UNIT 7 STRATEGIC ANALYSIS INDUSTRY COMPETITORS CUSTOMERS 1

UNIT 7: STRATEGIC ANALYSIS: INDUSTRY, COMPETITORS, CUSTOMERS 1

INDUSTRY ANALYSIS Purpose • Match strategy to industry conditions • Identify opportunities and threats posed by the state of the industry • Industries differ in terms of characteristics and attractiveness. Understanding of industry attractiveness important. • Making entry/exit decisions 2

Key questions (Issues) • Degree of competition in the industry • Dominant economic features • Drivers of change in the industry • Key success factors in the industry 3

A. Competition in the industry • 1. 2. 3. 4. 5. • Industry competition depends on five basic forces: (Michael Porter, 1980) Threat of new entrants Rivalry within the industry Threat of substitute Bargaining power of Suppliers Bargaining power of buyers Collective strength of forces determines industry attractiveness 4

Value Creation Suppliers Industry R C Buyers R C Cost Accumulation 5

B. Industry dominant economic features • Industries differ in character and structure • Need to understand an industry’s dominant features. Such features include: - Market size and growth rate - Scope of competitive rivalry (Local, regional, national, international, global) 6

- Number of rivals (competitors) and their relative sizes - Number of buyers and their relative sizes - Extent of product differentiation - Extent of vertical integration - Distribution channels used 7

- resource requirements and ease of entry/exit - Any learning and experience effects - Industry profitability (attractiveness) - Capacity utilization – levels required to achieve production efficiency 8

c. Drivers of change in the Industry • How is the industry environment changing? • What are the driving forces for change in the industry? These include: - Changes in long term industry growth rate - Changes in who buys the product and how they use it - Product innovation - Technological change - Marketing innovation - Increasing globalization of industries - Government policy changes 9

D. Key success factors in the industry • Key success Factors (KSF)→The thing that most affects the ability of a company to succeed in the market place. • A company must develop competence on its industry’s key success factors if it has to remain successful • Key success factors are few in each industry • Key success factors vary across industries • Sound strategy incorporates efforts to be competent on all key industry success factors and to excel on at least one factor 10

Competitor Analysis • Identification of competitors (at least the major ones) • Strategies used by competitors • Performance of competitors Strategic moves competitors are likely to make 11

• Components of competitor analysis include: - Competitors’ future goals - Current strategy - Assumptions - Competitor capabilities 12

• Managers need to provide answers to the following questions: - Is the competitor satisfied with current position? - Any likely competitor strategy - Where is the competitor vulnerable? - What is likely to provoke competitor retaliations? 13

• Sources of competitor information include: - Published sources - Electronic media (advertising) - Sales people - Middlemen - Surveys by the company 14

MARKET ANALYSIS • The essence of any business is the Customers • Customer information important • Successful companies tend to be marketoriented • Strive to create value • See value through the eyes of the customer 15

- Maintain true customer focus - Customer is the focal point of all company activity - Customer is the starting point for company action - Everyone defines their job in terms of satisfying customers 16

• Question to be answered include: • Who are our customers • Where are they located? • Any changes in customers? 17

• What do customers see as important? • What are customer preferences? • Can the customers be segmented? • Any unserved segments? 18