KGlobal Group of Companies
Volume 2: Competitive Strategy
Competitive Strategy: Intro
Successful marketers are those who can steer their organizations through the turbulent marketing environment, and do it better than competitors. Whilst easy to say, in practice it is not easy to do. Many competitive industries and organizations are very difficult to penetrate, despite all the intelligence techniques that may be available to get information. For Example the USA flower industry, whilst willing to give general information on their production and marketing, are very reluctant to give away their "trade" secrets. Other industries, like the diamond industry, are very exclusive in the sense that few companies dominate, the most famous being De Beers.
Despite this, any successful organization has to look at the competition, and moreover, be aware how the nature of competition can guide its strategy. The USA flower industry is facing increasingly stiff competition from EUROPE. Its response has to be rapid in order to preserve its stance. Whilst USA may have been a market "leader" with the appropriate strategy to go with it, EUROPE as a market "challenger," may have made USA now to think, more in the future, to go with a "niche" strategy as a counteraction. As we saw earlier, this certainly was the case with USA vegetables. The objectives are:
- To describe and give an understanding of the different ways of analyzing competition
- To show how to develop strategies based on competitive analysis and
- To give examples to ensure understanding of the techniques.
The structure opens with a discussion on the nature of competition and then looks at a number of competitive analyses, including the seminal work by Michael Porter on industry analysis. Examples are given to reinforce the theory and the chapter finishes by looking at "outsourcing" as an important competitive strategy.
Competition in most global product/markets is intense. In the fertiliser industry for example, few companies dominate - including Norsk Hydro. Product type competition has become intense also, for example, Pannar and Cargil seeds, so has brand competition, for example Israel's CARMEL and South Africa's OUTSPAN. Substitute competition has also become an increasingly bitter battleground, with products being able to replace others as technology and tastes have changed.
One way to look at competition is by industry analysis. Competition drives down rates of return on invested capital. If the rate is "competitive" it will encourage investment, if not, it will discourage competition. Porter1 (1980) and (1985) looked at the forces influencing competition in an industry and the elements of industry structure. The four forces influencing competition, threat of new entrants, threat of substitute products, "macro" factors like changes in technology and social factors and "micro" factors like customers' or buyers' changing needs.