change in favour of one particular competitor? Consideration of relative
competitive position of rivals is an important aspect of an audit and
needs now to be considered in more detail.■ Competitor analysis
The ‘five forces’ analysis has examined the overall industry and is a start-
ing point in assessing a company’s competitive position. This is likely to
be a rather broad definition of an industry and contains a number of com-
panies that would not be direct competitors. Toyota’s is likely to have a
number of natural direct competitors, Aston Martin is not likely to be one
of them, although both companies are in the car industry. Toyota’s scale is
global and manufacture cars across the full range, Aston Martin is a spe-
cialist, low-volume prestige sports car manufacturer. Companies that are
direct competitors in terms of products and customer profiles are seen as
being in a strategic group. The car industry would be made up of a num-
ber of strategic groups.
Strategic groups
Strategic groups are made up of organisations within the same industry
that are pursuing equivalent strategies targeting groups of customers that
have similar profiles. Aston Martin’s strategic group is likely to contain
Ferrari, Lotus, Lamborghini, etc. All these companies are following simi-
lar strategies and facing similar strategic questions. They are also aiming
at very similar market segments. In the airline industry there are at least
three strategic groups. One group consists of airlines with regional oper-
ations who offer scheduled flights and compete on cost. There is a group
of major airlines who have global operations and offer scheduled flights
with quality environments and service. The third group offer charter ser-
vices to a range of holiday destinations (see Figure 2.5).
There is a range of attributes that can be used to identify strategic
groups. Some examples are as follows:
● Size of the company
● Assets and skills
● Scope of the operation
● Breadth of the product range
● Choice of distribution channel
● Relative product quality
● Brand image
For many companies analysing every competitor in its generic industry,
would be a difficult task in terms of management time and company
resources. Defining an organisation’s strategic group allows a company to
concentrate its analysis on its direct competitors and to examine them in
more detail.
External analysis 29