1 / 40

Today’s topic: Analyzing and Beating the Competition

Today’s topic: Analyzing and Beating the Competition. How companies (beneficially) distinguish themselves from their competitors in order to generate superior revenues & earnings. Second Course Module. Market/customer analysis ( DLJdirect case – online brokerage)

Download Presentation

Today’s topic: Analyzing and Beating the Competition

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Today’s topic:Analyzing and Beating the Competition How companies (beneficially) distinguish themselves from their competitors in order to generate superior revenues & earnings

  2. Second Course Module • Market/customer analysis (DLJdirect case – online brokerage) • Competitive analysis --- today (Airborne Express case – package delivery) • Making product decisions (Techsonic case – depthsounders/fishfinders) • Midterm exam on making product decisions (THINK case – electric cars)

  3. What we’re learning…... • (previously)Differentiationof the “whole product” from competitors is the key driver of success…… • (last week) …..whichdifferentiators to choose depends on what the target customersvalue….. • (this week) ….and what competitorsoffer to those customers

  4. Definition of product success Whole product Product plan: key success factors Differentiation Market attractiveness Target customers Competitive advantage Marketing mix (C+4P) Product positioning Sales functions Channel options Channel value-added Operations balance Course Concepts (13)

  5. Income statement analysis Financial benchmarks Target customer description Target customer selection 5 Forces analysis Competitive analysis (10 dimensions) Identifying competitive options Decision criteria Product decisions Product competitive positioning Channel economics Process dimensions Product development best practices Course Methods/Tools (13)

  6. Today’s Agenda • Sustainable competitive advantage: understanding, developing and using it • Analyzing competitive position, and making subsequent business decisions (Airborne Express case) • Next week’s case (Techsonic): making decisions about products --- financial, market and competitive considerations

  7. Today’s Learning Objectives • Competitive advantage, and its relationship to differentiation • Performing a competitive analysis • Identifying competitive options and making business decisions based on competitive analysis results

  8. Inter-Industry DifferencesOperating Income/Assets (%) • High (15-30%) : Pharmaceuticals, Packaged software, Semiconductors • Medium (8-15%) : Restaurant chains, Petroleum/natural gas, Engineering services • Low (2-7%) : CATV service, Motor vehicles, Airlines

  9. Market/Industry Attractiveness:Porter’s “Five Forces” Model • Threat from substitute products • Degree of competitive rivalry • Bargaining power of buyers • Bargaining power of suppliers • Ease of entry (and exit)

  10. Statistical analysis of profit variation across firms….. • 10-20% explained by differences between industries (market, industry rivalry, gov’t regulation,…) • 30-45% explained by measureable differences within industry (size, share, cost position,…) • remainder “explained” by other factors

  11. Conclusion: Impact on Earnings/Profits • The firm’s industry has a noticeable but not dominating effect (market, rivalry, assets) • The largest differences stem from performance relative to a firm’s industry competitors • Therefore, some “competitive advantage”(vs. other participants in the industry) is key to achieving superior revenue and earnings performance

  12. A company’s competitive advantages allow it to createdifferentiators,the key drivers of success Example: success = high earnings/growth differentiation = best product features comp adv = best market research (best understanding of customers and their needs)

  13. How the concepts relate…... Competitive Advantage(s) Differentiators Success (superior earnings)

  14. Definitions • Differentiator = a dimension of the “whole product”that is unique or best compared to competitive offerings (whole product differentiation; as measured by the value assessed by the targeted end-customers) • Competitive advantage = a capability, competency, process, skill or position of a companythat enables creation of one or more differentiators

  15. Core Competenciesvs.Competitive Advantages Competitive Advantages - capability - process - skill - position Core Competencies

  16. Competitive Advantage andDifferentiators: Examples

  17. From the Customer’s Perspective… Customers identify their options/choices amongst: like-products, substitute products and doing nothing For each option, they compare their assessment of the value (to them) of each whole-product to its price (or lifecycle cost)

  18. So, companies create “economic value” … Define a whole product that customers value highly (market/customer analysis) Design the whole product to minimize cost to produce (design and operations engineering) Produce the whole product at minimum acceptable cost (manufacturing and opns engineering) Efficiently promote, sell, deliver and support the product (marketing, sales, service operations)

  19. Creating Economic Value Create a (whole) product that provides potential customers a better ”value minus price” proposition than competitors while managing costs and expenses so as to make profits (earnings)

  20. Competitive Advantage • Valuable things that a company does/knows better than its rivals • Opportunities for competitive advantage are numerous (but often temporal/replicable) • Possibilities can be identified via analysis of the value chain • Sustaining/renewing/evolvingan advantage is critical

  21. A Firm’s Value ChainHow the firm’s activities can lead to the creation of value (and added value) • Primary activities: design/development, inbound/ outbound logistics, operations/manuf, marketing, sales, service • Support activities: procurement, IT/ technology development, HR, legal, finance/accounting, quality office, …..

  22. Sustaining AdvantageMost advantages are temporal/replicable, so they must be sustained/strengthened/evolved/changed • Size: scale/scope economics, experience effects, customer base • Access: know-how, inputs, markets • Competitors’ options: public policy, competitors’ defense, response lags

  23. Airborne Express: Case Summary • The timeframe is 1997 • The market is the $16-17B U.S. express mail delivery (letter, package) market • Airborne is the smallest of the three major competitors with 16% market share (FedEx 45%; UPS 25%) • It is recently the fastest growing, but historically the least profitable, of the Big 3 • The US Postal Service is threatening to enter the market

  24. Assignment Questions • Perform a Five Forces analysis of the US express mail industry • Perform a competitive analysis of FedEx, UPS and Airborne in the 10 dimensions shown on the next slide (display as a 3 x 10 matrix) • Based on the competitive analysis, what are Airborne’s competitive strengths vis-à-vis FedEx and UPS? • How is Airborne’s “whole product” differentiated ? • What does Airborne need to do to assure that it survives and thrives in the future?

  25. Market/Industry Attractiveness:Porter’s “Five Forces” Model • Threat of substitutes • Degree of rivalry • Bargaining power of buyers • Bargaining power of suppliers • Ease of entry/exit

  26. Products offered Target customers Competitive positioning (incl. price & cost) Financial performance Culture & human resource management Operations: pickup & delivery Operations: air & hub operations Marketing & sales Customer service Information technology Competitive Analysis Dimensions

  27. Airborne’s Target Customer(list of target customer descriptors)

  28. Identifying Airborne’s Options Opportunities Challenges ? • ?

  29. Identifying Competitive Options Products Current Position Current products Current target customers Customers

  30. Today’s Learning Objectives • Competitive advantage, and its relationship to differentiation • Performing a competitive analysis • Identifying competitive options and making business decisions based on competitive analysis results

  31. Definition of product success Whole product Product plan: key success factors Differentiation Market attractiveness Target customers Competitive advantage Marketing mix (C+4P) Product positioning Sales functions Channel options Channel value-added Operations balance Course Concepts (13)

  32. Income statement analysis Financial benchmarks Target customer description Target customer selection 5 Forces analysis Competitive analysis (10 dimensions) Identifying competitive options Decision criteria Product decisions Product competitive positioning Channel economics Process dimensions Product development best practices Course Methods/Tools (13)

  33. Topic for Next Class:Making Product Decisions Pulling together the things we’ve learned so far to make decisions about product definition and product priorities…… this is also the topic for the mid-term exam

  34. What are we “pulling together”? • Financial: income statement analysis, objectives and constraints, growth challenges • Market: market attractiveness (5 forces), target customers, needs/value analysis • Competitive: competitive analysis, strengths/weaknesses, competitive advantage, differentiation • Product decisions: whole product concept, differentiation sources, opportunity assessment

  35. Making Product Decisions Financial Analysis (health, challenges) Market Analysis (customers, needs, market trends) Competitive Analysis (strengths, weaknesses) Objectives and Constraints (mkt, finc’l) Competitive Adv Decision Target Market Decision (C) Product Decisions (4P’s)

  36. “Product decisions” case: Techsonic: Humminbird and New Products

  37. Techsonic: case summary • Private company in 1989 • Market leader in depth sounders/fish finders under the Humminbird brand • Growing and profitable until….. • Recent industry-wide downturn in new boat sales • Three new products at various stages of development: next-gen depth sounder (901), VHF marine radio, and navigation product (“GPS”) • Which one(s) to pursue…..?

  38. Homework Questions - 1 • Calculate Techsonic’s absolute and relative operating income for 1987, 1988, and 1989; are these operating results “good”? Why did operating income fall between 1988 and 1989? Identify both financial and market reasons. • What are the decision criteria Techsonic should use in making decisions at this point? (I.e., what are the outcomes a “good” decision would achieve?) • Perform a 5 forces analysis of the U.S. market for depthsounders/fishfinders

  39. Decision Criteria are desired outcomes for…… Revenues Market share Gross margins or cost position Expenses (by category) Operating income (or cash) Timeframes for these outcomes Level of risk tolerance

  40. Homework Questions - 2 What are Techsonic’scompetitive advantages? What are the 901’sdifferentiators? What are the potential differentiators of the navigation product? Who are Techsonic’scurrent target customers (provide at least eight descriptors) ? Separately, identify the positives-and-negatives of focusing primarily on: (1) 901, (2) VHF marine radio, (3) GPS-based navigation product.

More Related