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Influence Of Industry and Competitive Analysis on Business Planning and Strategy
Business planning could be described as part of an ongoing ongoing activity that concerns the direction of the entire organization. It contains the mission, goals, strategies, tactics and policies that guide the organization in adapting to the environment over a period of time. A business plan is thus considered the backbone of a business entity; an attempt to follow the vision to achieve the company’s goal. However, business planning should be flexible and adaptable so that it can be changed from time to time to adapt to the overall environment, not just the business environment. A critical analysis of the industry and competitors is inevitable for an effective business plan.
Strategy is the determination of the company’s main long-term goals and objectives, directions of action and the resources necessary to realize these goals. Thus, strategy is not an end in itself, but rather a means to an end. This is what makes it an essential ingredient in any business. It is usually included in marketing and business plans of organizations.
It is also a process and is usually discussed under three broad aspects or stages, namely strategy analysis, which is the stage where the strategist identifies the opportunities, strengths, weaknesses and threats of the environment through analysis; strategy formulation, which is the stage where a choice is made among many and potential ones; and strategy implementation, which is when the chosen strategy is translated into organizational action.
Strategy is thus the development and shaping of organizational goals and objectives, providing the necessary response to the environment (to achieve competitive advantage) and providing good corporate governance. As already noted, strategy and business planning are somewhat related.
“Strategy” is usually part of business and marketing planning processes.
Industry and competitive analysis form part of the first stages of business planning and strategy. However, there is some difference between the two.
Industry analysis attempts to identify the forces that affect the level of competition in an industry. Research has proven that industry analysis at the strategic business unit (SBU) level is highly effective because when done at a generalized level, it diminishes its value.
Thus, this analysis is done at the SBU level, still with an industry in mind, applying Porter’s five forces—threat of entry, buyer power, supplier power, and threat of substitutes and competition—to demonstrate the impact of the portal. environment for the industry as a whole.
Threat of entry: This is the extent to which other interested parties are able to enter the industry. It depends on the barriers or restrictions to entry in the industry. There are many examples here, but few can be explained. Some examples are economies of scale, capital required in the firm, access to distribution channels, anticipated retaliation (ie if a competitor fears retaliation by an existing firm), legislation or government action, and differentiation. Analyzing barriers takes into account which barriers are prevalent, the extent of prevention, the position of the organization and possible gaps.
Buyer Power: This analysis affects the buyers of the industry in question. The capacity intensity is felt based on the supply requirement of the organization. For example, grocery retailing in the UK, where shoppers are concentrated, is dominated by a few retailers, especially supermarkets.
Buyers can also manipulate the system if the costs of switching suppliers are not high. There is also a risk of backward integration if suppliers’ prices and quality are perceived as unsatisfactory. This belies the fact that a good understanding of such matters is a potential determinant of corporate strategy. Even when there is an (intense) price war between competitors, buyers can manipulate the system, e.g. low-cost airlines Airbus and Boeing.
Somewhat related to the above is the power of suppliers: if consumers of a particular supplier are dispersed, the supplier can exercise power in that industry. Brand reputation can also help a supplier become powerful. For example, in Ghana, the brand “Graphic” has become a common name, so when someone wants to buy any brand of newspaper, the word “Graphic” is used. Like Gucci and Coca-Cola, most retailers stock them to win over shoppers because of the brand name.
A significant benefit to any strategy is to attack a brand name or increase marketing spend based on the knowledge gained here.
The next force is the threat of substitutes entering the industry. They can occur in one or more of these as a by-product of a product (e.g., fax for postal service and e-mail for fax, replacement with a new product if necessary, general replacement (ie products that compete for the need) and without, for example, beer, tobacco. , cannabis.
When planning a business or preparing a strategy, it is therefore necessary to find out how risky a substitute for the organization’s product or service is; does the service or product withstand the threat of substitutes? or how easily consumers can switch to these substitutes.
Intensity of rivalry: This concerns the potential entry of competitors into the industry; availability of substitutes and control of buyers and suppliers. If the position of this existing organization changes. How might competition affect it? The following must also be taken into account. Competition is intense where competitors are of equal size, such as in the computer search engine industry until Google appeared. Market growth rates and global customers may increase competition. Even where there is little or no differentiation, customers can be easily influenced; acquisitions and mergers also increase a company’s reach in an industry and thus provide a competitive advantage. High fixed costs in the industry due to high capital intensity are causing competitors such as Boeing and Airbus to lower prices.
As with other analyses, a good understanding of the information here is the starting point for successful strategy and business planning.
While industry analysis addresses industry-specific issues, competitive analysis considers marketing and financial metrics, mission statements, research and development, and product developments to determine where competitors are directing their priorities and resources.
Some of the marketing aspects to consider as part of a competitive (competitor) analysis may include finding out how competitors meet customer needs in terms of goods or services offered, affordable prices, and unique features. The quality and reliability of the services and goods offered by competitors must also be taken into account. For example, Toyota recently cut engineering costs on the Camry by 30% and was able to launch a new longer, wider Sienna Mivan with a folding rear seat and a $1,000 lower price than its predecessor. Others may involve obtaining information, either through intelligence or annual reports, because information is not easily disclosed (for fear of competitors taking advantage) of the total market share, whether growing, declining or stable, of specific markets such as the UK or the US about. ; launching new brands or products – Toyota launched a new brand in the US in 2003; Other aspects of ‘Scion’ aimed at younger buyers that may provide relevant marketing information for competitor analysis are changes in promotional tactics, distribution channels, and not least the addition of new manufacturing or service facilities to improve efficiency and reduce costs. A good and recent example is Asda’s installation of radio frequency identification (RFID), a device that would be used to scan barcodes on incoming goods, which could save Asda $8.35 billion a year. Fortune, “Wal-Mart Holds Change,” November 10, 2003, p.23.
Competitors’ results must be taken into account in the financial analysis. Competitors’ investment program in terms of research and development, diversification (mergers and acquisitions, as well as personnel training and development) must be evaluated and analyzed. Research and development is especially important in large companies, it is the key to their survival, although usually for a long time. For example, Microsoft spends billions to develop its own search engine, which will be integrated into both its MSN online service and a new operating system to be released in 2006 to challenge Google’s dominance of the search engine industry.Fortune, December 22, 2003 p.
To facilitate the analysis, Porter developed a model, a matrix, that compares the five forces with three levels of intensity, low, medium, and high (see Figure 1 below). Based on the experience of a well-known UK retail group, the illustration depicts the intense competition from competitors and the strong need to maintain their customer base against them. In business planning and strategy, sectoral analysis helps in positioning the company and in the right environment (i.e. adapting to the environment and formulating strategy. Competitor analysis, on the other hand, influences business planning and strategy by providing marketing, financial and other key information about competitors, which helps in business planning and strategy formulation, which gives competitive advantage needed by the organization.
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