Please enable JavaScript.
Coggle requires JavaScript to display documents.
CHAPTER 3: THE EXTERNAL ASSESSMENT B (Five-forces Model of competitors…
CHAPTER 3: THE EXTERNAL ASSESSMENT B
Competitive intelligence
A systematicðical process for gathering and analyzing info abut competition's activities&general business trends to further a business own goals
The more info&knowledge can be obtain, the more likely it is that it can formulate &implement effective strategies
Sources
Internet
Employees
Managers
Supplier
Consultant
Want ads
Trade journal
Objectives
Provide a general understanding of industry&competitors
Identify areas where competitors are vulnerable and assess impact of actions on competitors
Identify potential moves that a competitor might make
Market commonality
the number&significance of market that a firm competes in rival
offer similar products/services in the same market
Resources similarity
Extend to which the type&amount of a firm's internal resources are comparable to a rival
Five-forces Model of competitors
Rivalry among competitors firms
Most powerful forces
Focus on competitive advantage of strategies over other firm
Condition that causes high rivalry
high number of competing firims
similar size of firm cometign
similar capability of firms competing
Falling demand for industry's product
falling product/service price in the industries
Consumers can switch brands easily
Barriers to leaving the market are high
Barriers to entering the market are low
Fixed costs are high among firm competing
The product is perishable
Rivals have excess capacity
Consumer demand falling
Rivals have excess capacity
Consumer demand is falling
Rivals have excess inventory
Rivals sells similar product/services
Mergers are common in industry
Potential development of substitutes products
Pressures increase when
Price of substitutes decrease
Consumers' switching costs decrease
Bargaining power of suppliers
Increase when
large number of suppliers
Few substitutes
Cost of raw material is high
Backward integration is gaining control/ownership of supplier
Potential entry of new competitors
Barriers to entry are important
Quality, pricing, and marketing can overcome barriers
Bargaining power of consumer
Customers being concentrated/buying in volume affects the intensity of competition
Consumer power is higher where products are standard/undifferentiated
Condition where consumer gain power
if buyers can inexpensively switch
If buyers are particularly important
If sellers are struggling in the face of falling consumer demand
If buyers are informed about sellers' products, prices and costs
If buyers have discretion in whether and when they are purchase the product
Steps to determine if an acceptable profit can be earned
1.. identify key aspects/elements of each competitors forces
Evaluate how strong&important each element is for the firm
Decide whether the collective strength of the elements is worth the fir entering/staying in the industry
External Factor Evaluation (EFE)
Steps
List key external factors
Weight from 0 to 1
Rate effectiveness of current strategies
Multiply weight x rating
Sum weighted scores
Competitive Profile Matrix (CPM)
Identifies firms major competitors&their strength&weaknesses in relation to a sample strategic position
Critical success factors include internal&external issues