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1. COMPETITIVE BUSINESS ENVIRONMENT
Submitted to: Submitted by:
Mr. S. C. Ojha Sir. Swati Saxena
Shivangi
Shlok Kumar
Sunil Ahirwar.

2. TOPICS TO BE COVERED:
 Defining Competition.
 Who are Competitors.
 Meaning of Competitive Environment.
 Elements of Competitive Environment.
 Michael Porter’s Five Forces Model.
 Competitive Strategies.
 Challenges to Competitiveness of Business.

3. COMPETITION:
 In economics:
"competition" is the rivalry among sellers
trying to achieve such goals as increasing profits, market
share, and sales volume.
 By varying the elements of the marketing mix: price,
product, distribution, and promotion.

4. COMPETITION:

5. COMPETITORS:
 Any person or entity which is a rival against another.
 In business, a company in the same industry or a similar
industry which offers a similar product or service.
 The presence of one or more competitors can reduce
the prices of goods and services as the companies
attempt to gain a larger market share.

6. TYPES OF COMPETITORS:
 Direct Competitors :
Direct competitors are those that the
sell very similar goods and services.
 Indirect Competitors :
Indirect competitors are those
that sell unrelated goods and services, but to
similar markets.

7. COMPETITORS:

8. COMPETITIVE ENVIRONMENT:
 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.

9. ELEMENTS OF COMPETITIVE
ENVIRONMENT:
 Regulatory Elements
 Direct Competitors
 Indirect Competitors
 Differentiation
 Technology

10. REGULATORY ELEMENTS:
 Various government regulations and demands of
professional licenses have a direct impact on the
environment in which a business tries to earn profits and
on the ability of an organization to face on the
competition.
 Example : When the state government’s rules to make it
compulsory for all the message therapists to have
licenses similar to the cosmetologists, the competitive
environment of a spa could be changed.

11. DIRECT COMPETITORS:
 Direct competitors are those that the sell very similar
goods and services.
 There will be the competition from the other local
computer repair shop as well as from the large retail
chain offering the repairing of computers for a small
computer repair business.

12. INDIRECT COMPETITORS:
 Indirect competitors are those that sell unrelated
goods and services, but to similar markets.
 Example: Local restaurants present the competition for a
fine dine restaurant. At the same time, the nearby
supermarkets offering ready to eat meals also present
competition to the nearby restaurants.

13. DIFFERENTIATION:
 Developing innovative elements in the business which
cannot be predicted by the competitors is referred to as
differentiation.
 Example: The customers will not be attracted towards an
Italian restaurant’s pizza which is almost same as of
other restaurant. But, if some sort of differentiations in
pizzas such as change of taste, size, or style is done.

14. TECHNOLOGY:
 The competitive environment is also influenced by
technological innovations and it will impact negatively to
those firms who do not adapt such innovations or
advancements.
 Example: Online take-out services are initiated with the
help of internet by many restaurants which is proving
quite a facility for many customers who do not find it
comfortable to order through call.

15. MICHAEL PORTER’S FIVE FORCES
MODEL:
 Porter's five forces analysis:
It is a framework for
analyzing the level of competition within an industry and
business strategy development.
It draws upon industrial organization economics to
derive five forces that determine the competitive
intensity.
Porter refers these forces as the Micro environment, to
contrast it with more general term Macro environment.

16. CONTINUED……..

17. THREAT OF NEW ENTRANTS
 Profitable markets that yield high returns will attract new
firms. This results in many new entrants, which
eventually will decrease profitability for all firms in the
industry.
 The entry of new firms can be blocked by the largest
company in a certain industry.
Potential factors:
 Government policy
 Capital requirements
 Absolute cost
 Economies of scale
 Brand equity

18. THREAT OF SUBSTITUTES:
 The existence of products outside of the realm of the
common product boundaries increases the propensity of
customers to switch to alternatives.
 Example: Coffee can be a substitute for tea, as it can also
be used as a caffeine drink in the morning.
Potential Factors:
 Quality depreciation
 Buyer switching costs
 Substandard product
 Availability of close substitute
 Number of substitute products available in the market
 Ease of substitution

19. BARGAINING POWER OF CUSTOMERS OR
BUYER:
 The bargaining power of customers is also described as
the market of outputs: the ability of customers to put the
firms under pressure, which also affects the customer’s
sensitivity to price changes. Firms can take measures to
reduce buyer power, such as implementing a loyalty
program.
 The buyer power is high if the buyer has many
alternatives. The buyer power is low if they act
independently.
 Example: if a large number of customers will act with
each other and ask to make prices low the company will
have no other choice because of larger number of
customers pressure.

20. CONTINUED…..
Potential factors:
 Buyer concentration to firm concentration ratio
 Buyer information availability
 Force down prices
 Availability of existing substitute products
 Buyer price sensitivity
 The total amount of trading
 Customer value analysis
 Buyer switching costs relative to firm switching costs

21. BARGAINING POWER OF SUPPLIERS:
 The bargaining power of suppliers is also described as
the market of inputs. Suppliers of raw materials,
components, labor, and services to the firm can be a
source of power over the firm when there are few
substitutes.
 Example: If you are making biscuits and there is only
one person who sells flour, you have no alternative but to
buy it from them. Suppliers may refuse to work with the
firm or charge excessively high prices for unique
resources.

22. CONTINUED…..
Potential factors:
 Suppliers switching costs relative to firm switching costs
 Degree of differentiation of inputs
 Presence of substitute inputs
 Strength of distribution channel
 Employee solidarity(e.g. labor unions)
 Impact of inputs on cost and differentiation
 Suppliers concentration to firm concentration ratio

23. INDUSTRY RIVALRY:
 For most industries the intensity of competitive
rivalry is the major determinant of the competitiveness of
the industry.
Potential factors:
 Degree of transparency
 Level of advertising expenses
 Powerful competitive strategy
 Firm concentration ratio
 Competition between online and offline companies

24. COMPETITIVE STRATEGIES:
 A firm’s relative position within its industry determines
whether a firm’s profitability is above or below the
industry average. The fundamental basis of above
average profitability in the long run is sustainable
competitive advantages. There are two basic types of
competitive advantage a firm can possess: low cost or
differentiation.
 The two basic types of competitive advantages combined
with the scope of activities for which a firm seeks to
achieve them, lead to three generic strategies for
achieving above average performance in an industry:
cost leadership, differentiation, and focus. The focus
strategy has two variants cost focus and differentiation
focus.

25. COMPETITIVE STRATEGIES:

26. COST LEADERSHIP:
 Cost leadership is a concept developed by Michael
Porter, utilized in business strategy. It describes a way to
establish the competitive advantage. Cost leadership, in
basic words, means the lowest cost of operation in the
industry.
 In cost leadership, a firm sets out to become the low cost
producer in its industry. The sources of cost advantages
are varied and depend on the structure of the industry.

27. DIFFERENTIATION:
 A differentiation strategy calls for the development of a
product or service that offers unique attributes that are
valued by customers and that customers perceive to be
better than or different from the products of the
competition.
 It is rewarded for its uniqueness with a premium price.

28. FOCUS:
 The generic strategy of focus rests on the choice of a
narrow competitive scope within an industry. The
focuser selects a segment or group of segments in the
industry and tailors its strategy to serving them to the
exclusion of others.
The focus strategy has two variants.
a. In cost focus a firm seeks a cost advantage in its target
segment, while in
b. Differentiation focus a firm seeks differentiation in its
target segment.

29. CHALLENGES TO COMPETITIVENESS OF
BUSINESS:
 Operations
 Logistical cost
 Creating global marks
 Leadership
 Customer Acceptance
 Market Understanding and Branding
 Less Experience of International Markets, Customers and
Suppliers