UNIT VII Case Study BP&S

Competitive Forces

Arguably the most important part of an external audit is identifying rival firms and determining their strengths, weaknesses, capabilities, objectives, and strategies. George Salk stated, “If you’re not faster than your competitor, you’re in a tenuous position, and if you’re only half as fast, you’re terminal.” As indicated in Global Capsule 3, Netflix is faster than its rival firms but staying ahead requires constant monitoring of what those firms are doing and why. Go to www.owler.com for information about competitors.

Global Capsule 3

What Company Is Growing Fastest Globally?

The answer to the question posed may be Netflix, a firm that pursues global expansion with a vengeance. Netflix added 4.45 million new international subscribers in the third quarter (Q3) of 2017 alone, with Q3 revenue increasing 30 percent. Netflix is taking advantage of the opportunity associated with the population of the world approaching 7.5 billion; the United States has slightly more than 320 million people. That leaves billions of people outside the United States who may be interested in the products and services produced through domestic firms. Remaining solely domestic is an increasingly risky strategy, especially as the world population continues to grow to an estimated 8.6 billion in 2030, 9.8 billion in 2050, and 11.2 billion in 2100.

Netflix is also mitigating an external threat in that some content owners such as Walt Disney Company are planning to offer their own movie- and video-streaming services instead of working with Netflix. Apple also expects to spend more than $1 billion in 2018 to produce its own original content. To combat this threat, Netflix is spending over $8 billion on content annually, substantially more than its rivals Hulu, Amazon.com, and HBO. Netflix is focused on signing creative talent and acquiring its own production and intellectual property. For example, the company recently made it first acquisition, taking onboard the comic-book publisher Millarworld. In addition to continued global expansion, Netflix’s long-term strategy is to continue international expansion, rely less on licensing programs from content suppliers, and focus increasingly on acquiring original content.

Source: Based on Austen Hufford, “Netflix Subscriber Growth Surges,” Wall Street Journal, (October 17, 2017): B2.

Competition in virtually all industries is intense—and sometimes cutthroat. Within the smartphone and personal tech industry, for example, GoPro Inc. is struggling to maintain market share. To differentiate its offerings from the latest smartphone camera technologies offered by Apple and Samsung, GoPro developed a new product called Fusion that features a 360-degree spherical camera with a unique Over-Capture capability, enabling users to capture pictures from every angle simultaneously.

Addressing questions about competitors, such as those presented in Table 3-4, is essential in performing an external audit.  Competitive intelligence (CI) , as formally defined by the Society of Competitive Intelligence Professionals (SCIP), is a systematic and ethical process for gathering and analyzing information about the competition’s activities and general business trends to further a business’s own goals (SCIP website). Quality competitive intelligence in business, as in the military, is one of the keys to success. Major competitors’ weaknesses can represent external opportunities; major competitors’ strengths may represent key threats.

Table 3-4 Key Questions about Competitors

1. What are the strengths and weaknesses of our major competitors? 2. What products and services do we offer that are unique in the industry? 3. What are the objectives and strategies of our major competitors? 4. How will our major competitors most likely respond to current economic, SCDE, political, governmental, legal, technological, and competitive trends affecting our industry? 5. How vulnerable are our major competitors to our new strategies, products, and services? 6. How vulnerable is our firm to successful counterattack by our major competitors? 7. How does our firm compare to rivals in mastering the social-media conversation in this industry? 8. To what extent are new firms entering and old firms leaving this industry? 9. What key factors have resulted in our present competitive position in this industry? 10. How are supplier and distributor relationships changing in this industry?

Various legal and ethical ways to obtain competitive intelligence include the following:

· Reverse-engineer rival firms’ products.

· Use surveys and interviews of customers, suppliers, and distributors of rival firms.

· Analyze rival firm’s Form 10-K.

· Conduct fly-over and drive-by visits to rival firm operations.

· Search online databases and websites such as www.owler.com.

· Contact government agencies for public information about rival firms.

· Monitor relevant trade publications, magazines, and newspapers.

· Purchase social-media data about customers of all firms in the industry.

· Hire top executives from rival firms.

Information gathering from employees, managers, suppliers, distributors, customers, creditors, and consultants can make the difference between having superior or just average intelligence and overall competitiveness. All members of an organization—from the CEO to custodians—are valuable intelligence agents for the firm. Special characteristics of a successful CI program include flexibility, usefulness, timeliness, and cross-functional cooperation. CI is not corporate espionage. Unethical tactics such as bribery, wiretapping, and computer hacking should never be used to obtain information. Due to cybersecurity threats, CI must assure however that persons in a firm cannot access data and information unrelated to their job description because hackers exploit this avenue in firms.

In performing an external assessment, competitor-related factors must be stated in AQCD terms to the extent possible to be useful in strategic planning.