MARKETING MANAGEMENT

COMPETITIVE ENVIRONMENT

G.N. Sandhy Widyasthan

widyasthana@gmail.com
    sandhy_widyasthana
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 Objectives

❖ To understand environmental effect for the busines

❖ To understand the environmental factors characteristic

 Environmental Analysis
A continuous process which include
❖ Scanning for early signals of potential
changes and trends in the general environmen
❖ Monitoring changes to see if a trend emerges from among
those spotted by scannin
❖ Forecasting projections of outcomes based on monitored
changes and trend
❖ Assessing the timing and signi cance of changes and trends on
the strategic management of the rm
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 Three Areas for Analysis

❖ Macro Environmen
❖ Industry Environmen
❖ Internal Environment
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 Analysis of the Environments

❖ Macro environmen
✦ Focused on the futur
❖ Industry environmen
✦ Focused on factors and conditions in uencing a rm’s
pro tability within an industr
❖ Internal environmen
✦ Focused on internal capability to understand the
company strength and weakness
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 Opportunities and Threats
❖ Opportunit
✦
A condition in the general environment that if
exploited, helps a company achieve strategic
competitivenes
❖ Threa
✦
A condition in the general environment that may
hinder a company’s efforts to achieve strategic
competitiveness
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Environmental Forces

Internal
 Macro Environment
❖ Dimensions in the broader society that in uence and industry
and the rms within i
✦ Economi
✦ Sociocultura
✦ Globa
✦ Technologica
✦ Political/lega
✦ Demographic
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 Economic
Impact of the economy on busines
❖ Size and change in gross domestic produc
❖ Per capita income level
❖ In ation rat
❖ Interest rate
❖ Foreign trade de cit or surplu
❖ Unemploymen
❖ Rates of saving and investment
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 Sociocultural
In uence of values, beliefs, and lifestyles of a country on
busines
❖ Family relationship
❖ Attitudes about wor
❖ Living arrangement
❖ Styles of entertainmen
❖ Attitudes toward health
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 Global

International developments that can impact a busines

❖ Rise of China as economic powe
❖ Rising global trade and WT
❖ Intellectual property protectio
❖ Important political events: ISIS wa
❖ Search for low cost suppliers
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 Technological

Technological developments relevant to a busines

❖ Telecommunication
❖ Interne
❖ On-line trainin
❖ Product and process innovations
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 Political / Legal

Political and legal conditions affecting busines

❖ Government policies toward busines
❖ Investment incentive
❖ Business regulation: labor, environmen
❖ Education prioritie
❖ Budget conditions and plans
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 Demographic
Characteristics of a country’s populatio
❖ Size of population and growth rat
❖ Age distribution of populatio
❖ Education level
❖ Income distributio
❖ Ethnic diversit
❖ Geographic distribution
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 Industry Environment
❖ Set of factors directly in uencing a rm and its
competitive actions and competitive response

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Porter’s Five Forces Model of Competition

Substitute Products
(of firms in
other industries)

Rivalry
Suppliers
Among
of Key Buyers
Competing
Inputs
Sellers

Potential
New
Entrants 16
 Threat of New Entrants
❖ Fundamental question: how easy is it for another company to enter the
industry
❖ Factors making easy entry to industr
✦
Low economies of scal
✦
Low product differentiatio
✦
Low capital requirement
✦
No switching costs for buye
✦
Easy access to distribution channel
✦
Little government regulation
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 Supplier Power
❖ Fundamental question: how badly does a supplier need your
business
❖ Factors giving power to supplier
✦
Supplier industry dominated by few rm
✦
Buyer is not important to custome
✦
Supplier’s product is important input to buyer’s produc
✦
Supplier’s products have high switching cost
✦
Supplier can “integrate forward” and become competitor of buyer
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 Threat of Substitutes
❖ Fundamental question: what other products or services
could perform the same function as your products or
services
❖ Factors indicating high threat of substitutes
✦
Few switching costs for buye
✦
Price of substitute lower or quality higher than for
your product
✦
Firms offering substitutes have high pro tability
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 Buyer Power
❖ Fundamental questions: How badly does a buyer need your products
or services
❖ Factors contributing to high buyer power
✦
Few buyers compared to the number of seller
✦
Buyers purchases high relative to seller’s sale
✦
Products are undifferentiate
✦
Buyer has low switching cost
✦
Buyer has low pro t
✦
Buyer can “integrate backward” and supply the product to itself
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 Competitive Rivalry
❖ Fundamental question: how intense is competition in the industry
❖ Factors leading to high competitive rivalry
✦
Numerous or equally balanced competitor
✦
High xed cost
✦
Slow industry growt
✦
Lack of differentiation or switching cost
✦
High strategic stake
✦
High exit barriers
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Interpreting Industry Analysis

❖ Suppliers and buyers have
strong positions
❖ Low entry barrier
❖ Strong threats from
substitute product
❖ Intense rivalry among
competitors
❖ High entry barrier
❖ Suppliers and buyers have
weak position
❖ Few threats from substitute
product
❖ Moderate rivalry among
competitors

Unattractive Attractive
Industry Industry
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 Internal Environment
❖ Company internal capabilities

Internal
 The Shifting of USA’s Most Valuable Company in 100 Years
From traditional physical asset-based to Technology-based Companies

 INTERNAL ANALYSIS
❖ How can we assess the resource ❖ Intangible asset
capabilities
✦
Resource Based Vie
❖ Nike - Brand Nam

❖ Each rm has three basic kinds of ❖ Dell – Reputatio

Resource ❖ GE- Welch’s Leadershi
✦
Tangible assets
❖ Organizational capabilitie
❖ Ford’s Cash Reserve
❖ Dell’s Customer Servic
❖ 3M’s Patent
❖ Georgia Paci c Land holding
❖ Sony’s Product Developmen
❖ Coca Cola’s formula ❖ 3M’s Innovation
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How resources become valuable

❖ Competitively Superio
✦ Walmart’s Logistics – Allowed better pricin
❖ Resource Scarcit
✦ OPEC’s Oil Reserves – Finite oil reserve
❖ Appropriabilit
✦ Who pro ts from a resource
❖ “Mickey Mouse does not have an agent
❖ Inimitabilit
✦ Priceline’s pricing for air ticket
✦ Wendy’s Drive Throug
❖ Path dependency - Steinway with Piano
❖ Causal ambiguity – South West Airline
❖ Economic Deterrenc
❖ Durabilit
✦ How long will the competitive advantage last
❖ Patentable products – longer durability
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