Determine how well each business will be positioned in its industry relative to rivalsEvaluate whether it is or can be competitively strong enough to contend for market leadership
Factors to Use inEvaluating Competitive StrengthRelative market shareCosts relative to competitorsAbility to match/beat rivals on key product attributesAbility to benefit from strategic fits with sister businessesAbility to exercise bargaining leverage with key suppliers or customersBrand image and reputationCompetitively valuable capabilities Profitability relative to competitors
Procedure: Calculating Competitive Strength Scores for Each BusinessStep 1: Select competitive strength factorsStep 2: Assign weights to each factor (sum of weights = 1.0)Step 3: Rate each business on each factor, using a scale of 1 to 10Step 4: Calculate weighted ratings; sum to get an overall strength rating for each business
Interpreting the CompetitiveBusiness Strength ScoresBusiness units with ratings above 6.7are strong market contendersBusinesses with ratings in the 3.3 to 6.7 rangehave moderate competitive strengthvis-à-vis rivalsBusiness units with ratings below 3.3are in competitively weak marketpositionsIf a diversified firm’s businesses all have scores above 5.0,its business units are all fairly strong market contenders
Using a Matrix to Display Industry Attractiveness and Competitive StrengthUse industry attractivenessand business strength scoresto plot location of each business in matrixIndustry attractiveness plotted on vertical axisCompetitive strength plotted on horizontal axis Each business unitappears as a “bubble”Size of each bubble is scaled to percentage of revenues the business generates relative to total corporate revenues
Industry Attractiveness-Competitive Strength Matrix
Strategy Implications of Attractiveness/Strength MatrixBusinesses in upper left cornerAccorded top investment priorityStrategic prescription - grow and build
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- Fall '19
- Management, competitive strength