Transcript Competition Analysis - marketing

Competition Analysis
Chinmay Das
ABIT,Cuttack
Chinmay Das, ABIT, Cuttack
PEST Analysis
Political Factors
The political arena has a huge influence upon the regulation of
businesses, and the spending power of consumers and other
businesses.
 1. How stable is the political environment?
 2. Will government policy influence laws that regulate or tax
your business?
 3.What is the government's position on marketing ethics?
 4. What is the government's policy on the economy?
 5. Does the government have a view on culture and religion?
 6. Is the government involved in trading agreements such as
EU, NAFTA, ASEAN, or others?
Chinmay Das, ABIT, Cuttack
PEST Analysis
Economic Factors
Marketers need to consider the state of a trading
economy in the short and long-terms. This is
especially true when planning for international
marketing.
 1. Interest rates.
 2. The level of inflation, Employment level per capita.
 3. Long-term prospects for the economy Gross
Domestic Product (GDP) per capita, and so on.
Chinmay Das, ABIT, Cuttack
PEST Analysis
Socio-cultural Factors
The social and cultural influences on business vary from country to
country. It is very important that such factors are considered. Factors
include:
 1.What is the dominant religion?
 2.What are attitudes to foreign products and services?
 3.Does language impact upon the diffusion of products into markets?
 4.How much time do consumers have for leisure?
 5.What are the roles of men and women within society?
 6.How long are the population living? Are the older generations
wealthy?
 7.Do the population have a strong/weak opinion on green issues?
Chinmay Das, ABIT, Cuttack
PEST Analysis
Technological Factors
Technology is vital for competitive advantage, and is a major
driver of globalization. Consider the following points:
 1. Does technology allow for products and services to be made
more cheaply and to a better standard of quality?
 2.Do the technologies offer consumers and businesses more
innovative products and services such as Internet banking, new
generation mobile telephones, etc?
 3.How is distribution changed by new technologies e.g. books
via the Internet, flight tickets, auctions, etc?
 4.Does technology offer companies a new way to communicate
with consumers e.g. banners, Customer Relationship
Management (CRM), etc?
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
'Porter's five forces analysis is a framework for industry analysis
and business strategy development formed by Michael E.
Porter of Harvard Business School in 1979.
It draws upon industrial organization (IO) economics to derive
five forces that determine the competitive intensity and
therefore attractiveness of a market. Attractiveness in this
context refers to the overall industry profitability. An
"unattractive" industry is one in which the combination of these
five forces acts to drive down overall profitability. A very
unattractive industry would be one approaching "pure
competition", in which available profits for all firms are driven to
normal profit.
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
Threat of new competition
Profitable markets that yield high returns will
attract new firms. This results in many new
entrants, which eventually will decrease
profitability for all firms in the industry. Unless
the entry of new firms can be blocked by
incumbents, the abnormal profit rate will tend
towards zero (perfect competition).
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
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The existence of barriers to entry (patents, rights, etc.) The most
attractive segment is one in which entry barriers are high and exit
barriers are low. Few new firms can enter and non-performing firms
can exit easily.
Economies of product differences
Brand equity
Switching costs or sunk costs
Capital requirements
Access to distribution
Customer loyalty to established brands
Absolute cost
Industry profitability; the more profitable the industry the more
attractive it will be to new competitors
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
Threat of substitute products or services
The existence of products outside of the realm of the
common product boundaries increases the
propensity of customers to switch to alternatives.
Note that this should not be confused with
competitors' similar products but entirely different
ones instead. For example, Pepsi is not considered
a substitute for Coke but water, tea, coffee, and milk
are.
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
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Buyer propensity to substitute
Relative price performance of substitute
Buyer switching costs
Perceived level of product differentiation
Number of substitute products available in the market
Ease of substitution. Information-based products are more
prone to substitution, as online product can easily replace
material product.
Substandard product
Quality depreciation
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
Bargaining power of customers (buyers)
The bargaining power of customers is also
described as the market of outputs: the ability
of customers to put the firm under pressure,
which also affects the customer's sensitivity
to price changes.
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
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Buyer concentration to firm concentration ratio
Degree of dependency upon existing channels of distribution
Bargaining leverage, particularly in industries with high fixed
costs
Buyer volume
Buyer switching costs relative to firm switching costs
Buyer information availability
Availability of existing substitute products
Buyer price sensitivity
Differential advantage (uniqueness) of industry products
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
Bargaining power of suppliers
The bargaining power of suppliers is also
described as the market of inputs. Suppliers
of raw materials, components, labor, and
services (such as expertise) to the firm can
be a source of power over the firm, when
there are few substitutes. Suppliers may
refuse to work with the firm, or, e.g., charge
excessively high prices for unique resources.
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
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Supplier switching costs relative to firm switching
costs
Degree of differentiation of inputs
Impact of inputs on cost or differentiation
Presence of substitute inputs
Strength of distribution channel
Supplier concentration to firm concentration ratio
Employee solidarity (e.g. labor unions)
Supplier competition - ability to forward vertically
integrate and cut out the BUYER
Chinmay Das, ABIT, Cuttack
Michael Porter’s Five Forces Analysis
Intensity of competitive rivalry
For most industries, the intensity of competitive
rivalry is the major determinant of the
competitiveness of the industry.
 Sustainable competitive advantage through
innovation
 Competition between online and offline companies
 Level of advertising expense
 Powerful competitive strategy
Chinmay Das, ABIT, Cuttack