Wednesday, November 9, 2011

Are you competing with the right competitors?

This week's readings starts with competitor's analysis. One of the first few steps of doing this analysis is to understand as to who are our competitors, how big are our competitors, whether they are a competitor only in this segment or they are a competitor for all product lines/geographical locations of operation. To rip apart the above analysis, Michael Porter's five forces will come in handy wherein he talks about the new entrants and substitutes, the bargaining power of suppliers and customer and the industry trends as a whole. However, apart from the factors as mentioned above, we must not ignore some of the key concepts of positioning, strategies ,objectives, weaknesses and strengths of both our company and also for our competitors. And last but definitely not the least, we should understand as to how aggressive is our own policy compared to others in the market. These will help me in strategizing some of my moves - as to where whether I should be defensive in my moves and wait till my competitors burn out all their money in setting up in the initial infrastructure or should I be more aggressive as it might be a winner take all market wherein jumping in early would help me building a sustainable model. By positioning, the author means to say getting answers to questions like: whether our company should aim at a particular segment or are the competitors aiming at a particular market segment, whether I have a monopolistic share in one market segment.

Coming to the next article, it talks about some of the other external factors which must be kept in mind while strategizing:like the macro economic factors prevailing, social and business trends. What really matters in case of the above factors is to find out the not so obvious factors lying underneath the obvious ones and use them as parameters in predicting some of the uncanny incidents in the future, much like the way Goldman Sachs analysts predicted the downfall of the economy and the oncoming of the recession which other banks and financial institutions failed to decipher prior to the occurrence of the incident even though they might have looked at the same set of data. That is why we see the new trend as more and more companies are investing time, energy, money and resources on Business Intelligence to use the current data to predict the future and thereby adapt to some of the future market trends without changing the core of the business. The article termed the act of adapting to new market trends as "shifting portfolios".

The next article is a continuum to the previous concept talking about some of the crucibles which might help us in building a stable and a sustainable model of business strategies. The article talks about five crucibles: the first being the "Great Rebalancing". By "Great Rebalancing" the author highlights some of the modern day trends like reduced dependency rates and urban migration which might affect any industry in general .And to be honest, I quite agree with the author wherein today it is a reality that even the developing world are having families with double income groups, people are either moving to or are expressing their desire to move to an urban centric lifestyle. With these, comes the next crucible which the author calls as "Productivity Imperative" which could be considered as a direct consequence of the first crucible. As more and more people want to move to urbanized locations, this in turn increases the average cost of labor and other aspects of variable cost involved. With that comes the next crucible of the "Global Grid" which focuses on the fact of tapping in markets in other parts of the world both for the selling of the products and also for reducing variable cost like reducing labor cost. The last two crucibles are "Pricing" and the "Market State". As many of us already know in some of our earlier discussions both in this class and in other subjects that "Pricing" could just be the most distinguishing factor in deciding whether a company would be profitable or not. However, a company strategy and objectives play a real crucial role in shaping the pricing model. For example, the price at which a company might become have a market leader will differ from the price at which the company would make the maximum profits. And the last crucible talks about the "Market State" which cautions us not to forget the market state in which we plan to set up our business because the government plays a crucial and mission critical role in stabilizing and controlling some of the factors as we discussed above. The greatest example that I can site from the recent past is the mess that the Tata's had with the government of West Bengal in India over a dispute for a piece of land by the effect of which the Tata's had to move out of the state to another state called Gujarat wherein they received huge patronage from the Gujarat State Government thereby helping them to make up some of their sunk infrastructure costs in the state of West Bengal.

To conclude what we see that all the crucibles are tightly coupled with one and another and can be seen as a direct cause and consequence from the prior one. And so, is the industry trend today where almost anything could be sold "As a Service" to the other and the industries are so tied up to each other that we can term it as the large mesh of "Internet of things".


Article: Going From Global Trends to Corporate Strategy (Becker and Freeman, McKinsey Quarterly, 2006 Number 3)

Article: What Happens Next? Five Crucibles of Innovation That Will Shape The Coming

Decade (Bisson et al., McKinsey Special Report, 2010)—SKIM

Article: Clouds, Big Data, and Smart Assets: Ten Tech-Enabled Business Trends to Watch (Bughin, Chui, and Manyika, McKinsey Quarterly, August 2010)—SKIM

Book Excerpt: Competitor Analysis: Understand Your Opponents (Marketer’s Toolkit: The 10 Strategies You Need to Succeed (HBS Press), 2006)

Article: Risk: Seeing Around the Corners (Lamarre and Pergler, McKinsey Quarterly,October 2009)

Article: Remapping Your Strategic Mindset (Ghemawat, McKinsey Quarterly, August 2011)

Article: Dell: The Erstwhile PC King Aims for the Middle (Ricadela, Bloomberg Businessweek, September 2011)

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