Managerial Economics Competitive Analysis Project
Managerial Economics Competitive Analysis Project
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The analysis of market competition helps to assess the company’s standing against direct and indirect competitors. The direct competitors of a particular company are those selling the same products and services. The indirect competitors are companies that sell different products but these products satisfy the same needs. It also includes companies in different industries but can easily switch to become a competitor.[1]
The analysis of competition is invaluable for companies. It informs about the value proposition of the company as it highlights the strength and the weaknesses of the company and its competitors. By doing that, it also uncovers potential opportunities in the market place and assists in making strategic decisions.
There are four main components that are included in company competitive report: company highlights, market information, product information and SWOT analysis.
The company highlights provide background/profile information about the company and its competitive advantage. It brings up the factors that makes the company successful in the market place.
The market information defines the target market, provides the company market share and the marketing strategies that the company is using. This could be anything such as paid advertising, word of mouth, organic trafficking from Google or reaching customers through affiliates and/or wholesalers.
The product information describes the products and services the company is selling, its pricing and distribution channels: how the product comes from the company to the end users.
The SWOT is an analysis of the strengths, the weaknesses, the opportunities, the threats of the company. In doing the SWOT analysis you may need to also to look further beyond the company and at the wider market place.
Some markets are highly competitive, with most players struggling to earn adequate returns on capital, whereas others have attractive characteristics that allow almost all industry participants to generate healthy profits.
Porter (2008) identified five determinants of the intensity of competition in a market: The threat of entry, the power of suppliers, the power of buyers, the threat of substitutes, and rivalry among existing competitors.
The threat of new entrants depends on the existence and extent of barriers to enter the industry. It can be sometimes very difficult for new competitors to enter the market due to these barriers. Markets that are easy to enter will generally be more competitive than those with high barriers to entry.
The bargaining power of suppliers depends also on many issues. If there is only a small number of suppliers and industry is concentrated, then suppliers are powerful. It also depends on supply substitutes and the switching costs you may incur when switch from one supplier to another. If the suppliers are powerful, then they are able to increase prices, restrict supply and pass rising input costs to customers. Normally, suppliers of scarce or limited parts or elements often posses significant pricing power.
The bargaining power of customers is related to the number, size and concentration of customers. It also depends on the availability of substitutes, other suppliers and the cost of switching to other suppliers. Sometimes the customers are able to produce the product or the service. If the customers are able to force a price reduction or to get better payment terms, then they are relatively powerful.
The threat of substitutes is affected by the availability of alternative product categories that can satisfy customer needs. For instance, lower priced brands may be close substitutes to premium brands and vice versa.
The rivalry among existing competitors and price discipline depends on industry structure (concentration or fragmentation), product or service differentiation and industry entry/exit barriers.
Required:
Each Group should pick a local or international company, analyze competition and summarize the analysis by writing up a power point presentation.
Time Limit
Each group of students have 30 minutes presentation that is followed by 10 minutes questions and answers.
Due Date
The Power Point Presentation should be submitted on Friday 15th of December 2023.The group presentations will be conducted on the same day in the afternoon session.
[1] For example, home insurance can extend to other types of insurance.