Introduction:

Understanding
Competition and
Environment
Welcome to the session on "Understanding Competition and Marketing
Environment". 

Let's look at what you will learn in this session

So you saw when Apple launched the iPhone in 2007, the mobile and smartphone
world was shocked. BlackBerry, Nokia, Motorola, Palm - all of them had
dominated the mobile phone market for years and yet, a new competitor entered
into the field and disrupted the entire industry.

Then again four years later, when Steve Jobs came on stage at the Yerba Buena
Center for Arts in San Francisco on the 27th January 2010, the world - including
Samsung, Microsoft, Dell and many more computer and pad manufacturers - were
not ready for the iPad. And yet, Apple entered the market with a new product and a
simple, yet powerful marketing message - "Come see our latest creation". Within
only 10 months, Apple gained a market share of 75% globally and created a unique
positioning in the market.

 
 These are only two examples of a competitive move by a company that disrupted
an entire industry and caused significant losses for competitors. As a marketer, it is
extremely important for you to understand your competition and the environment
around you to create a powerful business.  

In this session

In this session, you will get a basic introduction to competition and

environment and cover the following in detail:

1. Competitive environment in businesses

2. Porter's 5 Forces model

3. Situational analysis through SWOT analysis

A competitive environment is the dynamic external system in which a business competes and
functions. The more sellers of a similar product or service, the more competitive the environment
in which you compete. Look at fast food restaurants - there are so many to choose from; the
competition is high.
In a perfectly competitive environment, many small companies produce similar products, and
many consumers buy them. ... For example, when a farmer brings dairy products to the local
market, this person can't change the market price and agrees with the going one.
Economists have identified four types of competition—perfect competition, monopolistic
competition, oligopoly, and monopoly.
i hope this link help you..
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Competitive Environment
in Businesses
For any company, both internal, as well as external factors, will determine the
success of its business. The competitive environment is the dynamic external world
in which your business operates and competes. Economic conditions, for example,
might increase the prices of raw materials, forcing companies that supply your
industry to charge more, raising your overhead costs. At the other end of the scale,
local events, such as regional labour shortages or natural disasters, may also affect
your competitive environment. Apart from these macroeconomic events, a business
also has to react to the moves made by its competing companies. A new product
introduction by a rival company, changes in prices of the competition products, etc.
are important factors to consider when making business strategies. Let us hear
about this competitive environment in the video below

Let's look at another example of Amazon to better understand the threat of new
entry. There is always a threat of new entrants in the e-commerce space as it is
relatively less costly to enter the market and setup operations. There is no
additional cost incurred to set up any physical stores and locations. In addition,
traditional established physical stores can easily move into online retailing and
bring with them their substantial consumer base.

Amazon has created entry barriers through –

1. Variety of products offerings

2. First mover advantage for market acquisition

3. Substantial economy of scale

Above, you were introduced to Porter’s Five Forces that can be used to analyse the
competitive environment. These forces are:
1. Threat of entry
2. Buyer power
3. Supplier power
4. Threat of substitutes
5. Competitive rivalry

You saw the examples of businesses like Starbucks and Cafe Coffee Day to
explain the concept of a competitive environment and also analysed the
competition for these brands by using the first force of Porter’s Model, namely the
threat of entry.

Porter's 5 Forces Model

In the previous video, you were introduced to the Porter’s 5 Forces model and
delved into in its first force — the threat of entry. But a model is never complete
without understanding all its elements. Factors such as suppliers, buyers, product
substitutes and competitive organisations also play a huge role when analysing the
external environment for your business. So let’s hear more about these in the
following video

In this video, you understood different elements of Porter’s Five Forces — how the
five forces help marketers and business managers look at the ‘balance of power’ in
a market between different types of organisations, and to analyse the
attractiveness/potential profitability of a business sector. Designed as a strategic
tool, this model should be used to analyse from a global overview, rather than a
detailed business analysis technique.
Based on its key five forces, the model helps to review the strengths of an
organisation within its market environment.

Let's look at another example.

Porter's 5 Forces - Indian Telecom Industry

What is the threat of new businesses starting in the Indian telecom industry? How
easy is it to start up in the sector? (Word limit: 50)
Answer
The presence of major players like Airtel, Vodafone, Reliance and 10 other minor
players in the Telecom space has made it difficult for firms to enter the sector. Only
firms which have the capability of making heavy investments will be able to bear the
high cost of setting up the infrastructure and acquiring customers. Firms that are
able to enter the space can offer competitive prices (call charges, roaming charges,
data plans) and thus, force other firms to enter into a price war.

Porter's 5 Forces - Indian Telecom Industry

How much power do the potential buyers have? Is the cost of switching to
competitors for them high/low? (Word limit: 50)
Answer
With Mobile Number Portability (MNP), the cost of switching to competitors has
reduced for the users. Due to a lot of information about each and every plan offered
by a service provider, buyers have become more cautious while making decisions.  All
this has made service providers to step up their game in terms of product offerings
and quality. Hence, buyer power is high.

Porter's 5 Forces - Indian Telecom Industry

How much power do the suppliers have and what potential do they have to raise
prices? (Word limit: 50)
Answer
The supply is essentially the spectrum allotment from the government. And the
spectrum is a huge cost. This along with the existence of only one supplier makes the
negotiating power of the industry low. Therefore, the supplier power is high for the
telecom industry.
Porter's 5 Forces - Indian Telecom Industry
How easy is it for the consumers to find a substitute to a product in the Telecom
industry? (Word limit: 50)
Answer
In the telecom industry, there can be substitutes like VOIP service providers (Skype
and Hangouts, Facetime, Messenger). However, these forms might have also a
penetration issue. For example, in tier-II and II cities, Skype, Hangouts and email is
not that common (due to high data usage and therefore, high prices). Performance
issue is also present. Interrupted voice quality of platforms like Skype, Hangouts acts
is also a big challenge. 

Porter's 5 Forces - Indian Telecom Industry

What is the level of competition in the Indian telecom industry? (Word limit: 50)
Answer
Cut throat competition due to a large number of firms. Not much difference in the
market share of the top 3-4 firms. Price wars are a regular feature to sway users.

Situation Analysis
In the previous segment, you understood Porter's five forces. Now you will
understand how to conduct a situational analysis using the SWOT framework. This
is the process of examining the internal and external factors that impact your
business. It helps you determine the current situation of the business so that you
can plan ahead.

So, let’s learn to perform an effective situation analysis, from our subject matter
expert

Through the previous video, you learned that there are two sets of factors that you
need to analyse:
1. External factors
2. Internal factors

The internal factors are factors that you have complete control over. They include
‘strengths’ and ‘weaknesses’ such as your resources. The external factors include
‘opportunities’ and ‘threats’ such as the market, competition, and more.

It was on the basis of a SWOT (Strengths, Weaknesses, Opportunities, and

Threats) analysis that HCL decided to leverage its top position in India to pursue
other markets such as Europe and improve its top-of-mind recall over that of its
competitors
You also saw how a SWOT analysis of Catch-Up TV concluded that it could
leverage digital marketing to get more premium subscribers by reaching out to its
20K free subscribers; it also found that Catch-Up TV could acquire rights for more
shows that have higher viewership, to get more viewers onto its platform.

You can use the following template to perform your SWOT analysis.

Comprehension
Bira 91 is the start-up that brought the craft beer revolution to India and is
currently operational in 15 cities. In its first year of launch, 2015, Bira became an
instant hit with the sale of 150,000 cases. Its target audience is the urban youth of
the nation who are looking for premium beers.  
 
Bira’s primary advantages are branding that resonates with the young urban
population of India, and taste. Its beer is available in two flavours, Bira White Ale
and Bira Blonde Lager. While the White Ale is sweeter and more citrusy than
regular beer, the Blonde Lager has a delicate aroma and slight bitterness.
 
Initially, Bira 91 would import beer from Belgium, but now, due to a sudden surge
in sales — some outlets started selling 120 times more than its projected sales — it
is facing supply issues.
 

If the marketing objective of Bira is to improve its market share in coming years,
you need to perform SWOT to analyse the brand’s situation and help it plan.
 Strengths and Weaknesses
What are Strengths and Weaknesses of Bira 91?

Answer
Strengths

1. Branding resonates with the younger audience

2. The loyal community of customers

3. Taste is appreciated by customers

 
Weaknesses

1. Dependence on suppliers

2. Lack of resources and capital to establish breweries

Opportunities and Threats

What are the Opportunities and Threats Bira 91 might face?

Answer
Opportunities

1. Growing demand for craft beer revolution in India

2. Increasing level of alcohol consumption in India

 
Threats

1. Major brewery brands moving into craft beer niche

2. Government policies and environmental regulations

 Summary: Understanding
Competition and
Environment
This session introduced you to Porter's Five Forces model. This model is used as a
tool when understanding the competitive environment for business, including the
competing business organisations as well as the external environment. The five
forces of this model are:

1. Threat of entry

2. Buyer power

3. Supplier power

4. Threat of substitutes

5. Competitive rivalry

SWOT analysis is one of the most effective tools for internal analysis of an
organisation. SWOT has four elements:

Strengths are essentially the capabilities or resources that give you an edge over
your competitors. They provide you business advantages and include assets such as
superior technology or patents. 

Weaknesses are vulnerabilities or limitations that create a disadvantage for your

organisation against your competitors. 
  

Opportunities are new developments or emerging market segments. These can also
include favourable government policies or shifting social attitudes. 

Threats are risks and obstacles. They can be unfavourable policy changes or a
negative social attitude.

Additional reading
 Competitor Analysis: Creating an end-to-end competitor strategy.
 Competitor Analysis: Analysing market competition on digital.
 Competitive analysis: Learn how to do an effective competitive analysis.