Matching organisation strategy to competitive conditions
Involves 3 aspects-
1. Pursuing avenues that shield the firm from as many of the different competitive pressures as possible.
2. Initiating actions calculated to shift the competitive forces in the firm’s favour by altering the underlying factor driving the 5 forces.
3. Spotting attractive arenas for expansion where competitive pressure is weaker.
Driving Forces Analysis is a way of understanding and accounting for change at the industry level, managers need to be able to react in a timely fashion to both positive and negative force changes within the industry. With early notice one can potentially influence the ...view middle of the document...
iv) Customer changes, changes in who buys the products and also their perceived use and how they are used. Shift in buyer demographics alters the state of market competition.
Others include emerging new internet capabilities and applications, product and marketing innovation, entry or exit of major firms, regulatory influences and government policy changes, and improvements in cost and efficiency in closely adjoining markets.
2. Upon identifying the factors driving industry change the second step is to determine whether the prevailing change drivers, on the whole, are acting to make the industry environment more or less attractive.
Are factors driving demand for product to increase or decrease? Is competition becoming more or less intense as a result? Will the drive changers lead to higher or lower industry profitability?
3. Finally managers must draw conclusions about what strategy adjustments will be needed to deal with the impacts of the changes in the industry conditions. The value of analysing industry dynamics is to better understand what strategy adjustments will be needed to cope with the drivers of industry change and the impacts likely to have on completion and profitability as a result.
An integral part of analysing an industry’s competitive structure is understanding which firms are strongly and weakly positioned. Strategic group mapping is the best way to visualise market positions of industry competitors. A strategic group is a cluster of industry rivals that have similar competitive approaches and market positions.
To construct a group map you identify the competitive characteristics that differentiate firms in the industry. Plot the firms on a two-variable map using pairs of these differentiating characteristics. Firms occupying the same map location are in the same strategic group. Draw circles around each group with the circle proportional to the size of the group’s share of total industry sales revenue.
These strategic group maps reveal which organisations are close competitors and which are distant competitors. Some groups are more favourably positioned than others because they confront weaker competitive forces and/or because they are more favourably impacted by the drivers of industry change.