1950’s Structure / Conduct & Performance paradigm (Joe Bain)

Market Performance

profits, growth

Market Conductpricing, advertising, R&D, etc.

Market Structurenumber of sellers, buyers, and suppliers

Basic Conditions Of Cost And Demand

Strategic Group Analysis

A strategic group is a group of firms in an industry following the same or similar strategy.

Identifying strategic groups:

• Identify principal strategic variables which distinguish

firms.

• Position each firm in relation to these variables.

• Identify clusters of common competing characteristic

“No two species that depend on the same prey will think differently” - Gause “Laws of natural competition”

Strategic Groups in the World Automobile Industry

Broad

Product RangeRange

Narrow

National Geographical Scope Global

NATIONALLY- FOCUSED, SMALL, SPECIALIST

PRODUCERS e.g., Bristol (U.K.), Classic Roadsters

(U.S.), Morgan (U.K.)

NATIONALLY FOCUSED, INTERMEDIATE LINE

PRODUCERS e.g. Tofas, Kia, VAZ, Maruti

REGIONALLY FOCUSED BROAD-LINE

PRODUCERS e.g. Fiat, PSA, Renault, Rover,

Chrysler

PERFORMANCE CAR PRODUCERS

e.g., Porsche, Maserati, Lotus

LUXURY CAR MANUFACTURERS e.g.,

Jaguar, Rolls Royce, Daimler-Benz, BMW

GLOBAL SUPPLIERS OF NARROW MODEL RANGE e.g., Volvo, Subaru, Isuzu,

Suzuki, Saab, Hyundai

GLOBAL, BROAD-LINE PRODUCERS e.g., GM, Ford, Toyota, Nissan, Honda, VW

A Framework for Competitor AnalysisOBJECTIVES• What are competitors current goals?• Is performance meeting there goals?• How are its goals likely to change?

STRATEGY• How is the firm competing?

ASSUMPTIONS• What assumptions does the competitor hold about the industry and itself?

RESOURCES & CAPABILITIES• What are the competitors’ key strengths and weaknesses?

PREDICTIONS

• What strategy changes will the competitor initiate?

• How will the competitor respond to our strategic initiatives?

Tool: CCSI (Core Competency Strategic Intent matrix Matrix)

• The CCSI matrix makes firm dynamics alive.• Matrices are made at regular intervals– Yearly or quarterly depending on how fast things are changing

• The two dimensions of the matrix are:– Core Competency: firms’ relative capacity -- as measured by

Tobin’s Q or market/book value or defect rates(Customer switching) or as rated by industry experts.

– Strategic Intent: firms’ relative aggressiveness -- as measured by R&D expenditures or capital investments or analysis of press releases.

Strategic Intent

Passive

Average

Aggressive

Low

Aver

ag eHi

ghCo

re

Capa

bilit

ies

Tool: CCSI Matrix Each competitor is mapped as a circle:• the size of which

reflects sales or capitalization or assets

• and the pie slice in which reflects free cash or other available resources

Case: CCSI Analysis of the early 90s Automobile Industry

• Flip & Observe ;– The decline of Honda & Toyota– The ascendancy of Ford – General Motors unsuccessful run at leadership– Chrysler’s repositioning as an up and coming

star.

Passive

AggressiveStrategic Intent

Core

Ca

pabi

litie

s

Automobile Industry 1990

Honda

General Motors

Ford

Toyota

Chrysler

1.0

.5

1.5

(1.0)

(1.5)

(.50)

1.04 1.08 1.12.88 .92 .96

Low

High

illustrative

Strategic IntentPassiv

eAggressiv

e

Core

Ca

pabi

litie

s

Automobile Industry 1991

1.0

.5

1.5

(1.0)

(1.5)

(.50)

1.04 1.08 1.12.88 .92 .96

General Motors

Toyota

Chrysler

Honda

Ford

Low

High

illustrative

Passiv

eAggressiv

e

Core

Ca

pabi

litie

s

Automobile Industry 1992

1.0

.5

1.5

(1.0)

(1.5)

(.50)

1.04 1.08 1.12.88 .92 .96

General Motors

Ford

Toyota

Chrysler

Honda

Strategic Intent

Low

High

illustrative

End of Deck