Module on the Competitive Environment

Introduction

• Lecturer: Dr. Ronald
• Topic: Competitive Environment, also known as Task Environment
• Belongs to: External business environment of an organization
• Importance: Determines firm performance through industry and internal composition of resources and capabilities

Understanding Industry and Competitive Environment

• Definition of Industry: A group of firms producing comparable products or services
• Industry Structure Determinants:
  • Number and size of companies
  • Types of products and services
  • Entry and access barriers
• Profitability Impact: 20% of a firm’s profitability is influenced by its industry

Strategic Planning and Industry Analysis

• Assumptions in Industry Analysis:
  1. No two firms are totally different
  2. No two firms are precisely the same
• Strategic Groups: Clusters of similar firms with comparable strategies
  • Example: Mercedes concerns more about BMW than Toyota
  • Importance: Greater competitive rivalry among similar firms
  • Dimensions for Mapping: Product breadth, geographic scope, price, quality, vertical integration

Competitive Environment and Firm Strategy

• Nature of Competition: Directly influences industry dynamics and firm profitability
• Competitive Intelligence:
  • Helps understand position relative to other companies
  • Defines industry landscape and competitive landscape
  • Identifies opportunities and threats
  • Avoids surprises and anticipates competitor moves

Identifying Competitors

• Existing Competitors: Current threats
• Potential Competitors: Future threats
  • Can enter industry easily
  • Might have synergy from being in the industry
  • Possible backward or forward integration
• Entry through Integration: Vertical or horizontal integration for strategic position

Sources of Competitive Intelligence

• Information Sources:
  • Internet, Social Media, Videos (e.g., YouTube)
  • Company websites, press releases, advertisements
  • Salespeople, trade shows, conferences
  • Vendors and customers providing indirect information

Analytical Tools

• SWOT Analysis:
  • Strengths, Weaknesses, Opportunities, Threats
  • Develop strategies based on internal and external factors
• Porter’s Five Forces Model:
  • Competitive rivalry, threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers

Conclusion

• Competitive Intelligence: Gathering and analyzing data for competitive advantage
• PESTEL Assessment: Broader environmental analysis of business conditions
• Final Note: Understanding the competitive environment is crucial for strategic planning and maintaining advantageous positions in the industry

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• End of Module: Dr. Ronald thanks participants and looks forward to the next session.