Growth Strategy – Workshop 3 (Competitive Environment)
The Appleton Greene Corporate Training Program (CTP) for Growth Strategy is provided by Mr. Ardila Certified Learning Provider (CLP). Program Specifications: Monthly cost USD$2,500.00; Monthly Workshops 6 hours; Monthly Support 4 hours; Program Duration 27 months; Program orders subject to ongoing availability.
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Learning Provider Profile
Mr Ardila is the co-founder of The Hawksbill Group, a business consulting and investment firm advising medium and large clients in the public and private sectors. Mr. Ardila is also a member of the Board of Directors of Accenture, Goldman Sachs BDCs, Nexa Resources and Ola Electric Mobility. Prior to his current activities, he was Executive Vice President of General Motors and CEO of Latin America from 2010-2016 (March). In his 30-year career with GM, he held several important positions, including country CEO in Ecuador, Colombia, Argentina and Brazil, as well as CFO of Latin America, Africa and the Middle East. He also worked as an investment banker for the Rothschild Group from 1996-1998 and Secretary General at the Ministry of Industry and Trade in Colombia (1983-84).
Mr. Ardila is a graduate of the London School of Economics where he obtained a MSc. Degree in Economics. He has lived in 10 countries and speaks English, Spanish, Portuguese and German.
MOST Analysis
Mission Statement
A system where numerous businesses compete with one another utilizing diverse marketing channels, advertising strategies, pricing approaches, etc. is referred to as a competitive environment. Businesses should abide by the rules contained in this system. Your business and your decisions may be directly impacted by your rivals. Consider two rival online clothes retailers who compete with one another for customers and financial gain. Before Christmas, one of them decides to hold a flash sale where buyers may get 40% off anything on the website. The competing store will also need to develop a compelling offer to draw leads and consumers, boost sales, move off-brand merchandise, and ultimately increase profits. Similar to this, if a coffee firm releases a new product, its rival will need to think about growth hacking. Therefore, competition can be advantageous because it spurs businesses to improve themselves and their goods. Customers benefit from a competitive environment as well. Businesses frequently provide premium products at competitive prices to attract customers. Additionally, corporations must innovate in order to release their products. However, competition can occasionally make it more difficult for a business to survive. Consider two businesses that are housed in the same place. It will be challenging for the second company to compete if one of them sets low prices and discounts. It’s time to move on to the many sorts of competition that define the relationships between and among sellers and customers now that you understand how a competitive environment affects your business and customers.
Objectives
01. Competitive Environment Analysis: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
02. Identify Potential Competitive Offerings: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. Intellectual Property Reviews: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Technology Stack Assessment: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Porters Five Forces Analysis: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Identify Competitor’s Team Members: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Identify Competitor’s Investors: departmental SWOT analysis; strategy research & development. 1 Month
08. Identify Competitor’s Customers: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Monopolistic competition: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
10. Monopoly: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
11. Oligopoly: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
12. Pure Competition: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
Strategies
01. Competitive Environment Analysis: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. Identify Potential Competitive Offerings: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. Intellectual Property Reviews: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Technology Stack Assessment: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Porters Five Forces Analysis: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Identify Competitor’s Team Members: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Identify Competitor’s Investors: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. Identify Competitor’s Customers: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Monopolistic competition: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
10. Monopoly: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
11. Oligopoly: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
12. Pure Competition: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
Tasks
01. Create a task on your calendar, to be completed within the next month, to analyze Competitive Environment Analysis.
02. Create a task on your calendar, to be completed within the next month, to analyze Identify Potential Competitive Offerings.
03. Create a task on your calendar, to be completed within the next month, to analyze Intellectual Property Reviews.
04. Create a task on your calendar, to be completed within the next month, to analyze Technology Stack Assessment.
05. Create a task on your calendar, to be completed within the next month, to analyze Porters Five Forces Analysis.
06. Create a task on your calendar, to be completed within the next month, to analyze Identify Competitor’s Team Members.
07. Create a task on your calendar, to be completed within the next month, to analyze Identify Competitor’s Investors.
08. Create a task on your calendar, to be completed within the next month, to analyze Identify Competitor’s Customers.
09. Create a task on your calendar, to be completed within the next month, to analyze Monopolistic competition.
10. Create a task on your calendar, to be completed within the next month, to analyze Monopoly.
11. Create a task on your calendar, to be completed within the next month, to analyze Oligopoly.
12. Create a task on your calendar, to be completed within the next month, to analyze Pure Competition.
Introduction
A system where numerous businesses compete with one another utilizing diverse marketing channels, advertising strategies, pricing approaches, etc. is referred to as a competitive environment. Businesses should abide by the rules contained in this system.
How does a competitive environment affect businesses?
Your business and your decisions may be directly impacted by your rivals. Consider two rival online clothes retailers who compete with one another for customers and financial gain. One of them chooses to offer 40% off the entire website during a flash sale right before Christmas. The competing store will also need to develop a compelling offer to draw leads and consumers, boost sales, move off-brand merchandise, and ultimately increase profits.
Similar to this, if a coffee firm releases a new product, its rival will need to think about growth hacking. Therefore, competition can be advantageous because it spurs businesses to improve themselves and their goods.
Customers benefit from a competitive environment as well. Businesses frequently provide premium products at competitive prices to attract customers. Additionally, corporations must innovate in order to release their products. However, competition can occasionally make it more difficult for a business to survive. Consider two businesses that are housed in the same place. It will be challenging for the second company to compete if one of them sets low prices and discounts.
It’s time to move on to the many sorts of competition that define the relationships between and among sellers and customers now that you understand how a competitive environment affects your business and customers.
Types of Competitive Environment
To evaluate the business environment’s economic climate, it is crucial to comprehend the different types of competitive situations. To be able to understand industry and market news, policy shifts, and legislation in the future, you need be familiar with how businesses and markets operate. Let’s identify the primary categories of competitive situations and examine each one in greater detail.
• Pure competition. In an environment where competition is fierce, numerous small businesses manufacture comparable goods that are in high demand. Due to their modest size, these producers have no ability to change the price, which is determined by supply and demand for the product. For instance, when a farmer takes dairy products to the neighborhood market, he or she cannot alter the going price and must accept it.
• Monopolistic competition. In this setting, numerous producers create various goods that may or may not have the same function. Because of the variations in quality, features, and other factors, customers can discern between the products. Businesses actively utilize advertising to market their goods and persuade customers that they are superior to competing goods. Companies engaged in monopolistic competition have the power to set prices for their products because they are price makers. To differentiate themselves from other enterprises, they need offer something unique to support the price increase on their items, such raising the caliber of their goods.
• Oligopoly. There are typically two or more small enterprises in this market model. Companies cooperate rather than compete in order to gain high market returns, hence it is seen as steady. Prices are jointly set and maintained high by businesses or under the direction of a single business. Profit margins are higher in an oligopoly than they are in a more competitive setting. The primary issue with this market structure is that businesses frequently experience the prisoner’s dilemma, which provides an incentive to deceive and behave in their own best interests at the expense of other enterprises.
• Monopoly. One business creates a distinctive product. There is no competition for this company, and there are no alternatives for the product. A monopolist also establishes hurdles for new businesses to enter the market and determines the product’s pricing.
When joining the market, you should be aware of the four primary market structures: monopoly, monopolistic competition, oligopoly, and perfect competition. It’s time to move on to the study of the competitive environment.
Case Study: Beating the competition – Amazon Web Services
AWS provides a range of goods and services that are primarily classified into two categories: cloud computing and cloud storage. Although other businesses offer a lot of the same services, AWS stands out for its exceptional scalability and versatility.
AWS came to the realization that a business with processing peaks lasting only a few hours per day does not need to invest in pricey infrastructure around-the-clock. Similar to this, if just 5,000 people choose to use a company’s services after renting server space for a forecasted 10,000 consumers, the company stands to lose a lot of money.
Because of this, AWS customers only pay for what they really use. A company’s cost is automatically and proportionally reduced if it doesn’t use the available processing power at specific periods of the day (or week, or year). All AWS services can be quickly and simply terminated or added in accordance with the requirements of the client, according to a similar approach. AWS services are astonishingly affordable and practical for small, medium, and big businesses thanks to a customer-focused approach, which has helped them gain a 32% market share in the global cloud computing market.
Competitive Environment Analysis
Understanding your rivals’ strategies will help you create a winning marketing plan. To reach your company rivals at this point, you require a competitive analysis framework. Let’s talk about a few of the most common frameworks.
• SWOT Analysis. You can evaluate the internal and external forces affecting your business. With the use of this framework, you may pinpoint competitive advantages, assess your competitors’ strengths and weaknesses across various marketing channels, and determine your next marketing moves.
• Strategic Group Analysis. This framework describes the many strategic characteristics of all effective competitors’ strategies. It enables you to determine the positions of your rivals in the market and the elements that make your company profitable. Additionally, it enables you to measure your position among rivals and pinpoint the essential elements of success.
• Porter’s Five Forces. This framework’s foundation is based on an examination of the industry’s competitive market dynamics and a contribution to the identification of the sector’s advantages and disadvantages. It has five components: substitutes, new competitors, buyers, suppliers, and suppliers. These five factors affect how fierce the rivalry is in your sector.
• Growth-Share Matrix. Using this framework, you may choose whether items are worthwhile investments based on their market attractiveness and competitiveness. Large businesses find it particularly helpful because it enables them to define their product portfolios and determine which goods are still worthwhile to invest in and which are no longer.
• Perceptual Mapping. You can use this framework to compare your product to those offered by your competitors. You can use it to determine whether your positioning strategy is appropriate for your target market and how buyers view your product in comparison to that of your competitors. It can also assist you in identifying the holes you need to fill.
To fully understand different market structures, let’s walk you through some examples.
Examples of Competitive Environment
Even tiny businesses include a component on competitive environment analysis in their business plans. It comprises all the outside circumstances that have an impact on your business and the goods or services you provide, as you are already aware from the information above.
Take electronics as an illustration. The South Korean corporation Samsung, which specializes in electrical and smart appliance technology, was created. Apple, Sony, Huawei, Intel, and many other companies are among their rivals, therefore Samsung’s team works to produce a product that is superior to alternatives employing innovations that might draw customers.
The types of competitive environments might change as a result of advancements in technology or changes in consumer purchasing patterns. As an illustration, Amazon altered product distribution and client expectations. New breakthroughs increased the number of consumer goods businesses and provided new markets for startups that previously had no chance to compete with more established businesses.
Your company could be exposed to several competitive environments. Because of this, it’s essential to recognize how they differ and to be prepared to evaluate news about the market, the business, and government regulations.
Competitive environment in marketing
• Samsung. There are several direct competitors for Samsung in its competitive landscape. Similar products like smartphones, cameras, computers, etc. are offered by several businesses all over the world. These businesses include, among others, Huawei, Apple, and Xiaomi. These businesses are constantly in competition with one another. Samsung must develop fresh, cutting-edge concepts and marketing strategies that will draw people and persuade them to buy its goods if it is to prosper.
• McDonald’s. McDonald’s has a lot of rivals, including Burger King, KFC, Five Guys, and more. Nevertheless, despite the fact that all of these eateries serve quick food, the food they provide is distinct. Each of them has a distinct menu that features dishes with a variety of flavors and recipes. Fans of McDonald’s are therefore unlikely to choose any of the other eateries instead. McDonald’s may also set prices due to all of the aforementioned factors.
• American Airlines. There aren’t many monopolizing businesses in American Airlines’ market. Examples of this are United Airlines, Southwest Airlines, and Delta Air Lines. They make up the top four domestic flight providers in the United States along with American Airlines. As a result, they are able to work together and set rates.
• Railways. Since no other businesses are creating the goods, there is no competitive environment. Government-run railways cannot be operated by new partners or privately held businesses because they are public services.
Case Study: Beating the competition – Etsy
IOspace, a small software development startup, first introduced Etsy in 2005. Etsy, in contrast to Amazon, which stores and delivers goods, brings together consumers and sellers from all over the world and earns money by keeping 5% of the purchase price.
From the beginning, Etsy attracted notice for its cutting-edge business methods from both consumers and merchants. The business frequently added new features and tools, making considerable use of tags and categories and flash animations.
With up to 30 updates released every day by their technical team, the company’s innovation pace increased in 2010. This was made possible by modifications to the implementation procedure, which eliminated the need for management approval for each modification to the website. Instead, software was utilized to track website modifications while the same engineers who planned the improvements oversaw their execution.
Their R&D expenditure for 2018 was $97.2 million, a 30% increase over 2017. Regular updates add new features, automatic suggestions for landing page optimization, buyer customization tools, and enhancements to Etsy’s mobile app. Additionally, the business has used machine learning to translate transactions into ten different languages and assist users with item browsing.
Despite Amazon’s efforts to surpass them, all of this helped Etsy dominate the market for handmade goods.
Benefits and Drawbacks of Business Competition
For practically any firm, competition, whether direct or indirect, is a given. Even innovators who are the first in their industry must accept the fact that competitors will eventually emerge, such as start-ups or established businesses expanding their product lines.
Although it can appear that competition in business gives businesses a lesser part of the market and a smaller piece of the metaphorical pie, competition can also be advantageous for both businesses and customers.
Advantages of Competition for Businesses
Although commercial competition reduces your individual market share, it can also push you to improve as a company. When you’re the only choice, it’s simple to take it easy. However, “competition creates excellence,” they claim.
A common example is a restaurant that attracts customers primarily because it is the most practical option. As a result, even if the meal isn’t great, customers will still patronize the establishment. However, if a rival eatery starts up close by, the first one will have to fight for customers and upgrade to survive.
The same idea underpins all businesses and benefits both enterprises and customers. But in the end, businesses benefit the most from this aspect of competition since it spurs them on to innovate and pursue better standards. Clients should never seek you out; you want them to do business with you.
7 Reasons that Competition is Good for Business
Many companies view competition as their enemy. In some circumstances, this might increase workers’ motivation. You must not disregard the numerous ways in which your rivals support the expansion and development of your company.
1. Inspiration
Capitalism is based on competition. You cannot argue against the fact that competition spurs workers to put in more effort, even if you believe there are better ways to organize an economy. It compels companies to innovate their offerings. It fosters a sense of unity among workers at an organization. Many teams become closer when they have a same objective. One of these objectives can include outperforming the competitors in terms of revenue, new clients, or market share. When there is more competition around them, your employees—especially if they are paid on commission—will be more driven to keep clients. The introduction of new products, marketing strategies, or business models by the competitors keeps your organization on its toes and spurs innovation. Growth, innovation, and progress are stimulated by competition. You might take a higher risk when conditions are competitive in the hopes of earning a significant profit. As circumstances change and new players enter your industry, you can’t just stay the same and hope to keep your clients.
2. Partnerships
Many businesses dislike their rivals because they believe they steal their clients. The market for your sector will really grow as more businesses enter it. You should make an effort to maintain cordial relations with your rivals. A positive working relationship with rivals can have many advantages for both parties. Sharing advice, providing relevant content, or attending events together can all result from networking. Not every company in your neighborhood is a rival. That eatery next to your theater is not in direct competition with you. In fact, your traffic is probably rising as a result. Who wouldn’t want to watch a movie after filling their bellies with delectable food? Everywhere, complementary firms are working together to organize events or give their clients promotions for the other company. Through exposure and increased sales, this collaboration tremendously benefits both companies.
3. Customers
Consumers benefit from competition since it results in lower pricing and more options. Competition benefits your business because it makes customers happier. How would you feel if Snickers and Reese’s peanut butter cups had never been created, and all you could eat for the rest of your life were Almond Joys? People who enjoy peanuts or dislike coconuts would have an unhappy life if they lived it that way. It’s true that this additional competition would cause sales of Almond Joys to decline. Customers would, however, be considerably pleased. Almond Joy currently caters to people who genuinely adore their candy in a world where there are many candy bar options. Brand loyalty is produced by competition when it would not otherwise exist. There are now supporters of Almond Joys and Reese’s peanut butter cups, respectively.
4. SWOT
Companies are prompted by competition to do a SWOT analysis to determine their strengths, weaknesses, opportunities, and threats. Businesses should be aware of and build upon their strengths. It is important to acknowledge and correct weaknesses. Without acknowledging what needs improvement, improvement is impossible. Every business has room for improvement, whether it is in terms of their offerings, offerings, customer service, internet presence, or something else. Research should be done to examine various prospects that your business might exploit. Your threats can also include your rivals or a sluggish economy. Once you have established all of these factors, take them into account while making crucial business decisions.
5. Learning
What better approach to learn how to successfully attract clients than by looking at another prosperous company in your sector? If your company is that successful, then don’t feel frightened when other businesses imitate you. The fact that people are copying your firm should make you feel honored. Even if you’re at the top, there’s always something you can pick up from your rivals. Perhaps you can make one small adjustment to greatly increase your chances of success. Whether or whether your rival is prosperous, you can still learn from their wise choices and failures.
6. Customer service
How can you retain your clients while luring away business from your rivals? Better customer support is a good place to start. Consumer service is more crucial the more expensive the purchase a customer is making. Since there are so many alternatives, your employees will need to work much harder to maintain client interest in your company. Because of this, you must carefully select your customer service personnel and ensure that they are driven to assist clients in any manner possible. Customers should be treated with the same consideration and respect as those who are making purchases, regardless of whether they do so. This can entice them to visit again or recommend your company to others. Your company’s reputation improves as your customer service does.
7. Niche
Your company may stand out from the competition in a crowded market with similar competitors. Pay attention to what makes your business unique. Customers should be able to tell that you have a competitive advantage, offer excellent customer service, or produce high-quality goods. Market segments that are devoted to distinct brands are created by competition. You will get some devoted clients if your business is truly unique and provides value to customers.
Although competition might challenge your company, it also has numerous positive effects. Customers benefit and continue to visit your store when you are compelled to be innovative and provide excellent service. When you serve your consumers well, even in a competitive market, you may build some fairly strong brand loyalty.
Disadvantages for Businesses
In business, competition reduces a company’s market share and reduces the pool of potential customers, particularly if demand is constrained. Reduced profit margins for each sale or service might result from a competitive market’s need to cut prices in order to remain competitive.
A flooded market is an extreme case. Inventories grow as products are overproduced. When inventory reaches unmanageable levels, too much capital is locked up in goods that are simply sitting in storage, leaving little left over for expenses like rent and wages. Employee layoffs or hours cutbacks become necessary if the inventory continues to be chronically overstocked in order to keep payroll expenditures within the budget’s tightening limits.
Advantages of Competition for Customers
It’s beneficial for customers to have options. There will be more options for potential customers to pick from if there are more businesses in a sector offering comparable goods or services. Market competition forces companies to enhance their offers, which are then passed on to customers as more specialized, effective, and superior possibilities. The most obvious advantages for customers are cheaper costs and more purchasing power.
Disadvantages for Customers
Customers must also contend with the negative effects of competition. Due to how brutally competitive the business world may be, it may hurt brands that customers frequently support. For instance, you won’t be able to eat at your preferred restaurant ever again if it closes down due to excessive competition.
Having too many options can make choosing products more difficult. For instance, toothpaste. Even though toothpaste has an entire store lane dedicated to possibilities, most people do not have a strong preference for features in a bottle of toothpaste.
On the other hand, a market monopoly ultimately results in fewer, worse options.