Recording-2025-03-12T08:08:17.400Z

Introduction to Competition Analysis

• Purpose: Understanding the driving forces of competition in key market segments.

• Focus: Identifying key success factors for financial and competitive success.

• Recap of last week: Emphasis on external analysis to pinpoint prerequisites for success in the industry.

External Analysis Framework

• Objective: Identify factors necessary for success in market segments.

• Methodology:

  • Segmentation Analysis: Determining customer demands and drivers.

  • Nature of Competition: Analyzing competition intensity and main dimensions.

Key Success Factors (KSFs)

• Definition: Prerequisites that firms must deliver to compete effectively in a market segment.

• Previous Insights: Last week covered customer wants; this week focuses on firm survival and competition strategies.

• Target Outcome: Identification of approximately five key factors that contribute to success in the upcoming assignment.

Segmentation Analysis Steps

1. Identify Key Segmentation Variables: Determine variables such as product attributes and demographics.

2. Construct Segmentation Matrix: Analyze the attractiveness of each segment.

3. Assess Segment Selection Scope: Consider service similarities or differences across segments.

Analytical Tools

• Porter's Five Forces:

  • Purpose: Understand competition drivers and their intensity.

  • Process: Fill out a template and provide insights beyond mere completion.

  • Value Addition: Identify and articulate key insights for the assignment rather than just displaying the template.

Porter's Five Forces Overview

1. Threat of New Entrants:

   • Impact: Increased threat leads to lower profitability due to price competition and increased costs.

   • Barriers to Entry: High capital requirements, strong differentiation, and difficult distribution access increase entry barriers.

2. Supplier Power:

   • Dynamics: Strong suppliers can increase costs, impacting profitability negatively.

   • Conditions for Supplier Power:

     • Switching costs are high.

     • Supplier products significantly contribute to buyer value.

3. Buyer Power:

   • Comprehensive View: Powerful buyers can lower prices or demand additional value, reducing profitability.

   • Buyer Power Conditions:

     • Concentrated buyer base.

     • Ability to integrate backward into supply chains.

4. Threat of Substitutes:

   • Potential: High availability of substitutes can cap industry profitability.

   • Examples: Alternatives that fulfill similar needs (e.g., bottled water vs. cans).

5. Competitive Rivalry:

   • Drivers: Intense rivalry can lead to price cuts or increased costs from competitive practices.

   • Conditions for Increased Rivalry:

     • No dominant firms.

     • Low product differentiation.

     • Ease of customer switching.

Sense Making and Sense Giving

• Sense Making: Process of interpreting complex information and extracting insights from analysis tools like Porter's framework.

• Sense Giving: Communicating and framing insights to guide decision-making and industry understanding.

Practical Implications for Assignments

• Insights Extraction: Move beyond basic ratings of the five forces and identify the implications of changes in these forces.

• Anticipating Changes: Consider future shifts in competitive forces, both negative and positive.

• Craft Insights: The value lies in how insights drawn inform strategic choices and recommendations.

Market Analysis Dimensions

• Considerations: Assess market size, market share, and growth rates.

• Tools: Modify the Boston Consulting Group growth matrix for visual representation of market dynamics.

• Key Quadrants:

  • Dogs: Low growth, low share – divest potential.

  • Cash Cows: High share, low growth – utilize profits for reinvestment.

  • Question Marks: Low share, high growth – potential for investment.

  • Stars: High share, high growth – require investment to maintain competitive position.

Conclusion and Next Steps

• Recap: Focus on segment attractiveness; clarify customer demands and competition analysis.

• Next Week: Transition to internal analysis concerning resources and capabilities.

• Encouragement: Collaborate with peers, utilize AI tools for research, and seek clarity on any ambiguous points.