MKT5610 Chap.2 Competitive and Industry Analysis
Competitive and Industry Analysis
Deciding who you compete with is the decision
The schedule puts competitive analysis and industrial and company analysis in the same class, and neither answers a question alone. Knowing a rival is strong at distribution is useless until you know whether buyers choose on distribution, and knowing your own manufacturing is efficient is useless until you know whether anyone pays for that.
The output is not a list of rivals but a judgement about which competing factors the industry has converged on.
Substitutes, alternatives, and why the difference shows up in the numbers
A substitute has a different form and the same function. An alternative has a different form and a different function while serving the same purpose.
Losing buyers to a substitute moves share inside the industry and appears in a share report.
Losing them to an alternative shrinks the industry itself, and a company watching only its named rivals sees stable share in a contracting base and reads its own decline as an execution problem.
Strategic groups make the unserved invisible
A strategic group is a cluster of firms inside one industry whose strategies resemble each other.
Inside one, everybody knows the competing factors and improvement is incremental. The customers the group does not serve are invisible to every member of it, because no member measures them.
What this chapter covers
- 01
Tools for competing in existing industry conditions
- 02
Head-to-head posture against boundary crossing, on six dimensions
- 03
Substitutes and alternatives, and which report each one appears in
- 04
Strategic groups and the within-group ranking trap
- 05
Company analysis worked backwards from a buyer decision
- 06
Convergence on competing factors as the thing an analysis looks for
- 07
Reading a share figure as a ratio with two moving parts
Decide which rival is the one that matters
- 3Classify the three by form and function.
- 2Say what each classification implies for measurement.
- 2Name the misreading the wrong classification produces.
Key terms
- Competing Factor
- A dimension on which an industry's offerings are compared and on which buyers actually choose. An industry's list is usually short, stable and agreed by everyone in it without anyone having decided.
- Substitute
- A product with a different form and the same function, such as software, an accountant or a pencil for managing personal finances. Losing buyers to one moves share inside the industry.
- Convergence
- The state in which rival offerings carry the same features in the same proportions and differ mainly in execution and price. It is a finding rather than a complaint, and it names the first candidate move.
- Functional Orientation
- An industry competing principally on price and function through calculations of utility. Adding emotion to such a category can create demand where price competition has exhausted itself.
- Emotional Orientation
- An industry competing largely on feelings, which tends to accumulate extras that add price without adding function. Stripping them can produce a simpler, cheaper offering buyers welcome.
- Within-Group Ranking
- A company's position among firms pursuing a similar strategy. It moves satisfyingly and says nothing about whether the group is gaining or losing against the industry.
- Generic Strategy
- One of the broad postures available inside fixed industry boundaries. A position between cost leadership and differentiation is a position rather than a compromise, and usually a losing one.
Competitive and Industry Analysis FAQ
How do I tell a substitute from an alternative, and does it matter?
A substitute differs in form but performs the same function, so a buyer choosing between them is solving the same problem a different way. An alternative differs in form and in function while serving the same underlying purpose.
It matters because the two show up differently in your data: a buyer lost to a substitute appears as share moving inside the industry, while a buyer lost to an alternative appears as the industry getting smaller, and only the second is invisible in a share report.
Is competitor analysis just making a list of the other firms?
A list produces no decision. What produces one is naming, for each competitor, the factor it is better on and what a buyer would give up by choosing you instead. The analysis is finished when you can say which competing factors the industry has converged on, who is capturing the profit, and whether you intend to compete on those factors at all. Everything short of that is a description.
Why is the twelve per cent figure about health club customers used as an illustration?
Because it is a number no member of that strategic group would ordinarily compute. Full-service clubs measure each other, so the eighty-eight per cent of the population using none of them is outside everybody's data at once.
The figure illustrates a general property: the customers a group does not serve are structurally invisible from inside it, which is why boundary work has to start from outside the group rather than from a better analysis within it.
What makes a company strength a real strength?
That you can name the buyer decision at which it changes the outcome. A capability nobody is choosing on is an expense, however well the company performs it, and listing it as a strength produces a plan nobody can act on. The course objective phrases this as assessing opportunity by analysing customers and competitors alongside the company's own strengths and weaknesses, and the order in that sentence is the order of the work.
Assessment move
Pick one product you bought recently and write down everything you considered instead, including doing nothing. Sort them by whether they differ in form, in function, or in both. Most people find one entry on that list that no company in the category treats as a competitor, and that entry is what this chapter is trying to make visible.
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