IntraIndustry Analysis

1
Intra-Industry Analysis
OUTLINE

• Game theory
• Competitor Analysis
• Segmentation
• Strategic Groups

2
The Contribution of Game Theory to Competitive
Analysis

• Main value
• Framing strategic decisions as interactions
  between competitors
• Predicting outcomes of competitive situations
  involving a few
• players

• Some key concepts
• Competition and CooperationGame theory can show
  conditions
• where cooperation more advantageous than
  competition
• Deterrencechanging the payoffs in the game in
  order to deter
• a competitor from certain actions
• Commitmentirrevocable deployments of resources
  that
• give credibility to threats
• Signalingcommunication to influence a
  competitor's decision

Problems of game theory Useful in explaining
past competitive behaviorweak in predicting
future completive behaviour. Whats the problem?
Multitude of models, outcomes highly sensitive
to small changes in assumptions
3
A Framework for Competitor Analysis
OBJECTIVES What are competitors current
goals? Is performance meeting their goals? How
are its goals likely to change?
STRATEGY How is the firm competing?

• PREDICTIONS
• What strategy changes
• will the competitor
• initiate?
• How will the competitor
• respond to our strategic
• initiatives?

ASSUMPTIONS What assumptions does the
competitor hold about the industry and itself?
RESOURCES CAPABILITIES What are the
competitors key strengths and weaknesses?
4
Segmentation Analysis The Principal Stages

• Identify key variables
• and categories.
• Construct a segmentation matrix
• Analyze segment attractiveness
• Identify KSFs in each segment
• Analyze benefits of
• broad vs. narrow scope.

Identify segmentation variables Reduce to 2 or 3
variables Identify discrete categories for each
variable
Potential for economies of scope across
segments Similarity of KSFs Product
differentiation benefits of segment focus
5
The Basis for Segmentation Customer and Product
Characteristics
Size Technical sophistication OEM/replacemen
t
Industrial buyers
Characteristics of the Buyers
Demographics Lifestyle Purchase occasion
Household buyers
Size Distributor/broker Exclusive/
nonexclusive General/special list
Distribution channel
Opportunities for Differentiation
Geographical location
Physical size Price level Product
features Technology design Inputs used (e.g.
raw materials) Performance characteristics Pre-s
ales post-sales services
Characteristics of the Product
6
Segmenting the European Metal Can Industry
7
Segmenting the World Automobile Market
REGION US Canada W.Europe
E.Europe Asia Lat America Australia
Africa Luxury Cars Full-size sedans Mid-size
sedans Small sedans Station wagons Passenger
minivans Sports cars Sport-utility Pick-up
trucks
8
Vertical Segmentation Industry Profit
Pools The US Auto Industry
25





20
Service repair
Leasing
Operating margin

15
Warranty
Aftermarket parts

Auto manufacturing
10
Auto rental
Auto insurance
Auto loans
New car dealers
5
Used car dealers
0
Gasoline
100
0
Share of industry revenue
9
Segmentation and Key Success Factors in the U.S.
Bicycle Industry
SEGMENT
KEY SUCCESS FACTORS
Low-costs through global sourcing of components
low-wage assembly. Supply contract with
major retailer. Leading competitors Taiwanese
Chinese assemblers, some U.S manufacturers, e.g.
Murray Ohio, Huffy
Low price bicycles sold primarily through
department and discount stores, mainly under the
retailers own brand (e.g. Sears Free Spirit)
Cost efficiency through large scale operation
and either low wages or automated
manufacturing. Reputation for quality
(durability, reliability) through effective
marketing to dealers and/or consumers.
International marketing distribution. Leading
competitors Raleigh, Giant, Peugeot, Fuji
Medium-priced bicycles sold primarily under
manufacturers brand name and distributed mainly
through specialist bicycles stores
Quality of components and assembly, Innovation
in design (e.g. minimizing weight and wind
resistance). Reputation (e.g. through success in
racing, through effective brand
management). Strong dealer relations.
High-priced bicycles for enthusiasts.
Childrens bicycles (and tricycles)
sold primarily through toy retailers (discount
toy stores, department stores, and specialist
toy stores).
Similar to low-price bicycle segment.
10
Strategic Group Analysis

• A strategic group is a group of firms in an
  industry following the same or similar strategy.
  

• Identifying strategic groups
• Identify principal strategic
• variables which distinguish
• firms.
• Position each firm in relation
• to these variables.
• Identify clusters.

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Strategic Groups in the World Automobile Industry
Broad
GLOBAL, BROAD-LINE PRODUCERS e.g., GM, Ford,
Toyota, Nissan, Honda, VW, Daimler Chrysler
REGIONALLY-FOCUSED BROAD-LINE PRODUCERS e.g.
Fiat, PSA, Renault,
GLOBAL SUPPLIERS OF NARROW MODEL RANGE e.g.,
Volvo, Subaru, Isuzu, Suzuki, Saab, Hyundai
NATIONALLY FOCUSED, INTERMEDIATE LINE PRODUCERS
e.g. Tofas, Kia, Proton, Maruti
PRODUCT RANGE
LUXURY CAR MANUFACTURERS e.g., Jaguar, Rolls
Royce, BMW
NATIONALLY- FOCUSED, SMALL, SPECIALIST PRODUCERS
e.g., Bristol (U.K.), Classic Roadsters (U.S.),
Morgan (U.K.)
PERFORMANCE CAR PRODUCERS e.g., Porsche,
Maserati, Lotus
Narrow
National
GEOGRAPHICAL SCOPE
Global
12
Strategic Groups Within the World Petroleum
Industry
INTERNATIONAL UPSTREAM COMPANIES
INTEGRATED OIL MAJORS INTERNATIONAL UPSTREAM, REGI
ONALLY FOCUSED DOWNSTREAM
Premier Oil
Enterprise
Kuwait Petroleum
PDVSA
INTEGRATED DOMESTIC OIL COMPANIES
NATIONAL PRODUCTION COMPANIES
Iran NOC
0 0.5 1.0 1.5 2.0
Exxon -Mobil
Statoil
BP-Amoco
Vertical Balance
INTEGRATED INTERNATIONAL MAJORS
Chevron
Petronas
Pemex
Royal Dutch -Shell Gp.
Phillips ENI Elf-Fina-Total Repsol
YPF
Indian Oil
Phillips
Petrobras
Texaco
ENI
INTERNATIONAL DOWNSTREAM OIL COMPANIES
Repsol
Nippon
E.g. Neste
Tosco
0 10 20 30 40 50 60 70 80
NATIONALLY-FOCUSED DOWNSTREAM COMPANIES
Geographical Scope