Industry Competitive Structure Analysis Serge Oréal.
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Transcript of Industry Competitive Structure Analysis Serge Oréal.
Industry Competitive Industry Competitive Structure AnalysisStructure Analysis
Serge OréalSerge Oréal
5 Forces Model5 Forces Model
RivalryAnalysis
BuyersSuppliersFinal
Consumers
New Entrants
Producers ofSubstitutes
Rivalry AnalysisRivalry Analysis
Define industry limitsDefine industry limits Analyze concentration rate of the industryAnalyze concentration rate of the industry Identify competitive structure of the industryIdentify competitive structure of the industry Evaluate strategies and competitive weaponsEvaluate strategies and competitive weapons Analyze evolution of industry structureAnalyze evolution of industry structure
Increasing concentrationIncreasing concentration Increasing competitionIncreasing competition
Existence of barriers to Entry and to ExitExistence of barriers to Entry and to Exit Strategic map: identify Strategic GroupsStrategic map: identify Strategic Groups
Industry LimitsIndustry Limits
ExogenousExogenousGeographic coverageGeographic coverageDegree of diversityDegree of diversityDegree of vertical integrationDegree of vertical integration
EndogenousEndogenousProductProductMarkets/needs being servedMarkets/needs being servedTechnology/know-howTechnology/know-how
Industry ConcentrationIndustry Concentration
Number Number ofof
FirmsFirms
TopTop
44
TopTop
88
TopTop
2020
CigarettesCigarettes 77 70%70% 100%100%
DetergentsDetergents 599599 70%70% 78%78% 86%86%
ArtificialArtificial
Fur coatsFur coats
3 0003 000 8%8% 10%10% 11%11%
Industry StructureIndustry Structure
MonopolyMonopoly
Monopolistic competitionMonopolistic competition
OligopolyOligopoly
Pure/perfect competitionPure/perfect competition
Industry Structure & Competitive Industry Structure & Competitive WeaponsWeapons
Perfect Competition
CostCompetitiveness
Price
Production
Logistics
Purchasing, Supply mgt
Distribution
Process innovation
General/admin. Cost mgt
Industry Structure & Competitive Industry Structure & Competitive WeaponsWeapons
Oligopoly
Quality, Service, Attributes, Image, Brand
name, etc…
Market analysis
Research & development
Communication
CRM
Barriers to EntryBarriers to Entry Start-up capitalStart-up capital Technology and know howTechnology and know how Government policyGovernment policy Regulations and norms, legal barriersRegulations and norms, legal barriers Access to suppliers and to distribution channelsAccess to suppliers and to distribution channels Switching costsSwitching costs Economies of scaleEconomies of scale Image and reputationImage and reputation Product differentiationProduct differentiation Cost disadvantages independent of scale: location, government Cost disadvantages independent of scale: location, government
subsidies, experience curve effectssubsidies, experience curve effects Expected retaliation by existing competitorsExpected retaliation by existing competitors Market saturationMarket saturation Concentration of the industryConcentration of the industry
Barriers to ExitBarriers to Exit
Legal barriers: Legal barriers: contracts, serviving, public service obligationcontracts, serviving, public service obligation
Specialized assetsSpecialized assetsFixed costs of exitFixed costs of exitSunk costsSunk costsPolitical and social pressuresPolitical and social pressuresEmotional and cultural barriersEmotional and cultural barriersRelationships with other SBUsRelationships with other SBUs Image and reputationImage and reputation
Strategic Group MappingStrategic Group Mapping
Strategic Group:Strategic Group:Group of companies in the same industryGroup of companies in the same industry
Having very similar economic characteristics,Having very similar economic characteristics,Following very similar strategiesFollowing very similar strategies
Industry Mapping:Industry Mapping:Strategic Group Analysis Strategic Group Analysis
a b
c de
g h
ij
k lm
f
no
How to use it?How to use it?
Analysis:Analysis: Identify direct competitorsIdentify direct competitorsBenchmarkingBenchmarkingFollow their strategic evolutionFollow their strategic evolution
Decision making:Decision making:Be/stay the leader in your groupBe/stay the leader in your groupJoin an other groupJoin an other groupCreate your own group: InnovateCreate your own group: Innovate
Strategic Group MappingStrategic Group Mapping Firms in Firms in same strategic group same strategic group have two have two
or more competitive characteristics in or more competitive characteristics in commoncommon Sell in same price/quality rangeSell in same price/quality range Cover same geographic areasCover same geographic areas Be vertically integrated to same degreeBe vertically integrated to same degree Have comparable product line breadthHave comparable product line breadth Emphasize same types of distribution Emphasize same types of distribution
channelschannels Offer buyers similar servicesOffer buyers similar services Use identical technological approachesUse identical technological approaches
Procedure for Constructing aProcedure for Constructing aStrategic Group MapStrategic Group Map
STEP 1STEP 1: : Identify competitive characteristics that Identify competitive characteristics that differentiate firms in an industry from one differentiate firms in an industry from one anotheranother
STEP 2STEP 2: : Plot firms on a two-variable map using pairs Plot firms on a two-variable map using pairs of these differentiating characteristicsof these differentiating characteristics
STEP 3STEP 3: : Assign firms that fall in about the same Assign firms that fall in about the same strategy space to same strategic groupstrategy space to same strategic group
STEP 4STEP 4: : Draw circles around each group, making Draw circles around each group, making circles proportional to size of group’s circles proportional to size of group’s respective share of total industry salesrespective share of total industry sales
Example: Strategic Group Map of Example: Strategic Group Map of the Video Game Industrythe Video Game Industry
Typ
es o
f V
ideo
Gam
e S
up
pli
ers/
Dis
trib
uti
on
Ch
ann
els
Overall Cost to Players of Video Games
Low(Coin-operated
equipment)
Medium (Console players cost
$100-$300)
High (Use PC)
Arcades
Home PCs
Video game consoles
Online/Internet
Sony, Sega, Nintendo, several
others
Arcade operators Publishers
of games on CD-ROMs
MSN Gaming Zone, Pogo.com,
America Online, HEAT, Engage, Oceanline, TEN
Example: Strategic Group MapExample: Strategic Group Mapof Selected Retail Chainsof Selected Retail Chains
Example: Strategic Group MapExample: Strategic Group Mapof Selected Retail Chainsof Selected Retail Chains
Car IndustryCar Industry
Number of Models
Few Many
Market
Coverage
National
World
Zone
Car IndustryCar Industry
Number of Models
Few Many
Market
Coverage
National
World
ZoneVAG Chrysler
Fiat Nissan
Renault PSA
GM
Ford
Toyota
HondaBMW
MercedesFerrari
Porsche
Rolls
Jaguar
Huyndai
Daewoo
Mitsubishi
Isuzu
Rover
Lada
Dacia