Industry and Competitive Analysis

Managers are not prepared to decide on a long-term direction or a strategy until they have a keen understanding of the company's strategic situation-the exact nature of the industry and competitive conditions it faces and how these conditions match up with its resources and capabilities.

An industry's economic features help frame the window of strategic approaches a company can pursue.

When strong economies of learning and experience result in declining unit costs as cumulative production volume builds, a strategy to become the largest-volume manufacturer can yield the competitive advantage of being the industry's lowest-cost producer.

Principle of Competitive Markets

Competitive jockeying among rival firms is a dynamic, ever-changing process as new offensive and defensive moves are initiated and emphasis swings from one blend of competitive weapons and tactics to another.

Principle of Competitive Markets

The threat of entry is stronger when entry barriers are low, when there's a sizable pool of entry candidates, when incumbent firms are unable or unwilling to vigorously contest a newcomer's efforts to gain a market foothold, and when a newcomer can expect to earn attractive profits.

Principle of Competitive Markets

The competitive threat posed by substitute products is strong when substitutes are readily available and attractively priced, buyers believe substitutes have comparable or better features, and buyers' switching costs are low.

Principle of Competitive Markets

The suppliers to a group of rival firms are a strong competitive force whenever they have sufficient bargaining power to put certain rivals at a competitive disadvantage based on the prices they can command, the quality and performance of the items they supply, or the reliability of their deliveries.

Principle of Competitive Markets

Buyers are a strong competitive force when they are able to exercise bargaining leverage over price, quality, service, or other terms of sale.

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