hi i'm dr ronald and this is a module on the competitive environment the competitive environment also known as a task environment belongs to the external business environment of an organization it also refers to the industry an organization belongs to the individual performance of an organization is determined by the industry it operates in and the firm itself this means an organization is exposed to the effects of the industries underlining economic structures and its own internal composition of resources and capabilities to be clear an industry is a group of firms that produces comparable products or services and all industries are composed of similar components that determine their structure for example an industry structure is determined by the number and size of companies types of products and services offered entry and access barriers research has shown that about 20 percent of a firm's profitability depends on its industry making it even more essential to explore and understand an industry's underlying structure to devise an appropriate strategy after all understanding the forces at work in the overall industry is an essential component of effective strategic planning now in an industry analysis two assumptions are unassigiable one no two firms are totally different and two no two firms are precisely the same the issue becomes one of identifying strategic groups which are clusters of firms that are more alike than firms that are not this is important because competitive rivalry tends to be greater among similar firms strategy groups share comparable strategies for example mercedes is more likely to be concerned about bmw than toyota those strategic groups are helpful as an analytical tool we must exercise caution and deciding the dimensions used in mapping these firms such dimensions can include the breadth of product and geographic scope or price and quality maybe the degree of vertical integration type of distribution and so on and so on the organization should also select the dimensions to reflect the variety of strategic combinations in an industry for example if all firms in an industry have approximately the same level of product differentiation reflected by a new product development or r d intensity then this might not be an appropriate dimension to select the nature of competition in an industry and the firm's profitability is often directly influenced by the development in the competitive environment an industry's competitive environment consists of many factors which are particularly relevant to a firm's strategy because firms directly compete with each other are likely to compete for the same or similar resources like suppliers or customers competitive intelligence facilitates a company's understanding of its position relative to other companies in the same industry it helps firms to define and understand the industry and identify the strength and weaknesses of current and potential rivals it helps analyze the competitive landscape and provides both an offensive and defensive strategic context to identify opportunities and threats competitive intelligence appropriately helps the company to avoid surprises and helps them to anticipate a competitor's move and decrease their response time the firm needs to identify all its existing competitors that pose a significant threat to their position now and all potential competitors that may pose a significant threat in the future and potential competitors for a firm can be firms that are not in the industry but can overcome the entry barriers very easily and with very low effort and using resources and costs also firms with an obvious synergy from being in that industry customers could backward integrate or suppliers could forward integrate other organizations might compete in the industry that is obviously an extension of their corporate strategy or others try to enter the industry through a vertical horizontal integration trying to merge or acquire organizations that are already in the industry in order to obtain a more favorable strategic position now keeping track of competitors has become easier these days since the amount of information available on the internet is just so vast but people also have very helpful information for example the company owned sales people those who go to customers or trade shows or conferences they might hear very valuable specifics about the competitor competitor products or the customer base or the industry itself going to trade shows and conferences you will meet vendors those that specialize in serving the entire industry they also have very important and very interesting information and of course the customer itself who might inadvertently or even intentionally share information they have acquired about competitive products or services and then of course there are so many internet sources that can be screened and monitored for any kind of information about the competitive landscape and particular competitors youtube is a great source with all kinds of videos about certain organizations it could even be advertisement material marketing material but at least it gives some kind of indication of where the company is heading and what the company is doing company related pressler releases social media posting company websites gives an insight on their direction on their vision mission and values so there's so much information out there that can be integrated into the competitive intelligence about the competitive environment of the industry now strategic analysts need to understand an organization's general and competitive environment to make sense of the driving forces in their business environment the quality of their assessment depends on the data and information gathered from the industry which is crucial for understanding the dynamics among the existing firms the swot analysis is a fundamental yet powerful tool to assess the strength and weaknesses within an organization and the opportunities and threats surrounding them the primary purpose of swot is to develop a strategy built on the strength improving on the weaknesses exploit emerging opportunities and shield the firm from threats of the external environment powder's five force model is still one of the most commonly used tools to assess the competitive environment the model introduced the industry's five competitive forces framework with a competitive rivalry among existing players at its core the dynamic strength of these forces and how they influence each other determines an industry's profitability and shapes its structure the profitability of each industry is conditioned by the same underlying forces that drives competition and it is up to the organization and how it can obtain and sustain an advantageous position now competitive intelligence refers to the process of gathering and using data on factors that can affect the com company's competitive advantage this information gathering and analysis process helps a company to develop its strategy or identify competitive gaps but gathering data and information is is a more complex than conducting just a simple internet search executives must be careful to avoid spending too much time on effort tracking the actions of existing competitors that they ignore new and potential players in the industry or in the market moreover other environmental changes and events may dramatically impact a firm's profitability and competitiveness and this is why a broader pastel assessment of the general business environment needs to complement the competitive environmental analysis this concludes the module on the competitive environment i'm dr rano thank you for listening and i see you next time