Companies operate in an environment with several companies who want a piece of the same pie. This leads to competition between them, which is so severe in many cases the survival of an organization depends on the ability to cope with this competition. To measure the extent to which an organization can compete, developed the concept of competitiveness. Competitiveness determines to what extent a company has a chance to survive in a competitive market.
Levels of competition
To achieve a competitive analysis, one must analyze the competition itself. In the competition analyzes, one has to deal with three levels of competition, namely:
- Macro level; strategic analysis of the competitive field and any movement
- Meso; identification and analysis of current relevant competition
- Micro level; Identifying major direct competitor, strength and weakness analysis of these
The five-forces model of competition between field
Companies tend to view the competition field based on the existing competition. Just look at the current market is a dangerous and narrow view, because there are still four acting external forces on the current competitive environment, which may be in term of strategic significance. These external forces are illustrated with the so-called five-strength model:
- Power shift in the relationship between the existing operators and their suppliers
- Power Shift about the existing service providers and their customers
- The risk of new entrants
- Availability complements and substitutes
- Internal market competition
Suppliers can exert power by threatening to increase costs or reduce quality. This power is greater if there are no alternatives to few suppliers; For organizations, it is, therefore, advisable not to go into business with a supplier who can exercise power thereby. Power suppliers may also be exercised by information released; For example, if a batch is enabled for the personnel and the data from it are thus arriving at this party, this supplier of services can exercise a certain power; he / she indeed has the information of the company in such a format that a lot of time or energy would cost to switch supplier.
New entrants to the market
New entrants in a market may significantly disrupt the market. Think for example of parties putting the entire market upside such as the introduction of Bing on the investment market for individuals. Brinck knew the cost for individuals wanting to invest in such a way to reduce the company this could take a considerable share of the market and even market managed to extend.
Internal competition and the availability of substitutes and complements
The availability of complements and substitutes for organizations and companies also a risk; in fact, it is true that the smaller to choose the opportunities for customers to a different party, the stronger the market position of the organization. Internal competition in the market has the same effect on the competitive position of a party.
Continuing the philosophy of competitive strategies developed by the five-force model. In this philosophy, there are three generic competitive strategies, namely:
- Cost leadership: the company applies a broad approach to the market to an aggressive price approach
- Differentiation leadership: the market approach is broad, but the content is determined by adding value
- Focus strategies, including cost focus (narrow approach to the market price aggressive approach) differentiation and focus (narrow market approach, completion value-added)
Cost orientation and differentiation orientation
Cost orientation companies can best translate to “price providers” or “discount.” Differentiation orientation companies, however, are more companies that fall under the heading of “quality shopping” or “upscale shopping.”
Competitive Analysis Macro, Meso, and Micro level
Competition at the macro level, a game in the bigger picture. For a bar this example the competition of dance festivals throughout the rest of the country. In a competitive analysis, these should also be included as a customer can spend its money only once and draw the dance festival customers from the whole country.
When we look at the competition at the Meso level in the example of a cafe, then we look at hospitality venues in around the city. For example, local clubs can be who attract the customer’s region.
The micro level of competition in the example of a pub the immediate vicinity; For example, the other bars in the city center or going out square. Competitors at the micro level can be placed in the direct competition. In the case of the example of the cafe, so the bars and restaurants are close together, the consumer is inclined to, if at all is not pleasant to look at another catering facility.
To measure the competitiveness of organizations, it is important to take all the above factors; i.e.,
- The three levels of competition and the position therein
- Influences from the five-force model
- The competitive strategy
The results of analyzes on the individual faces can give an answer to what is the overall competitiveness of an organization.