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Chapter 19Analysing

competitors and creating a

competitive advantage

The Porter model of competitive Industry structure

Entry barriersEconomies of scaleProprietary product differences

Brand Identity

Switching costs

Capital requirements

Access to distribution

Absolute cost advantages

Proprietary learning curves

Access to necessary inputs

Proprietary low-cost product design

Government policy

Expected retaliation

Rivalry determinantsIndustry growth

Fixed (or storage) costs/value added

Intermittent overcapacity

Product differences

Brand identity

Switching costs

Concentration and balance

Informal complexity

Diversity of competitors

Corporate stakes

Exit barriers

Determinants of supplier powerDifferentiation of inputs

Switching costs of suppliers and firms in the industry

Presence if substituent costs

Supplier concentration

Importance of volume to supplier

Cost relative to total purchases in the industry

Impact of inputs on cost or differentiation

Threat of forward integration

relative to threat of background integration by firms in the industry

Determination of buyer powerBargaining Leverage

Buyer concentration

versus firm concentration

Buyer volume

Buyer switching costs relative

to firm switching costs

Buyer information

Ability to backward- integrate

Substitute products

Pull-through

Price Sensitivity

Price/total purchases

Product differences

Brand identity

Impact on quality/performance

Buyer profits

Decision-makers’ incentives

Determinants of substitution threatRelative price performance of substitutesSwitching costs

Buyer propensity to substitute

New entrants

Substitutes

SuppliersBuyers

Threat of new entrants

Bargaining power of suppliers Bargaining power of buyers

Threat of substitutes

Industry Competitors

Insensitivity

of rivalry

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Competitor analysis

1. Who are our competitors?

2. What are their strengths and weaknesses?

3. What are their strategic objectives and thrust?

4. What are their strategies?

5. What are their response patterns?

Competitor analysis

seeks to answer five

key questions

3

Competitor analysis

Identifying competitorsProduct form Product substitutes Generics New Entrants

Audit competitor capabilitiesFinancial Technical Managerial Marketing assets

Strengths and weaknesses

Infer competitor objectives and strategic thrustBuild Hold Harvest Growth directions

Deduce competitor strategiesTarget segments Differential advantages

Competitive scope Cost leadership

Estimate competitor response patternsRetaliator Complacent Hemmed-in

Selective Unpredictable

4

Competitor identification

The Competitive Arena

Product form competitors

Technically similar products

Product substitutes

Technically dissimilar products

Generic competitors

Products that solve the problem or eliminate it in a dissimilar way

Potential new entrants

With technically similar products

With technically dissimilar products

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Company capability profiles

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Key success factor

Innovativeness

Financial strengths

Technical assistance to customers

Product Quality

Well-qualified workforce

Access to international distribution channels

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

Our company Competitor 1 Competitor 2

6

Apple

The design of Apple’s Store in

Shanghai reflects the

innovativeness of its products.

7

Competitive Strategy Options

Competitive base

Scope

Broad

Narrow

Differentiation Cost

Differentiation

leader

Differentiation

focuser

Cost

focuser

Cost

leader

8

Sources of competitive advantage

• Superior skills.

• Superior resources.

• Core competences.

• Value chain.

9

Nespresso

Nespresso aims to retain its competitive advantage in the coffee capsule market by using celebrity endorsement of

the brand.

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The value chain

Procurement

Technology development

Human resource management

Firm infrastructure

Inbound

logisticsOperations Outbound

logistics

Marketing & Sales Services

Margin through value

Primary activities

Support activities

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Value chain reconfiguration

No-frills

(e.g. easyjet, Ryanair)

Reduce costs and prices

Online retailers

(e.g. Amazon)

Provide wider choice, and reduce costs and

prices)

No-frills hotels

(e.g. Travelodge, Premier lodge)

reduce costs and prices)

Direct marketers

(e.g. Dell Computers)

Provide customization and reduce costs

and prices

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Creating a differential advantage

Product

Price

Distribution PromotionDifferential

Advantage

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Bang & Olufsen

Bang & Olufsen's stylish audio and television equipment.

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Cost drivers

Economies of scales

Capacity utilizationLearning

Linkages

Integration

Policy

decisionsInstitutional

factors

Interrelationships

Timing

Location

Costs

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Core reading to support this topic can be found in

Chapter 19of your

recommended text

Core Reading

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