Competitive Environment

12 Key excerpts on "Competitive Environment"

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  Advertising & Promotions NQF3 SB

  TVET FIRST

  • Sparrow Consulting(Author)
  • 2013(Publication Date)
  • Macmillan

    (Publisher)

  Topic 4 Understanding the Competitive Environment Module 10 138 Module 10: Explaining the nature and extent of the Competitive Environment Explaining the nature and extent of the Competitive Environment Overview At the end of this module, you should be able to do the following: • Identify and explain issues regarding the Competitive Environment (Unit 10.1). • Identify and explain strengths and weaknesses of the Competitive Environment (Unit 10.2). • Identify and explain organisational tactics to match competitive strategies (Unit 10.3). • Identify and explain roles and responsibilities of team members within the Competitive Environment (Unit 10.4). Introduction What is the Competitive Environment ? This is the environment in which two or more companies work and compete against each other to be the best. In other words, it is where healthy business takes place. In a Competitive Environment, companies are constantly competing against each other and it is an ongoing process. Unit 10 .1: Issues in the Competitive Environment The Competitive Environment is defined as the number and strength of the competitors in a market. It is constantly changing – this is because organisations are continually implementing strategies to improve their standing in the market, which forces their competitors to increase their efforts. This means you will constantly have to analyse the Competitive Environment. Many businesses fail because of a lack of interest in what their competitors are doing. It is very important to be aware of what other businesses in your field are doing. For example, if a rival company has a brilliant new plan to sell its products and you become aware of this, you could create a strategy that will overrule theirs, so that it does not damage your business. Ultimately, the main aim of doing business is to make money. If you do not compete successfully in the competitive business environment, you will not succeed in making money for your company and for yourself.

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  Managerial Economics

  The Analysis of Business Decisions

  • Stephen Hill(Author)
  • 2016(Publication Date)
  • Red Globe Press

    (Publisher)

  CHAPTERS The co111petitive environment Contents INTRODUCfiON 183 THE DIMENSIONS OF COMPETITION 185 FORMS OF MARKET STRUCfURE 188 OLIGOPOLY 191 MONOPOLY 192 THE MEASUREMENT OF COMPETITION 195 EMPIRICAL EVIDENCE 198 COMPETITION POLICY 201 SUMMARY AND CONCLUSIONS 202 APPLICATION 8 204 Introduction Whilst demand and cost information are crucial to the firm's decision-making process, the extent and nature of competition define the external environment in which the firm operates. An understanding of this Competitive Environment will enable cost and demand analysis to be put together to determine an economic theory of the firm, which can offer significant insights into the decision-making process. Each and every business decision must be made in the light of anticipations about competitors' actions and reactions. The extent of competition influences the nature of both cost and demand conditions. Moreover, the competitive environ-ment defines the discretion that the firm's managers have over pricing, marketing, input purchase and other decisions. An under-standing of that decision environment is essential for both describ-183 184 Managerial Economics ing the limitations of market behaviour, and analysing the opportu-nities available in the market. The Competitive Environment is not stable, but rather is continuously changing. The relationship of the firm to its environment is both reactive and proactive -reactive in that the firm must respond to changes in that environment, and proactive in that the firm, by a judicious choice of policies, may influence that environment in ways that can increase the market opportunities available. The purpose of this chapter is to examine the dimensions of competition that define the firm's market environment, and con-sider the impact of each dimension on the firm's decisions. The economic theory of the firm describes a series of various competitive market conditions referred to as market structures.

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  Fundamentals of Marketing

  • Geraldine McKay, Paul Hopkinson, Lai Hong Ng, Geraldine McKay, Paul Hopkinson, Lai Hong Ng(Authors)
  • 2018(Publication Date)
  • Goodfellow Publishers

    (Publisher)

  Fundamentals of Marketing 40 „ Competitors As mentioned earlier, the Competitive Environment is seen as part of the external environment. However, since competitors are operating under the same market conditions, relationships are usually close and competitors’ actions have a direct impact on the firm, they are therefore considered an intrinsic part of the firm’s microenvironment. Competing firms in a given market will examine each other’s actions before taking any major decisions and strategy is often strongly influ-enced by what competitors are doing. Conclusion Understanding both the internal and external environments that affect a compa-ny’s operating efficiency supports the decision-making process. All elements of the marketing environment are of importance at different stages of development and a good environmental scanning process, which furnishes the organisation with up-to-date, relevant marketing information, creates a strong competitive advantage. A firm must strive to understand the largely uncontrollable external envi-ronment, whilst being fully cognisant of its internal strengths and weaknesses. Competitive differential advantage can often be created by improving the internal processes and customer service elements of a product, even when the external environment is highly competitive and difficult to predict. Further reading Palmer, A. and Hartley, B. (2008) – The Business Environment , 6th Ed. A comprehensive introduction to today’s business environment, both within the internal organisation and in the wider environment. Baker, M.J. (1996) Marketing – An Introductory Text , 6th ed. London, Palgrave MacMillan. Collinson, E. (2002) Marketing Environment, in International Encyclopaedia of Business and Management , 2nd ed. Thomson Learning. Kotler P. and Armstrong G. (2015) Principles of Marketing , 6th Ed., Pearson. 41 2 The Marketing Environment References Chisnall, P. (1985) Marketing: A Behavioural Analysis , 2nd ed. New York: McGraw Hill.

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  Business Strategy and Competitive Advantage

  A Reinterpretation of Michael Porter's Work

  • Jovo Ateljević, Dženan Kulović, Filip Đoković, Mirza Bavčić(Authors)
  • 2023(Publication Date)
  • Routledge

    (Publisher)

  All the stated resource classifications (explained comprehensively and in detail) reinforce the hypothesis that there is a vast number of potential resources as well as the importance of their successful utilisation. A reaction is therefore needed based on the collected information on an industry.

  When reacting to gathered information on an industry, it is necessary to understand, interpret and correlate the information to reach relevant conclusions on the value of available information. The information concerning the given industry is important since the industry has a direct impact on the company (Mašić, 2009 ).

  According to Michael Porter (1983) , the relative environment is considerably broad and it includes the respective social and economic factors and it is a key aspect of the environment of the industries (or an industry) which is the competing field of the organisation.

  An analysis of the definition reveals that, in modern conditions, an industry does not have demarking lines. This means that each company can be both a rival and a competitor, simultaneously.

  However, the partner relationship can be easily transformed into a competitive relationship. For example, if a buyer starts producing items which it formerly bought or if a supplier starts using products for his own business, rather than for sales. If we add potential competitors and the possibility of substitution to this scenario, it can be concluded that the competitive outreach, i.e. the range of contact with competitors, is much wider than the range indicated by the industry analysis.

  However, the definition offered by Michael Porter is not accepted by contemporary theoreticians and practicians. Hence, he approached it from a broader aspect and expanded the competitive context beyond the industry (i.e. the competition among existing companies) to include suppliers, buyers, new competitors and substitute producers. He called it extended rivalry and he used it to set the boundaries of an industry. Considering his analysis of these five variables, there can be a so-called good and bad environment (Table 4.1 ; Bateman and Zeithaml, 1990

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  Strategic Management

  From Theory to Practice

  • Allen C. Amason, Andrew Ward, Allen Amason(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  Chapter 4 Analyzing the Environment

  Defining the Business and the Environment The Macro-Environment: PESTEL Framework Analyzing the Competitive Environment The 5-Forces Model Bargaining Power of the Seller Bargaining Power of the Buyer Availability of Substitutes Threat of New Entrants Rivalry Among Competitors Competitiveness and the Lifecycle Model Ongoing Evolution in the Environment Concluding Thoughts and Caveats Hypercompetition Industry Definition Locus of Competition

  Having detailed in the previous chapter the various “tools” of the strategic manager’s trade, this chapter looks in detail at one of those tools, the analysis of the environment. In terms of immediacy, the environment is probably the most important component of strategic success. This is because, as many contend, the environment “determines” the success of a company’s strategy. This view or belief reflects a deterministic view of strategy (Bourgeois, 1984; Child, 1972).

  The academic debate between determinism, the view that strategic success is a function of analytical precision and fixed cause and effect relationships, and voluntarism, the view that strategic success is a function of creativity, innovation, and the exercise of strategic choice, is not a matter of great practical importance. However, the tension between these two philosophies does reflect a comparable and essential tension between two practical strategic philosophies, proaction and reaction.

  A cursory browsing of the day’s popular business books will reveal any number of titles dealing with proaction, leadership, taking the initiative, and seizing the moment. However, a relative few are likely to spend much time on the importance of reaction. Indeed, the subject of reaction is far less popular and so often largely ignored. Undoubtedly, there is something satisfying about being first. Especially in business, we tend to celebrate leaders rather than followers. However, the reality is that leading is an imprecise science that often entails significant risk. Sometimes it is better to wait, to allow others to do the basic work of research and development and then to simply react quickly to the emerging changes in the marketplace. Thus, well-timed and appropriate reaction is an important part of strategy. Indeed, in some instances, reaction may be the very key to survival. At the same time, there are instances where being first can yield clear and sustainable advantages. In these cases, a firm would do well to accept the risks and step out ahead of the competition and, sometimes, ahead of the accepted wisdom.

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  Business Strategy

  • George Stonehouse, Bill Houston, David Campbell(Authors)
  • 2003(Publication Date)
  • Routledge

    (Publisher)

  The micro (or near) environment is that which immediately surrounds a business, the parts of which the business interacts with frequently and over which it may have some influence. For most purposes, we can identify competitors, suppliers and customers as comprising the main constituents of this strata of the environment.
• The macro (or far) environment comprises those influences that can affect the whole industry in which a business operates. The macroenvironment comprises influences arising from socio-demographic, political, economic, natural and technological factors. The nature of these factors normally means that individual businesses are unable to influence them – strategies must usually be formulated to cope with changes in the macroenvironment.

Porter's five forces model of industry analysis

Porter (1980) developed a framework for analysing the nature and extent of competition within an industry. He argued that there are five competitive forces which determine the nature of competition within an industry. Understanding the nature and strength of each of the five forces within an industry assists managers in developing the competitive strategy of their organization. The five forces are:

• the threat of new entrants to the industry;
• the threat of substitute products;
• the power of buyers or customers;
• the power of suppliers (to businesses in the industry);
• rivalry among businesses in the industry.

By determining the relative ‘power’ of each of these forces, an organization can identify how to position itself to take advantage of opportunities and overcome or circumvent threats. The strategy of an organization may then be designed to exploit the competitive forces at work within an industry.

When using Porter's framework (see Figure 7.1