14 Questions
What is the purpose of analysing key competitors?
To evaluate the strengths and weaknesses of competitors
Which of the following is an example of an organisation with low and easily surmountable barriers?
Microsoft with necessary technology
According to the ADL model, what is the characteristic of a dominant competitive position?
Strong and protected technological leadership or monopoly
Which of the following is an example of a company in a strong competitive position?
Volkswagen in the motor vehicles industry
What is the main reason organisations need to differentiate themselves from competitors?
Because consumers are well-informed of the choices they have
What is the main purpose of Porter's Five Forces model?
To analyse the competitive structure of an industry
What is the purpose of evaluating competitors' strengths and weaknesses?
To understand the competitive landscape
According to the ADL model, what is the characteristic of a weak competitive position?
Unsatisfactory performance, inefficient and ineffective
What is one of the factors that determines the threat of new entrants?
The reaction of existing competitors
What is an example of a source of barriers to entry?
Supply-side economies of scale
What does the bargaining power of customers depend on?
The number of alternative choices customers have
What is an example of a type of economic competition?
Monopolistic competition
What does the threat of substitute products depend on?
The availability of alternative products
What is the main purpose of identifying the competitive structure of an industry?
To understand the competitive dynamics of the industry
Study Notes
The Competitive Arena
- Organisations need to differentiate themselves from competitors in the market due to well-informed consumers and intense rivalry from new entrants.
Industry Structure
- Industry structure refers to the number and size of competitors in an industry.
- Michael Porter's five forces model explains competition in an industry, which includes:
- The threat of new entrants
- The bargaining power of suppliers
- The bargaining power of customers
- The threat of substitute products
- Rivalry among existing competitors
Porter's Five Forces Model
- The threat of new entrants depends on:
- Prevailing barriers to entry (low or high)
- Reaction of existing competitors that entrants can expect (low or high barriers)
- Sources of barriers to entry:
- Supply-side economies of scale
- Demand-side economies of scale
- Customer switching costs
- Capital requirements
- Incumbency advantages
- Unequal access to distribution channels
- Restrictive government policy
- The bargaining power of suppliers is influenced by the number of suppliers in the industry.
- The bargaining power of customers is influenced by the availability of alternative choices.
- The threat of substitute products is influenced by the number of competing businesses that offer substitute products.
- Rivalry among existing competitors is influenced by the intensity of competition in the industry.
Analysing Key Competitors
- Understanding current competitors involves analysing market size, growth, and profitability, as well as their strengths and weaknesses.
- Understanding potential competitors involves identifying organizations with low barriers to entry, such as those with necessary technology, market access, strong brand, or operating knowledge and skills.
Competitive Positions
- According to the Arthur D. Little (ADL) model, organisations can occupy one of the five competitive positions:
- Dominant: Strong technological leadership or monopoly
- Strong: Sufficient access to resources and capabilities
- Favourable: Exploitable strengths and better opportunities
- Tenable: Vulnerable, performing just satisfactorily
- Weak: Unsatisfactory performance, inefficient, and ineffective
Understand the different types of economic competition, including monopoly, monopolistic competition, oligopoly, and pure competition. Learn how organisations differentiate themselves in a competitive market.
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