Over the past few decades, the rate of globalization has increased exponentially. With new developments in technology emerging every day, the global business landscape is constantly shifting. People and businesses from across the world are more connected than ever before and this comes with numerous challenges. In this ever-changing type of environment, it can be incredibly difficult for organizations to craft appropriate strategies that allow them the opportunity to be successful. A successful strategy today needs to take a lot under consideration. I think one of the most important things a company can do as they are undergoing the strategic planning process is to understand the forces and analyze their competition in the market environment. As Michael Porter notes, “understanding the competitive forces, and their underlying causes, reveals the roots of an industry’s profitability while providing a framework for influencing competition.”[1]
It seems that with an effective understanding and analysis of the competition, a company can craft a strategy, move into a market, and after a few years, disrupt other companies that had been the market standard. I’d like to take a look at both Amazon and Netflix, two companies which began their rise to prominence in the 1990s. Both were in relatively saturated markets (e-commerce and video entertainment, respectively) and both analyzed their competitors. They observed their competition’s behavior and noted what these other companies had done in the past and what their behavior might be in the future. With this information, Amazon and Netflix were able to craft strategies to their strengths while taking into account their competition’s weaknesses. They were also able to analyze things that their competitors did that maybe were not as effective and learn from this. Netflix and Amazon were both also able to foresee a shift in their respective industries. As the price of movie tickets went up and theater attendance began to decline, Netflix saw an opportunity for streaming and creating its own content.[2] Netflix not only competed with theaters but also with video rental stores which are now extinct. In 2020, viewers are choosing to watch entertainment at home rather than in a theater.
Amazon anticipated the power of the internet and shipping services and dominated the market with its Prime service. By understanding its retail competition, Amazon was able to craft a strategy that would make it one of the most successful business in the world. As a result of this success, Amazon moved into the streaming service with its Amazon Prime Video service and became a direct competitor with Netflix. In Competitor Analysis: Understanding Your Opponents the author writes, “real competition may not come from the handful of established companies that are wrestled with every day. It may instead come from an unanticipated source.”[3] Was Netflix able to anticipate that one of its biggest competitors would arise from a company that sells everything from toilet paper to televisions? If so, Netflix is truly a master of competitor analysis.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.