MGMT 498
[business policy & strategy]
Professor Ravi Shanmugam
Class 4: External environment
(pt. 2)
Thu 1/26/23
Pre-class slides
© Ravi Shanmugam, 2023
Today’s plan
Environmental scanning & monitoring
Last time
Competitive intelligence
Today
Industry analysis
Forecasting
[Exhibit 3.1]
External environment cont’d: competitors
Competitors – companies that satisfy the same (or
similar) customer needs or wants.
Competitive intelligence
“The act of gathering, analyzing, and distributing information
about the competitive environment.”
How is (or could) this be done…
[at KU?] [by a company?]
Identifying existing competitors
Existing competitors:
• History
• Proven competitive strengths
• Exit barriers
Assessing potential competitors
Existing competitors:
• History
• Proven competitive strengths
• Exit barriers
Potential competitors:
• Entry barriers
• Attractiveness of market
• Technological landscape
Industry analysis: Porter’s five forces
Industry analysis: Porter’s five forces
Potential competitors:
• Entry barriers
• Attractiveness of market
• Technological landscape
Industry analysis: Porter’s five forces
Price war
Promotion war
Industry analysis: Porter’s five forces
Price war
Promotion war
Product war
[Example:
McDonald’s
vs. Tim Horton’s
in Canada]
Industry analysis: Porter’s five forces
Price war
Promotion war
Product war
[Example:
McDonald’s
vs. Tim Horton’s
in Canada]
Industry analysis: Porter’s five forces
Why these three things are bad: Price war
If we have: Promotion war
• a mature industry
• lots of competition
Product war
• very little opportunity for anyone to
differentiate themselves… [Example:
McDonald’s
vs. Tim Horton’s
…we end up with several firms getting in Canada]
pulled into:
• an expensive fight
• for a share of a “pie” that’s not
growing.
Industry analysis: Porter’s five forces
Industry analysis: Porter’s five forces
Industry analysis: Porter’s five forces
[Example: universities]
Industry analysis: Porter’s five forces
Industry analysis: Porter’s five forces
Industry analysis: how-to
How to perform P5F analysis in steps:
Define the industry
Identify the key entities in the industry: competitors, customers,
suppliers, producers of substitutes
Examine the factors that determine the level of each of the
model’s five forces
Finally….
Analyze external trends
…and whether they may affect any of the five forces
and industry profits.
Strategic groups
Main idea: grouping competitors based on whether
strategies are similar
Goal: to improve this part of the “five
forces” analysis…
…by not putting all competitors
together in a single list
Strategic groups
Main idea: grouping competitors based on whether
strategies are similar
Example: sandwich shops
Strategic groups
Main idea: grouping competitors based on whether
strategies are similar
Gourmet
Example: sandwich shops
Deep-fried Healthy
pork belly
Basic
Strategic groups
Main idea: grouping competitors based on whether
strategies are similar
Gourmet
Example: sandwich shops
Deep-fried Healthy
pork belly
Basic
Strategic groups
Main idea: grouping competitors based on whether
strategies are similar
Example: airlines
[Exhibit 3.5]
Recap
Competitive and industry analysis are also part of
the “external environment analysis” game.
Analyzing an industry means looking at multiple
factors that influence all firms’ ability to compete.
Strategic grouping helps with this analysis, and
there are ways to ID members of such groups.
Next in-person class
What’s due:
Due: Nothing
