Blog #1: Analyzing External Strategic Environment and Evaluating Industry Dynamics

This week’s readings allowed us to dig deeper into the aspects that impact the strategy development of a corporation. These could be socio-cultural, technological, political, and demographic and hence, need to be addressed for a company to succeed. One key factor that I’d like to highlight from our readings this week would be the importance of competitor analysis and other influences that determine the potential profitability and growth of a firm [1].

Competitor Analysis

Understanding your opponents plays a big part in how viable/successful you are – whether you are an established firm or a new entrant into the market. It would be easier for a company to assess its opportunities and threats if it knew what was going on in the market [2]. The professor explained multiple ways of going about it – be it the SWOT analysis or the PEST analysis. It doesn’t matter which one the company picks as long as the strategy helps the company refine its offerings and gain more revenue in the long run.

I have seen multiple companies adopting it to understand their markets better. Taking a personal example- a company I interned with wanted to analyze their offerings in the trade program management space and I was tasked with understanding the competitors and coming up with opportunity areas that could potentially help them grow their business. The major component of this exercise was the identification of competitors because I had to consider all the companies that offered substitutes for our products and then their ability to capture parts of the market [1]. Not only did I try positioning them with respect to our offerings, I also analyzed our strengths, weaknesses, opportunities and threats when placed in the market. This helped the company understand that their products would be better placed if two of them were combined into a single offering.

Porter’s Five Factors

When analyzing the other factors, Porter’s framework identifies five forces that collectively determine the ultimate profit potential of an industry [1]. A great example where these were applied would be the introduction of Reliance Jio’s services in India. Jio was able to capture a big piece of the telecom market by offering lower prices to the customers. For the Indian telecom market:

·       Bargaining power of customers was high because they could easily port their numbers to a different service provider [3]

·       Competitive rivalry was also high as established brands like Airtel, Vodafone had been in the industry for more than a decade [3]

·       A threat of substitutes and new entrants was low because a high capital investment was needed to enter this industry [3]

By considering these five forces, they correctly gauged the competition and customers' needs and improved their performance, ensuring long-term survival [4].

I have always believed that doing competitor analysis is of utmost importance to venture out into the market. But the readings this week made me realize how Porters five forces alongside competitor analysis could  be used to develop a strategy that helps a firm succeed in the market. 

References:

[1] (2006) Competitor Analysis: Understand your Opponents, Harvard Business School Press

[2] Bennett, Travis (2014) A Competitive Analysis Example to Give You a Running Start https://blog.udemy.com/competitive-analysis-example/

[3] Mhabde, Rahul; Dhamani, Ali (2018) Internal and External Analysis of Jio

[4] Hopkins, Brandon (2018) Reliance Jio Revolutionizing Indian Telecom Porter Five Forces Analysis https://www.case48.com/porter-case/24098-Reliance-Jio-Revolutionizing-Indian-Telecom

-- Shweta Dhar (shwetad@andrew.cmu.edu)