusters are geographic concentrations of interconnected companies in a particular field

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Firm Strategy, Structure, and Rivalry

Differences in management styles, organisational skills & strategic perspectives create advantages & disadvantages

Domestic rivalry has a powerful influence on competitive advantage because it keeps an industry dynamic & creates pressure to improve & innovate

Intensity of competition & quality of competitors are important

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Other Forces Acting on the Diamond

Chance Occurrences that are beyond the control of firms

Government Buyer of products and services Policy maker of policies on labour, capital formation and

product standards

Other Non-market factors Interest groups, activists and the public

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Dimension of Global Competition

Firm Strategy,Structure, and

Rivalry

Related andSupportingIndustries

DemandConditions

FactorConditions

Chance

Government

Source: Michael E. Porter, The Competitive Advantage of Nations (New York: Free Press, 1990),p.127.

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Characteristics of Strategic Groups

Mobility Barriers Limit access to specific industry and switch between strategy

groups

Varying level of bargaining power with consumer and supplier

Threat of Substitutes Companies serving special needs are less vulnerable

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Competitive Advantage of Individual Companies (1)

Generic strategies for creating competitive advantages

CostLeadership

Differentiation

FocusedDifferentiation

Cost Focus

BroadTarget

NarrowTarget

DifferentiationLowerCost

Co

mp

etit

ive

Sco

pe

Competitive Advantage

Source: Michael E. Porter, The Competitive Advantage of Nations (New York: Free Press, 1990), p. 39.

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Competitive Advantage of Individual Companies (2)

Broad Market StrategiesCost-Leadership AdvantageDifferentiation

Narrow Target StrategiesFocused DifferentiationCost Focus

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3 Strategic Positions

Variety-based A limited number of activities related to

delivering a product

Needs-based A specific customer segment with a

comparatively broad set of needs

Access-basedUniquely or preferentially reach a specific market

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Strategic Perspectives

Layers of Advantage Less risks if wide portfolio of advantages exist

“Loose Bricks” left in the defensive walls of competitors who are focused on a market area

Changing the Rules Refuse to play by the rules set by industry leaders

Collaborating Using know-how developed by other companies

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Hypercompetition – D’Aveni

Porter`s models only provide snapshots of competition “Hypercompetition” describes a dynamic, competitive

world, in which no action or advantages can be sustained for long

The only advantage of a companies is to manage dynamic strategic interactions: Cost-quality, timing & know-how, entry barriers & deep pockets

Companies must seek unsustainable advantages

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ISO-9000

International Organization for Standardization

Criteria for product development & manufacturing policies

Registration and certification leads to competitive advantage

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ISO-9000

Provides: Competitive advantage over suppliers who are

not certified Focus on continuing improvement Media awareness Customer perception

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Summary

Various Factors are helping industries and countries to achieve competitive advantage

Porter`s five Forces ModelGroups of companies may follow similar strategic

dimensionsFocusing on the individual strategy of a company, an

understanding of the unique source of the firm`s competitive advantages is of great importance