MKTG7140 Chap.2 Competitive Situation Analysis
Competitive Situation Analysis
This chapter locates evidence before choosing strategy. Internal factors concern resources, systems and capabilities under the firm's influence. The competitive environment concerns rivalry, entrants, substitutes, buyers and suppliers. The macro environment concerns wider forces. SWOT then compresses internal findings into strengths and weaknesses and external findings into opportunities and threats.
The chapter emphasises mechanisms, priorities and recommendations that match each pressure.
Start with the control boundary
Internal evidence includes resources, structures, systems and competencies that management can change directly within the planning horizon. External evidence describes conditions the firm must answer rather than own.
The same surface fact can sit in different environments when the mechanism changes, so classification needs an explanation.
A labour shortage caused by weak training is internal; rivals bidding up scarce talent is competitive; demographic decline in the labour pool is macro.
Use forces to explain economics
Five-force analysis asks how entrants, substitutes, buyers, suppliers and rivalry shape price, cost, differentiation and required investment. The framework is not a list of company names.
A substitute solves the customer's need differently, while a rival competes more directly. Buyer or supplier concentration matters because it changes bargaining leverage. Each force paragraph should begin with case evidence, state the mechanism and finish with the strategic consequence.
Compress only after analysis
SWOT should retain only findings that can change a decision.
Strengths and weaknesses remain internal; opportunities and threats remain external. A matrix full of generic claims creates visual symmetry without judgement. Select the strongest evidence, combine boxes selectively and test whether the proposed response fits the firm's capability and target customer. Ranking matters because different pressures require different remedies.
What this chapter covers
- 01
Internal, competitive and macro environments
- 02
Rivalry and industry profitability
- 03
Buyer and supplier bargaining power
- 04
Threats from entrants and substitutes
- 05
SWOT evidence boundaries
- 06
Force priority and matched responses
Worked example · free
Diagnose pressure on a creative studio
- 3Name the supplier and buyer mechanisms.
- 3Bound the substitution threat.
- 3Match a response to each priority.
Key terms
- Industry Rivalry
- The intensity and basis of competition among firms already serving a market.
- Buyer Power
- The ability of customers to influence price, terms or product conditions.
- Supplier Power
- The ability of input providers to alter cost, quality or continuity.
- Entry Barrier
- A condition that makes it harder or more costly for a new competitor to enter.
- SWOT
- A summary of internal strengths and weaknesses with external opportunities and threats.
Competitive Situation Analysis FAQ
Can the same fact belong to different environments?
Yes, if the mechanism differs. A skills shortage can be internal when the issue is development, competitive when rivals bid up wages, or macro when demographics reduce the labour pool. State the mechanism before classifying the evidence, because the category determines what management can change directly.
How is a substitute different from a rival?
A rival offers a comparable product within the same competitive space, while a substitute satisfies much or all of the same customer need through a different type of offering. The practical test is the job the customer is trying to complete, not whether products look alike.
Should every force receive equal analysis?
No. Rank forces by whether they change market attractiveness, economics or the capability required to compete. One well-evidenced force with a matched response is more useful than five labels. Acknowledge uncertainty and state which evidence would make another force the priority.
Exam move
Keep a brief error log after each drill and record which reasoning link failed before repeating the exercise. Choose one industry and write a separate evidence sentence for each force. Then list three internal capabilities without placing them in the force analysis. Build a SWOT from the most consequential evidence and defend one combination strategy. Remove any item whose absence would not change the decision.
Repeat the exercise with one ambiguous fact and write three mechanisms that would place it in different environments. For each selected force, name a response that actually matches the pressure: diversify concentrated buyers, create leverage against a supplier, strengthen a barrier, reduce comparability with a substitute or change the basis of rivalry. End by ranking the responses against the firm's available capabilities.
Add a boundary audit after the ranking. Circle every SWOT item management can change directly and confirm it sits inside the firm. Underline each industry claim that lacks a price, cost, differentiation or investment consequence, then rewrite it until the mechanism becomes explicit.
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