Competitor analysis

Abstract: Michael Porter presents a comprehensive structural framework and analytical techniques to help a firm to analyze its industry and evolution, understand its competitors and its own position, and translate this understanding into a competitive strategy to allow the firm to compete more effectively to strengthen its market position. The introduction reviews a classic approach to strategy formulation, one that comprises a combination of ends and means (policies), factors that limit what a company can accomplish, tests of consistency, and an approach for developing competitive strategy. A competitive strategy articulates a firm's goals, how it will compete, and its policies for achieving those goals. Competitive advantage is defined in terms of cost and differentiation while linking it to profitability. Part I, "General Analytical Techniques," provides a general framework for analyzing the structure of an industry and understanding the underlying forces of competition (and hence profitability). Five competitive forces act on an industry: (1) threat of new entrants, (2) intensity of rivalry among existing firms, (3) threat of substitute products or services, (4) bargaining power of buyers, and (5) bargaining power of suppliers. Looking at industry structure provides a way to consider how value is created and divided among existing and potential industry participants. One competitive force always captures essential issues in the division of value.There are three generic competitive strategies for coping with the five competitive forces: (1) overall cost leadership, (2) differentiation, and (3) focus. There are risks with each strategy. A firm without a strategy is "stuck in the middle." This framework for examining competition transcends particular industry, technology, or management theories. Building on this framework, techniques are presented for industry forecasting, analysis of competitors, predicting their behavior, and building a response profile. Essential for a competitive strategy are techniques for recognizing and accurately reading market signals. Implications of structural analysis for buyer selection and purchasing strategy are presented. Game theory provides concepts for responding to competitive moves. Using the concept of strategic groups, structural analysis can also explain differences in firm performance (profitability), provide a guide for competitive strategy, and predict industry evolution. Part II, "Generic Industry Environments," shows how firms can use the analytical framework to develop a competitive strategy in industry environments, which reflect differences in industry concentration, state of industry maturity, and exposure to international competition. These environments determine a business's competitive strategic context, available alternatives, and common strategic errors. Five generic industry environments are examined: fragmented industries (where level of industrial concentration is low), emerging industries, transition to industry maturity, declining industries, and global industries. In each, the crucial aspects of industry structure, key strategic issues, characteristic strategic alternatives (including divestment), and strategic pitfalls are identified. Part III, "Strategic Decisions," draws on the analytical framework to examine important types of strategic decisions confronting firms that compete in a single industry: vertical integration, major capacity expansion, and new business entry. Additional use of economic theory and administrative consideration of management and motivation helps a company to make key decisions, and gives insight into how competitors, customers, suppliers, and potential entrants might make them. Appendix A discusses use of techniques for portfolio analysis applied to competitor analysis. Appendix B provides approaches to conducting an industry study, including sources of field and published dat

Abstract: Competitive Strategy: Techniques for Analyzing Industries & Competitors By Michael E Porter The Free Press, New York, 1980, Pages: 397, Price: $25.33 ISBN-10:0684841487; ISBN -13:978-0684841489Competitive Strategy - Techniques for Analyzing Industries and Competitors aims to provide a comprehensive and structured approach for strategy formulation by inviting readers to look into the profound impact of environmental forces in general, and of competitors in particular, on the success of businesses.OVERVIEW OF THE BOOKCompetitive Strategy - Techniques for Analyzing Industries and Competitors posits that organizational actions are externally controlled and constrained. Survival of the organization lies in creating a best fit between environment and resources of the organization. Hypothesis supports the idea that environmental factors play decisive role in putting up threats and opportunities for the organizations. In addition, structure of industry and environmental forces keep on evolving, thereby forcing organizations to consistently interact and respond according to the changing environmental conditions. However, organizations do not remain passive in this process, rather they can be proactive to understand and predict changes in industries. Porter, in this book, provides set of tools and techniques to make strategic choices among various options posed by environment.Porter is of the view that every firm competing in industry holds a competitive strategy. The process of formulation of strategy in an organization takes place in two ways:* Explicit strategy formulation that is based on the planning process; and* Implicit strategy formulation that is evolved as an outcome of organization's functional activities.Porter takes the position that it is always doubtful to have implicit process as source of best strategy; hence, he attributes the explicit process of strategy formulation as a best way of taking maximum benefits for the firm.FINDING THE COMPETITIVE ENVIRONMENTThe essence of the book is to provide a framework of relating a company to its environment. Framework encompasses a best fit between firm's resources and environment. The book has been written from two dimensions. On one end it highlights importance of understanding industry structure and developing in-lined strategies to deal with it. Another dimension of the book, which is rather more interesting and productive, is to propose frameworks and tools for industry analysis and crafting strategy. The book, thus, successfully asserts philosophical insights and provokes thinking of business pundits to look into industry dynamics with a different perspective on one hand, and proposes standardized generic tools for systematic analysis on the other.Accordingly the book is divided into three parts.First part encapsulates general analytical techniques for understanding environmental forces, dynamics of industry evolution and dimensions of competitive strategies.Included in Part II is the application of generic business strategies in various forms of industries, in line with structural determinants, sources and impediments of respective industrial segments/forms.Finally Part III establishes multiple options for a firm in its dealing with environmental forces. The book considers Vertical Integration, capacity expansion and entry into new business as available strategic decisions for the firms.SCANNING THE COMPETITIONCompetition has always been central to the managerial decisions. Rising intensity of competition has continued until present era. This book however presented new spheres of looking into competition. Contemporary writers raised important points in strategy formulation for coping with competitive forces of the industry. Porter has given a systematic and rigorous tool to answer to these questions. Porter also signaled a new direction and provided thought for economic models. …

Abstract: In 1979, a young associate professor at Harvard Business School published his first article for HBR, "How Competitive Forces Shape Strategy." In the years that followed, Michael Porter's explication of the five forces that determine the long-run profitability of any industry has shaped a generation of academic research and business practice. In this article, Porter undertakes a thorough reaffirmation and extension of his classic work of strategy formulation, which includes substantial new sections showing how to put the five forces analysis into practice. The five forces govern the profit structure of an industry by determining how the economic value it creates is apportioned. That value may be drained away through the rivalry among existing competitors, of course, but it can also be bargained away through the power of suppliers or the power of customers or be constrained by the threat of new entrants or the threat of substitutes. Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. In exploring the implications of the five forces framework, Porter explains why a fast-growing industry is not always a profitable one, how eliminating today's competitors through mergers and acquisitions can reduce an industry's profit potential, how government policies play a role by changing the relative strength of the forces, and how to use the forces to understand complements. He then shows how a company can influence the key forces in its industry to create a more favorable structure for itself or to expand the pie altogether. The five forces reveal why industry profitability is what it is. Only by understanding them can a company incorporate industry conditions into strategy.