Strategic analysis seeks to determine alternative
course of action that could best enable the firm - to
achieve its mission and objectives.
Strategic analysis tries to find out:
How effective has the present strategy been?
How effective will that strategy be in the future?
How effective will the selected alternative strategy be
in the future?
Strategy evolves over a period (Balance between the internal Strategic Risk (Analyzing risk
of time (Result of a series of and external factors) involved and consequences
small Decisions) Balance Between thereon)
Strategy is the result of a Resources, Capabilities, Competitive markets,
series of small decisions Competencies, Strengths and liberalization, globalization,
taken over an extended Weaknesses. booms, recessions,
period of time. technological advancements,
And
inter-country relationships,
Events, Trends, Influences, etc. affect businesses and
Constraints and Opportunities. pose risk at varying degrees.
An important aspect of
strategic analysis is to identify
potential imbalances or risks
and assess their
consequences.
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Industries differ widely in their economic characteristics, competitive situations, and future profit
prospects.
The economic character of industries also varies.
Competitive forces can be moderate in one industry and fierce, even cutthroat, in another.
Industry and competitive conditions differ so much that leading companies in unattractive industries
can find it hard to earn respectable profits, while even weak companies in attractive industries can
achieve good performance.
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Interaction between a Business and its
Environment
Image Building.
Give Direction for growth.
Continuous Learning.
Determine Opportunities and threats.
Meeting Competition.
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Characteristics of a Global Company Reasons why Companies go Global
The need to grow.
Common Ownership
Rapid shrinking of time and distance across the
Common Pool of Resources
globe.
Common Strategy
Domestic markets are no longer adequate.
Steps in International Strategic Planning Need for reliable or cheaper source of raw-
Evaluate global opportunities and threats and materials, cheap labour, etc.
rate them with internal capabilities. Reduce high transportation costs.
Describe the scope of the firm’s global Generate higher sales and better cash flow.
commercial operations.
The rise of services.
Create the firm’s global business objectives.
Collapse of international trade barriers.
Develop distinct corporate strategies for the
global business and whole organization. Strategic alliances.
Assessments of the international environment can be done at three levels:
A. Multinational Environmental Analysis
Identifying, anticipating, and monitoring significant components of the global environment.
Understanding global developments covering economic and other macro elements is important.
Governments may have free or interventionist tendencies in economies that needs to be carefully
considered.
B. Regional Environmental Analysis
In-depth evaluation of the critical factors in a specific geographical area.
The emphasis would be on discovering market opportunities for goods, services, or innovations in the
chosen location.
C. Country environmental analysis
Country environmental analysis must take a deeper look at the important environmental factors.
Study of economic, legal, political, and cultural dimensions is required for planning to be successful.
The analysis must be customized for each of the countries to develop effective market entrance strategies.
Characteristics of Business Products Advantage of PLC Approach
Products are either tangible or intangible. Diagnoses a portfolio of products.
Product has a price. Attention is to be paid to declining businesses.
Products have certain features. Appropriate strategic choices can be made.
A product is pivotal for business. Mature businesses used as sources of cash for
investment.
A product has a useful life.
Combination of strategies.
Balanced portfolio of businesses.
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Sales and
Profits
Losses and
Investments
A. Introduction stage: It is with slow sales growth, in which competition is almost negligible, prices are
relatively high, and markets are limited. The growth in sales is at a lower rate because of a lack of
awareness on the part of customers.
B. Growth stage: It is with rapid market acceptance. In this stage, the demand expands rapidly, prices fall,
competition increases, and the market expands. The customer has knowledge about the product and shows
interest in purchasing it.
C. Maturity stage: It is where there is slowdown in growth rate. In this stage, the competition gets tough, and
the market gets stabilized. Profit comes down because of stiff competition. At this stage, organizations
must work to maintain stability.
D. Decline stage: It is with sharp downward drift in sales. The sales and profits fall sharply due to some new
products replacing the existing product. So, a combination of strategies can be implemented to stay in the
market either by diversification or retrenchment.
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Economies of Scale (EOS) Learning Curve (LC) Experience Curve (EC)
Adam Smith - 1776 Hermann Ebbinghaus - 1985 Experience curve shows the
relationship between
Theory of Mass Production German Psychologist
production cost and
The more times a task has been cumulative production
performed, the less time is quantity.
required on each subsequent
Unit costs decline as a firm
iteration.
accumulates experience in
terms of a cumulative volume
of production.
BCG – 25% Reduction
Concorde – Upto 40%
Reduction
Significant cost advantage.
Business with the highest market share likely to have the best experience.
Experience is a key barrier to entry.
External growth might be the best way to do this if a business can acquire
firms with strong experience.
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Competitive Environment Overall Environment
The competitive environment is the dynamic system in
which the business competes.
Competitive Environmental Variables-
New Entrants
Suppliers
Buyers
Direct Competitors
Indirect Competitors/Potential substitutes
Competition within an industry is determined by its
own particular structure.
Industry structure refers to the interrelationship
among five different forces that drive the behavior of
the firms competing in that industry.
Factors of Threat from New Entrants
Capital Requirements
Economies of Scale, EC and LC
Product Differentiation
Brand Identity
Switching Costs
Distribution Channels
Aggressive Retaliation
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Bargaining Power of the Buyers
Buyer’s Knowledge
Purchase Size
Product Function
Buyer’s Concentration
Product Differentiation
Vertical Integration
Switching Cost
Bargaining Power of the Suppliers
Purchase Size
Product Function
Supplier’s Concentration
Product Differentiation
Vertical Integration
Switching Cost
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Threat from Substitution/Indirect Comp.
Real estate, insurance, bonds and
bank deposits for example are clear
substitutes for common stocks,
because they represent alternate ways
to invest funds.
Digital cell phones currently pose this
kind of threat to landline
telecommunications firms.
Threat from Direct Competitors
Industry Leader
Number of Competitors
Type of Competition
Entry Barrier and Exit Barrier
Fixed Cost
Product Differentiation
Industry Growth Rate
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Competitive landscape is a business analysis which identifies competitors, either direct or indirect.
It’s about identifying and understanding the competitors
It permits the comprehension of their vision, mission, core values, niche market, strengths and
weaknesses.
Understanding of competitive landscape requires an application of “competitive intelligence”.
Example: Hyundai is a competitive company inside the Automobiles (car) market because they have
achieved constant success every year. This company is based on the development of new strategies
that helps Hyundai to differentiate from the competitors like Honda, Toyota, Suzuki, Ford, GM, etc.
What is Competitive Strategy?
Competitive strategy is designed to
help firms achieve Competitive
Advantage.
A competitive strategy consists of
moves to:
Attract Customers.
Face Competition.
Beat Competition.
Strengthen an organization’s market
position.
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Important Factors of Attractiveness of Industry Attractiveness Vs. Unattractiveness
Growth potential. Overall profit prospects are above average, the
industry can be considered attractive & Vice Versa.
Adequate profitability.
Potential entrants make it interesting.
Competitive forces.
Unattractive to weak competitors & Vice Versa.
Strategic drivers.
If the industry and competitive situation is judged
Potential to capitalize on the vulnerabilities of relatively unattractive, more successful industry
competitors. participants may choose to invest cautiously.
Degrees of risk and uncertainty. Strong companies may consider diversification into
Severity of problems confronting the industry. more attractive businesses.
Market and Customer
Important Factors of Attractiveness of Industry Factors influencing Consumer behaviour
Marketing External Influences
Product Marketing • Advertisement, peer recommendations or social norms
Customer Internal Influences
Customer Analysis • Psychological factors
Customer Behaviour Decision Making (Stages)
• Problem recognition, search for desirable alternatives
and list them, Seeking information on available
alternatives & Make a final choice.
Post-decision Processes
• Evaluating the outcome & level of satisfaction.
Key Success Factors (KSFs) are those things that most affect industry members’ ability to prosper in the
marketplace –
the particular strategy elements,
product attributes,
resources, competencies, competitive capabilities, and
business outcomes that spell the difference between profit and loss and, ultimately, between
competitive success or failure.
The answers to three questions help identify an industry’s key success factors:
i. On what basis do customers choose between the competing brands of sellers?
ii. What resources and competitive capabilities does a seller need to have to be competitively successful?
iii. What does it take for sellers to achieve a sustainable competitive advantage?
Notes:
1. Key success factors vary from industry to industry and even from time to time within the same industry as driving
forces and competitive conditions change.
2. Determining the industry’s key success factors, given prevailing and anticipated industry and competitive
conditions, is a top-priority analytical consideration.
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SBQ 1: Suresh Singhania is the owner of an Agri-based private company in Sangrur, Punjab. His unit is
producing puree, ketchups, and sauces. While its products have a significant market share in the
northern part of the country, the sales have been on decline in last couple of years. He seeks help from a
management expert who advises him to first understand the competitive landscape.
Explain the steps to be followed by Suresh Singhania to understand competitive landscape.
SBQ 4: Baby Turtle is a children’s clothing brand that has created a new age demand for washable diapers.
The major benefit for the brand has been that not many companies have shown interest in the product,
thinking it is not viable, however, customers, majorly working mothers are loving their product. The core
material needed for production is also used in many other waterproofing products in various industries. Baby
Turtle sources this material from a renowned supplier at comparatively low prices.
Which of the five forces of competitive pressure would Baby Turtle experience due to above setup and what
are major factors that create such pressure for a product?
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