■ Problems in identifying
competitors
Analysing members of a strategic group provides crucial information on
which to base strategic decisions. However there are risks in the process of
identifying an organisation’s competitors and a number of errors should
be avoided:
● Overlooking smaller competitors by placing too much emphasising on
large visible competitors.
● Focusing on established competitors and ignoring potential new
entrants.
● Concentrating on current domestic competitors and disregarding inter-
national competitors who could possibily enter the market.
The competitive analysis has allowed the organisation to establish its
relative position versus its competitors on a range of important criteria.
However the organisation has to judge itself and its competitors against
the market it is operating within. At this stage in the external analysis it is
useful to establish a range of information about the market. The customer
and market segmentation would also be considered under a market
analysis and this will be explored in detail in Chapter 4.
■ The market analysis
A market analysis will be made up of a range of factors relevant to the par-
ticular situation under review, but would normally include the following
areas:
● Actual and potential market size: Estimating the total sales in the market
allows the organisation to evaluate the realism of particular market
share objectives. Identifying the key sub-markets of this market, and
External analysis 33Illustrative Example 2.2 (Continued)
Linden dollars. It is already possible to exchange Linden dollars into US dollars at a rate of
l$275 to the US$1 and they are about to become convertible into Euros. More than $600 000
changes hands between Second Life avatars every day. The world has already created one US
Dollar millionaire who made their money through buying blocks of land and building housing
to sell to other avatars. Now commercial companies are beginning to see the potential of this
virtual and other virtual realms and a number of companies have set up operations in Second
Life including IBM, Nike, Adidas and Sony. The Chief Executive of IBM, Sam Palmisano, has
even held a virtual company meeting in Second Life. The company felt the meeting was more
interactive than holding a meeting through a conference call or video link. Mr Palmisano is
quoted as saying that 3-D worlds such as Second Life are the next phase in the Internet’s evo-
lution believing it could have the same impact as the first stage of web revolution.