Running Head: COMPETITIVE ANALYSIS
Competitive Analysis of an Industry
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Competitive Analysis of an Industry
Importance of understanding Business Strategy
In the business world, it is essential to always plan for every action so that the company’s operation is not impaired. This procedure involves making a series of decisions and setting goals for monitoring, implementation and verification of the results; and we may call this whole process a business strategy. In order to meet the challenges and opportunities of the business environment and still make the best of it, it is very important to set concrete and properly designed business plans. The act of drawing a strategy should involve well-structured areas of the organization and be divided into stages in order to be monitored and to avoid any errors capable of invalidating the constructed strategy, and then to make the necessary course corrections, therefore, you cannot have much, if you cannot always predict all the variables.
Oliveira (2002) conceptualizes competitive analysis as a structured methodology that considers certain techniques that provide the basic information for the inherent design of the company’s strategic decision making process. The process of competitive analysis starts in search of information and the analysis of environments. With this information, you can make an assessment of current and future scenarios of the company’s sector, identifying the best scenario, the most likely and the most worst. In this paper we have used Porter’s framework for our analysis competitiveness of the UK’s food industry. The 5 forces framework defines the characteristics of competition within a sector, industry or market, rivalry between the present firms, bargaining power of buyers, bargaining power of suppliers, threat of substitutes/products and threat of new entrants. Porter’s framework is ideal to fully meet the industry’s competitive behaviour and thus develop successful strategies.
Competitive Rivalry amongst existing firms
The food industry of UK has seen evident growth in recent years. However, this growth has recently slowed in due to the worldwide economic recession. As a result, the competition in the market is fierce, and without any new market share being offered through development, current firms are being enforced in order to directly compete for other’s market share (Traill, & Pitts, 1998). Even though there is a slow-down in the growth, however, it is worth noting that the continuing trends propose that the growth will persist once improvement takes place.
Number and Size of Competitors
The size of competitors significantly varies within the size of the market as shown in the UK’s food industry analysis. Tesco, the market leader holds 24.6% of the market share and the other big 4 firms collectively holds around 35%. The smaller firms hold the remaining market share in their own right. The significant share that is held by the Big 4 increases the sharing of these firms. The result of having high consolidation within the industry implies that the rivalry is strong; however, there are uncertainties that through complicity their strength within the industry can be harmed.
Threat of new entrants
Significant economies of scale exist in the UK food industry. The leading firms utilise the benefits of economies of scale through securing more approving business terms, spreading any semi fixed or fixed costs over large volumes and improving their supply efficiencies. Leading firms can make use of these economies of scale in order to provide competitive advantages within their value chain that will not be competent to be matched by new entrants, thus providing a major barrier to entry (Porter, & Ketels, 2003). Whenever there is the possibility that new firms enter in the food industry without much difficulty, it increases the strength of...
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