GLOBALBUSINESSSTRATEGIES

AnalysisoftheGlobalCompetitiveEnvironment
Lecture2

Analysisoftheglobalcompetitiveenvironment
Externalanalysis canbedividedinto2linkedprocesses:
Microenvironmentalanalysis
competitiveornearenvironment industry,market&strategicgroup
Macroenvironmentalanalysis
broadbusinessorfarenvironmentSTEPanalysis

Externalanalysisidentifiesopportunities andthreats through

continuouslearningabouttheglobalandlocalbusiness
environments

Industriesandmarkets
Anindustry consistsofagroupofbusinessesproducing
/supplying similarproducts(goodsorservices)using
similar:

resources,skills,competences,technology
processesandvalueaddingactivities
materials
supplierchannelsanddistributionchannels

Markets
Amarket isdefinedintermsofshared:

productsorservices
customers
customerneeds
distributionchannels
Competitors

Whythedistinctionbetweenindustryandmarket?
Businessesdevelopcorecompetenceswithinanindustrywhich
arethendeployedinmarketstosatisfycustomerdemands
Anindustrycanservemorethanonemarket
Amarketcanbeservedbymorethanoneindustry

Analysisofthecompetitiveenvironment
Thisinvolvesassessing:
theextentofglobalisation intheindustryandmarket
Yipsglobalisationdriverframework
thenatureandextentofcompetition Portersfive
forces ortheresourcebasedframework
strategicgroups

Thenetworkofbusinessenvironments

nationalmacro
businessenvironment
national
industry

national
market

Thefirm
global
industry

global
market

globalmacrobusinessenvironment

Yipsglobalisationdrivers
Analysewhichaspectsofindustriesandmarkets
areglobalandwhicharelocal
Industryglobalisationdependsupon4 drivers:
market
cost
competitive
government

Technology

Market
drivers

Industryglobalisation
Yipsdrivers

Government
drivers
Competitive
drivers

Cost
drivers

Economic
Factors

Social
Factors

Political
Factors

Globalisationdrivers marketdrivers
Assesstheextenttowhichthereare:
Commoncustomerneeds
Leadcountries
Globalbrandsandglobalmarketing
Globaldistribution

Thiswilldeterminewhichmarket characteristics
areglobalorlocal

Globalisationdrivers competitivedrivers
Assesstheextenttowhichthereare:
globalcompetitors
highimportsandexports
countryinterdependence

whichpushtowardsindustryglobalisationor
localisation

Globalisationdrivers costdrivers
Assesstheextenttowhichthecostfactors
pushtowardsindustryglobalisation:
Scaleeconomies
Highproductdevelopmentcosts
Sourcingadvantages
Logisticaladvantages

Globalisationdrivers governmentdrivers
Assesstheextenttowhichgovernmentshave:
reducedtradebarriers
createduniformtechnicalstandards

whichpushtowardsindustryglobalisation

Globalisationdrivers
Thestrengthoftheglobalisationdriverswill
determinewhichaspectsofamarketand
industryareglobalandwhicharelocal
Globalstrategymustcontainglobalandlocal
featuresinaccordancewiththestrengthof
thedrivers

Applicationoftheglobalisationdriverframework
TheConsumerElectronicsIndustry
Marketdrivers:

Customerneeds commoninallcountries
Leadcountries Japan
Globalbrandsandglobalmarketing
Distribution NOTglobalnetworks

Themarketislargelyglobalbut strategymusttakeaccountoflocal
distribution

Consumerelectronics
Competitivedrivers
thereareglobalcompetitors Sony,Panasonicetc.
importsandexportsarehigh
competitionisinterdependent

Costdrivers
thereareeconomiesofscaleinproduction
productdevelopmentcostsarehigh
transportcostsarelow

Governmentdrivers
tradebarriersarereducing
technicalstandardsarebecominguniform

Globalstrategyintheconsumerelectronicsindustry
mostaspectswillbeglobal
onlydistributionmustbelocalised

Industrystructure
Thestateofcompetitioninanindustrydependsonfive
basicforces,thecollectivestrengthofwhichdetermines
theultimateprofitpotentialoftheindustry.(Porter)
Bydeterminingtherelativeimportanceofeachofthese
forces,anorganisationcanidentifywheretoposition
itselftotakeadvantageofopportunitiesandovercome
orcircumventthreats.

Industryprofitability
Porters5forces
Technology

Social
Factors

Competitive
rivalry in
industry

Economic
Factors

Political
Factors

Threatofentry barrierstoentry
Barriers to entry are:
1. Economies of Scale - entrant must either enter on a large scale or
accept a cost disadvantage.
2. Differentiation - brand identification and customer loyalty to
overcome.
3. Capital requirements - how much finance is needed to enter and
compete?
4. Cost disadvantages independent of size - the learning curve, access
to cheaper labour, patents, etc.
5. Access to distribution channels - can new entrants gain access?
6. Government policy - legislation, tariff and non-tariff barriers.

Powerofsuppliers
Suppliers include suppliers of raw materials, components,
labour, power, plant and equipment, finance. Suppliers
are powerful if:
1.

There is a concentration of suppliers.

2.

The costs of switching to another supplier are high

- eg. the input is unique or differentiated.

3.

There is the possibility of forward integration by the

supplier if it does not get the prices it seeks.

4.

The industry is not an important customer to the

supplier

Powerofbuyers
Buyers (Customers) include manufacturers, service businesses, retailers,
wholesalers and distributors.
Buyers are powerful if:
1. There is a concentration of buyers and they purchase large quantities of
the product.
2. Buyers can switch easily to alternative sellers
3. The products purchased represent a large portion of the buyer's costs
or expenditure (buyer is more likely to shop around).
4. There is a credible threat of backward integration on the part of the
buyer.
5. The products of the industry are unimportant to the quality of buyers'
products or service.

Threatofsubstituteproducts
A substitute can be seen as something which meets the same needs as
the product of the industry or competes with it for discretionary expenditure
(eg. new car or holiday or cooker?)
Must consider:

1.

Relative price and performance of substitutes.

2.

Switching costs for buyers.

3.

Buyer propensity to substitute.

Competitiverivalry
This takes the form of jockeying for position through tactics such as price
competition, product development and advertising.
Intense rivalry can be caused by:
1. The number of competitors is increasing and they are becoming
more equal in size.
2. The market is mature and subject to shake out activities.
3. The products or services feature little differentiation and there are low
switching costs for buyers.
4. Exit barriers are high.
5. Competitors are diverse in terms of strategy, countries of origin and
personalities, and have different ideas of how to compete.

Fiveforcessummary
Thestrengthofthefiveforcesvaries fromindustryto
industryandwithinanindustryovertime
Thestrongerentrybarriers,thefewersubstitutes,
thelowerbuyerandsupplierpower,andtheless
rivalry lesscompetitive moreprofitable
Viceversa morecompetitive lessprofitable
Forceswithinanindustrymaycontradicteachother

Marketanalysis
Marketidentification
Customerneedsandmotivations:
sensitivitytoprice
sensitivitytoquality
theextentofbrandloyalty
unmetneeds

Segmentationanalysis

Strategicgroupandcompetitoranalysis
Strategicgroupanalysis (Porter,1980)attemptsto
compareanorganisationwithitsclosest
competitors
Astrategicgroupconsistsoforganisationswhich:

possesssimilarcorecompetences
pursuesimilarstrategies
serveasimilarcustomergroupandsimilarmarketsegments
employsimilartechnology
utilisesimilardistributionchannels
producesimilarproductsorservicesofcomparablequality

Comparisonofstrategicgroupmembers
isbasedoncomparisonof:
objectives,corecompetences,strategies,R&D,
innovation&culture
marketsandsegmentsserved,marketshare
profitabilityandpriceandcoststructures
accesstofinance;
productquality,customerloyalty&marketing
organisationofvalueaddingactivities&suppliersand
distributionchannels;

Roleofstrategicgroupanalysis
SGanalysisisessentialasit:
identifiesandfocusesonanorganisationsclosest
competitors
assistsinassessingcompetitivepotential
highlightsopportunitiesfordevelopment
providesexternalperformancebenchmarks
helpstoidentifycriticalsuccessfactors

Theresourcebasedframework
Theframeworkdividesanalysisintofive
interlinkedareas:
theorganisationitself
theindustry
productmarkets
resourcemarkets
competingindustries

Thisrelatestointernalanalysis

Collaboration

Theindustry:

Competition

competitorsin
resourceand
productmarkets,
strategicgroups

Thefirm:
Resourcemarkets:
suppliersofhuman
resources,technology,
finance,materials
servicesetc.

resources,
capabilities,
corecompetences,
knowledge,
valueadding
activities

Productmarkets:
customers,customer
needs,distributors,
competitors

Competing
industries:
Coordination

substituteproducts,
firmswithsimilar
competences

Intelligence

Industryanalysis
Examinesovertime:
theskillsandcompetencesofthecompaniesin
theindustry
theorganisationoftheirvalueaddingactivities
thetechnologythattheyemploy
thenumberofcompetitorsintheindustry
easeofentrytoandexitfromtheindustry
strategicgroupings

Productmarketanalysis
Themarketforeachproductwillbeanalysedintermsof:
no.ofbusinessesinthemarket&theirrelativemarketshares
no.ofcustomersandtheirrelativepurchasingpower
segmentsandtheirprofitability,customermotivations,unmet
customerneeds
accesstodistributionchannels,potentialforcollaborationwith
customersanddistributors

Resourcemarketanalysis
Resourcemarketsanalysedintermsof:
resourcerequirementsofbusinesses
no.ofactual&potentialresourcesuppliers
sizeofsuppliers,suppliercapabilitiesand
competences,potentialforcollaborationwith
resourcesuppliers
accessbycompetitorstosuppliers

Competingindustryanalysis
Thoseindustrieswhichproducesubstituteproducts
orservices analysedfor:
substitutabilityoftheproduct howclosethesubstituteis
tosatisfyingthesameconsumerdemandsastheoriginal
productorservice
keycompetencesofthebusinessesintheindustry
thenumberandsizeofthebusinessesintheindustry

Criticalsuccessfactors (CSFs)
CSFsarefactorsfundamentaltosuccessofall
businessesinanindustry&associatedmarkets
and
dictatetheskillswhichabusinessmustpossessto
ensuresurvivalinthecontextofitscompetitive
environment
differfromindustrytoindustryandfrommarketto
market
areshapedbythecompetitiveenvironment