Competitiveness analysis of the firm.
After assessing the attractiveness of commodity markets and segments of the basic market, the next stage of strategic marketing is the analysis of the climate, or competitive situation, in each commodity market and the subsequent assessment of the emergence and degree of competitive advantages that various competitors have in these markets. Taking into account their specific strengths and weaknesses compared to the most dangerous competitors can make adjustments to the firm's assessment of the attractiveness of a particular market. Therefore, the purpose of competitiveness analysis is to determine what advantage a firm or brand can achieve and to assess the extent to which this advantage can be protected in a particular competitive situation.
Competitive advantage - those characteristics, properties of a product or brand that give the firm a certain advantage over its direct competitors. These characteristics can be very different and relate to the product itself as well as to the additional services accompanying the basic services, to the forms of production, sales or sales specific to the firm or the product.
This advantage is thus relative, defined in comparison to a competitor with the best position in the commodity market or market segment. This most dangerous competitor is called a priority.
A competitive advantage is called an external one if it is based on the distinctive qualities of the product, which create value for the buyer by either reducing costs or increasing efficiency.
A competitive advantage is internal if it is based on the firm's superiority in terms of production costs, firm management or product management, which creates value for the manufacturer to achieve a lower cost than that of the competitor.
The ability of a firm to realize its advantage in basic sales depends not only on the direct competition it faces, but also on the role played by competitive forces such as potential competitors in that market, substitute goods, customers and suppliers. The first two forces constitute a direct threat and the last two are an indirect threat, depending on their ability to dictate their own terms.
Potential competitors are likely to enter the market as a threat that a firm should seek to lower and against which it should protect itself by creating entry barriers. The severity of this threat depends on the height of the entry barriers and the reaction force that a potential competitor can expect. Possible entry barriers:
- Economies of scale that force an incoming firm to either ensure large-scale production or risk losing costs.
- Legal protection afforded by patents.
- The strength of brand image.
- Capital requirements (which can be significant).
- Costs of transition, one-time costs of real or psychological restructuring, which is required of the buyer in the transition from the goods of a known producer to the goods of a novice firm.
- Access to distribution networks.
- Experience effect and cost advantage.
Other factors that can influence the determination of a new firm are its perceptions of the reaction power of existing competitors and the support they can provide to the newcomer. The impact of possible reliance on the following factors, among others:
- The impact of possible rebuffing depends, in particular, on the following factors
- The degree of importance of the market for a firm already operating in the market;
- The availability of large financial resources and the degree of their liquidity;
- The possibility of shifting the response to the new firm's core market.
This set of conditions is the existence of entry barriers and the ability to support and determines the ability to keep potential competitors from coming.
Substitutes are goods that perform the same function for the same group of consumers, but are based on another technology. These products pose a permanent threat, as substitution is always possible. This danger may increase, for example, as a result of technological advances that change the quality/price ratio of the substitute compared to the existing product on the market.
Buyers have a certain ability to bargain with their suppliers. They can influence the potential profitability of a firm's actions, forcing the firm to reduce costs, requiring more extensive services, more favourable payment terms or playing on existing competition.
Selecting your customers is an important determinant decision. A firm can significantly improve its competitive position by following a customer selection policy that aims to have a profitable customer portfolio and thus escape any form of dependence on customer groups.
Continuation follows.