Competition Analysis

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Hasna Askar Reg. No. 330 Ivth sem MBA

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Introduction:Competition analysis refers to the analysis of exact nature of opportunities and threats that a particular industry offers in terms of competition among the members of the industry. The objective of competition analysis is to understand the nature of forces shaping competition in an industry and to identify the competitors approach to develop strategies for competing successfully. A structured competition analysis enables a company to focus its attention on those companies with which it will directly compete and is especially important when a company faces a few powerful competitors.
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Competition analysis involves two types of analysis Competition forces analysis: Competition is not manifested only by other players: it is rooted in certain other competitive forces such as customers, suppliers, potential entrants, substitute goods etc. E.g.: Jute and petro-chemical products. Competitor analysis: E.g.: Soft drinks a) Identification of competitors b) Competitors approach.
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Michael Porters Competitive Analysis:According to Michael Porter, size of the firm, cost of production, range of products, technology are the critical factors, which determines the competiveness of the firm with an industry. Accordingly, he ha identified 5 competitive forces that shape firms strategy: Bargaining power of buyers, Bargaining power of suppliers, Substitute products, Threat of new entrants, Rivalry for position.
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Michael Porters Competitive Analysis:-

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Bargaining power of buyers: Large volume buying, Alternative supply sources, Tertiary dependent units, Margin earned by buyers, Backward integration by buyers.

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Bargaining power of suppliers: Number of suppliers, Uniqueness of the product, Switching over the cost, Absence of substitutes, Forward integration.

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Substitute products:The amount of competition in an industry depends upon the substitute products of the industry. Substitute products play a havoc to industries. This is especially true if substitutes offered are of better quality and low cost. E.g.:- Prefabricated RCC for building materials like doors and shelfs etc.

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Threat of new entrants:New entrants to an industry bring new capacity, the desire to gain market share, and have substantial resources. There are different kinds of barrier for new comers.

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Rivalry for position:Rivalry among the existing competitors takes the familiar form of jockeying for position, i.e. increasing market share at the cost of competitors. Number of competitors, Rate of growth in product supply, Product differentiation, Marketing practices, Pricing, sales promotion etc.

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Core competencies:According to C.K.Prahalad and Gary Hamel core competence is an enduring strength, which has the three characteristics as below: It is a source of competitive advantage, It has scope of application to a wide variety of markets. It is difficult for the competitors to imitate.

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Distinctive competence:Distinctive competence is based on the assumption that there are many ways though which competitive advantage can be generated. It is the unique feature of an organization cannot be shared by its competitors.

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Thank you.

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