Industries dominant economic features
While evaluating a company’s economic environment, one needs to evaluate some features like an industry’s market size and growth potential i.e. for the given product/service that are in question, we need to evaluate the size of the market in terms in terms of demography and preferences of customers. There is need to evaluate the future growth potential/rate so as to determine how much more the company shall grow.
Life cycle – The life cycle of the company evolves over five stages i.e. Introduction, Growth, Development, Maturity and Decline stage. The stage at which the company in question is the company at introduction the company’s pricing is a bit higher as the company is still recovering from the initial capital outlay.
Buyer needs and requirements are another feature for evaluation. The needs for buyers keep changing from time to time and most companies design their companies on the basis of such needs.
Pace of technological changes are other external factors that a company considers while laying strategies. While competing companies are globally integrated, the rate at which technology changes is readily embraced so as to keep at same base with other competing firms.
Preference of vertical integration has often resulted into mergers and acquisitions. The existence of vertical integrations make companies want to position themselves in the market place
Competitive forces facing the industry
Competitive response is a lens for evaluating a company performance. Competitive responsiveness is the measure of a company’s capability to respond to changes in external conditions and events. Te overall goal is to improve a company’s performance (Jobfunctions.bnet.com/external environment).
The ability to innovate represents a very important success in the modern business environment. The five competitive forces that face industries include:
- Firms in other industries offering substitute products.
- Buyers- Firms compete for existing buyers for the available products.
- Potential, new entrants- the would-be-players are those with interest to join the market where the company is already a participant, those who have recently started operations in the market.
- Rivalry among competing sellers- Corporations in the market environment have tendencies of scrambling for resources, market share, and loyalty and product leadership. This breeds rivalry among them. The sellers always feel they have more rights to customers/consumers than their rivals selling similar products/services.
- Suppliers of raw materials, parts, components of other resources input. These are constituents where competition emanates from. Most resources are scarce and thus the demand for raw materials and other raw materials and other resources are scarce. The suppliers form networks and arrangements with corporations to have steady flow of resources.
Factors driving industry changes & impacts they have
- Internet and e-commerce opportunities
- Increasing in long term industry growth rate
- Changes in who buys the product and how they use it.
- Product innovations
- Technological changes and process innovation
- Marketing innovations
Impacts include; industry changing because forces are driving industry participants to alter their actions.
Market position occupied by rivals
To determine the competitive positions of industry rivals, can use strategic group mapping technique (Ramaswamy & Namakumari, 2000). They explain that strategic group consists of those rivals with similar competitive approaches in an industry.
Such rival companies adopt competitive characteristics that differentiate them from other firms in the same industry
Others form strategic alliances with suppliers of resources/raw materials and even distributors. Other firms would position themselves for buyouts or mergers so as not to experience cut throat competition. This is normally through pricing packaging, aggressive market campaigns and product differentiation. Experts suggest that everyday brings with it a new set of challenges and a company adapting well with dynamic environment wins.
Key factors for future competitive success
These include pointing out and determining the basis for customer choosing between competing brands of sellers. The resources and competitive capabilities a seller needs to have to be competitively successful. The KSFs include competitive factor most affecting every industry member’s ability i.e.
- Specific strategy elements
- Product attributes
- Resources
- Competencies
- Competitive capabilities
Whether outlook for industry present company with an attractive opportunity
Successful companies normally put into shape strategies which revolve around an area of distinctive competence to the firm. It is the acquisition of a competitive advantage that takes a corporation to its objectives. They also need to be sustainable on the backdrop of financial and competitive success. The competitive environment should be attractive for earning good profits. However a company’s attractiveness can be assessed on the basis of
- Industry’s market size and growth potential.
- Whether competitive forces are conducive to rising/falling industry.
- Whether industries profitability will be favorably or unfavorably impacted by driving forces.
- Degree of risk uncertainty in industry’s future.
- Severity of problems facing industry.
- Firm’s competitive position, in industry, against rivals.
- Sufficiency of resources to defend itself against unattractive industry factors
Evaluating a company’s resources and competitive position
This evaluation can be done on the basis of corporate image and prestige. The CEO, company size, corporate performance record assets and other company resources.
How well is the company’s preset strategy working?
To evaluate a company’s preset working involves identifying resource strengths and competitive capabilities.
Strength is something a company does well or an attribute that enhances its competitiveness. These include the assessment of its human assets, personnel and expertise factors. They would be highly qualified & highly paid experts in each field. A company can also have high caliber human resource.
Other valuations are on physical assets like state-of-art factory for production that are better in relation to competition. They would also include organizational assets, competencies, marketing factors like wide product line, full range of products. A company displays competitive advantage in more than one factor, in spite of the companies advantage in several factors their strategy has been to forge a variety of strategies in market place and command a position of eminence.
Resource strengths, weaknesses and external opportunities & threats
A SWOT analysis stands for Strengths, Weaknesses, Opportunities and Threats. It helps you identify ways to minimize the effect of weaknesses in your business will maximize the strengths. The strengths are usually marched against market opportunities that result from voids in competitor’s products and/or services.
Opportunities and threats refer only to the external environment. Developed demand outstrips the supply of quality options, a customer’s segment becoming more predominant while their specific needs are not being met by your competitors.
A competitor or supplier goes out business or mergers with another company. This has been emphasized with the demise of pure play. The dotcom have resulted in many companies going out of business, opportunities arise to gain the defunct business customers (www.websitemarketingplan.com/marketing-management.)
Once the company its positive strengths and the negative weaknesses, opportunities build on those strengths and find ways to enter with the weaknesses. Look at positive changes to make, leverage strengths to use as a competitive advantage and remove weaknesses to become even stronger.
Identifying threats outside helps the company to realize that there is still business out there to be embraced. There is need for a plan to become more profitable no matter how large (www.thefreelibrary.com).
Competitiveness of prices and costs
The pricing strategy is a blend of two concepts. What the traffic can bear and value for money e.g. premium pricing that employs premium distribution facilities and carrying out premium promotional programmes. Other pricing strategy is defensive strategy, defensive pricing results in diminished profits and only aggressive and shrewd pricing enables a firm to retain profits.
Our company is stronger than the rivals but not in all aspects. The aspects that need front burner managerial attention include
USB’s (unique selling points, resources, assets, people, experience, knowledge, data, financials, cash flows, innovative aspects, distribution processes, management developments, new markets, environment’s effects, volume of production and economies.
References
V.S. Ramaswamy and S. Namakumari, (2002) Marketing management, Macmillan India Ltd.
Constantine James A, Evans, Rodney, E and Morris, Malcolm L, Marketing strategy and Management, Business Publications Inc. Dallas, 1999.
J. Scott Armstrong (1982), the value of formal planning for strategic decisions; Journal of Marketing.
Armstrong M.A. hand book of Human Resource Management practice (10th edition) 2006, Rogan page, London.
Wikipendia org./wiki/SWOT-analysis.