Macroenvironment
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7 Questions to Assessing the Company's Industry and Competitive Environment
1. What are the industry's dominant economic characteristics?
2. What kinds of competitive forces are industry members facing, and how srong is each force?
3. What forces are driving industry change, and what impact will these changes have on competitive
Question 1: What are the Industry's Dominant Economic Characteristics? (11)
This looks at:
1. Market Size and Growth Rate
2. # of Rivals
3. Scope of Competitive Rivalry
4. # of Buyers
5. Degree of Product Differentiation
6. Product Innovation
7. Demand-Supply Conditions
8. Pace of Tech Change
9. Vertical Integration
10. Economies
Question 2: How Strong Are the Inustry's Competitive Forces? (What Model)
Five-Forces Model of Competition:
1. competitive pressures stemming from BUYER bargaining power and seller-buyer collaboration
2. competitive pressures coming from companies in other industries to win buyers over to SUBSTITUTE PRODUCTS
3. comptetive press
Factors Affecting Buyer Bargaining Power (5)
1. If buyers' costs of switching to competing brands or substitutes are relatively low
2. If the # of buyers is small or if a customer is particularly imporatnt to a seller
3. If buyer demand is weak
4 If buyers are well-informed about sellers' products,
3 factors of how strong competitive pressures are from the sellers of subsititute products
1. Whether substitutes are readily available and attractively priced
2. Whether buyers view the substitutes as comparable or better in terms of quality, performance, and other relevant attributes
3. Whether the costs that buyers incur in switching to the
Factors Influencing Supplier Bargaining Power (8)
1. If the item being supplied is a commodity that is readily available from many suppliers
2. The ability of industry members to switch their purchases from one supplier to another or to switch to attractive substitutes
3. If certain inputs are in short s
Most widely encountered barriers that entry candidates must hurdle are? (8)
1. The presence of sizable economies of scale in production or other areas of operation
2. Cost and resource disadvantages not related to scale of operation
3. Strong brand preferences and high degrees of customer loyalty
4. High capital requirements
5. T
Factors that influence the tempo of rivalry among industry competitors include. (10)
1. Rivalry intensifies when competing sellers regularly launch fresh actions to boost their market standing and business performance
2. Rivalry is stronger in industries where competitors are equal in size and capability
3. Rivalry is usually stronger in
Question 3: What are the industry's driving forces of change and what impact will they have?
Driving forces
Driving forces
are the major underlying causes of change in industry and competitive conditions
3 steps of driving force analsis
1. Identifying what the driving forces are
2. Assessing whether the drivers of change are, individually or collectively, acting to make the industry more or less attractive
3. Determining what strategy changes are needed to prepare for the impact of the d
Common Driving Forces (13)
1. Changes in the long-term industry growth rate
2. Increasing globalization
3. Emerging new internet capabilities and applications
4. Changes in who buys the product and how they use it
5. Product innovation
6. Tech change and manufacturing process innov
Question 4: How are industry rivals positioned?
strategic group mapping
Strategic Group Mapping
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Strategic Group
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Procedure of constructing a Strategic Group Map
- Identify the competitve characteristics that delineate strategic approaches used in the industry.
- Plot firms on a 2-variable map based upon their strategic approaches
- Assign firms occupying the same map location to a common strategic group
- Draw ci
Why are some postions on the strategic group map more attractive than others? (2)
1. Industry driving forces may favor some strategic groups and hurt others
2. Competitive pressures may cause the profit potential of different strategic groups to vary.
Question 5: What strategic moves are rivals likely to make next?
Competitive intelligence = about rivals' strategies, their latest actions and annonuncements, their resource strengths and weaknesses, and the thinking and leadership styles of their executives is valuable for predicting the strategic moves competitives a
Question 6: What are the industry key success factors?
KSF = are the strategy elements, product attributes, competitive capabilities, or intangibible assets with the greatest impact on future success in the marketplace.
3 Questions that help identify an industry's key success factors
1. What basis do they choose b/w the competing brands of sellers?
2. What resources and competitive capabilites dows a company need to have to be competitively successful?
3. What shortcomings are almost certain to put a company at a significant competiti
Question 7: Does the industry offer good prospects for attractive profits? (5)
1. The industry's growth potential
2. Whether powerful competitive forces are squeezing industry profitability to subpar levels and whether competition appears destined to grow stronger or weaker
3. Whether industry profitability will be favorably or unfa