MKTG90005 Chap.5 External Market and Competitor Analysis
External Market and Competitor Analysis
External analysis connects market size, growth and trends with industry structure, strategic groups, competitor behaviour, customer choice and critical success factors. This chapter uses Five Forces to explain how value may be captured or lost, distinguishes direct, future and substitute competition, and maps customer journeys to locate barriers.
The emphasis is mechanism: every external finding should explain what changes, who gains power, how customers respond and which strategic decision follows. Market growth does not guarantee attractive returns when rivalry, buyer power, supplier concentration or substitutes absorb value.
Strategic groups show which rivals follow comparable logics, while competitor profiles consider objectives, assumptions, capabilities and likely moves. Customer analysis then locates the needs, choice criteria and journey barriers behind demand.
The chapter closes by deriving critical success factors from this evidence so later internal analysis can compare what the market requires with what the organisation can actually sustain.
What this chapter covers
- 01
Market size, growth and trends
- 02
Five Forces and industry attractiveness
- 03
Strategic groups and mobility barriers
- 04
Competitor objectives and response
- 05
Customer analysis and journey barriers
- 06
Critical success factors
Worked example · free
Assess a refill kiosk market entry
- 1Explain how buyer switching, supplier concentration and bulk delivery create pressure on value capture.
- 1Recognise that hardware lowers basic entry barriers while compliance and service can create operational barriers.
- 1Enter through a dense pilot cluster with auditable compliance, reliable replenishment and secured supply terms.
- 1Track retention, site service cost, input terms, downtime and conversion from the existing substitute.
Key terms
- Industry attractiveness
- Industry attractiveness describes the structural conditions that shape competition, value capture and the return available to participants.
- Strategic group
- A strategic group contains firms using similar combinations of variables such as price, service, channel breadth or range.
- Mobility barrier
- A mobility barrier makes it difficult for a firm to move from one strategic group or competitive position to another.
- Critical success factor
- A critical success factor is a condition firms must satisfy to compete effectively in a defined arena.
- Buyer power
- Buyer power is the ability of customers or intermediaries to influence price, service or trading terms.
- Substitute offer
- A substitute offer solves the same underlying customer problem through a different category or method.
External Market and Competitor Analysis FAQ
Why does market growth not prove attractiveness?
Growth shows demand movement but not who retains value. Strong buyers, concentrated suppliers, easy switching, intense rivalry or improving substitutes can absorb profit even in a growing category. Combine growth with structural pressure, margin pools, retention and the firm's ability to occupy a defensible position.
How do strategic groups improve competitor analysis?
Strategic groups separate close rivals from firms following a different competitive logic. Choose axes that explain meaningful choices such as price, service, range or channel breadth, then investigate objectives, assumptions, capabilities and likely moves within the relevant group. The map organises analysis but does not predict response by itself.
How should customer journeys be analysed?
At each stage, identify the customer's goal, question, touchpoint, friction and evidence. A drop-off only locates the symptom; it does not explain the cause. Combine behaviour, customer language and operational data to test competing mechanisms before recommending more traffic, a new message or a redesigned service.
How are critical success factors derived?
Start with recurring customer choice criteria and the structural demands created by industry competition. Identify the few conditions firms must meet, define observable indicators and compare relevant competitors. Avoid turning the organisation's existing strengths into universal success factors merely because management prefers them.
Assessment move
Build external analysis in layers. Start by defining the market and period, then distinguish size, growth and trend from attractiveness. For each Five Forces pressure, write the mechanism by which it affects price, cost, switching, access or differentiation. Map strategic groups on customer-relevant strategic variables and profile the objectives, assumptions, capabilities and likely responses of close rivals.
Separate direct rivals, future entrants and substitutes because each requires different evidence. Practise customer analysis through the who, why, how, what, when and where questions, then map a journey with goals and barriers. Derive a short list of critical success factors from the combined industry and customer evidence.
Close every finding with a response or monitoring decision; facts that do not change the choice belong in supporting research rather than the strategic argument. On a second pass, challenge the market boundary and time period. Ask whether one excluded substitute, emerging entrant or changing customer criterion would materially alter the recommendation and monitoring plan.
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