Strategic Management Process: Competitive Analysis & Value

Posted on Nov 17, 2025 in Business Administration and Management (BAM)

1. Introduction to Strategic Analysis

Strategic analysis involves assessing the company’s competitive capacity and meeting management requirements. This includes analyzing potential environmental changes, resources, and capabilities.

2. Environmental Analysis

Environmental analysis evaluates the impact of the external environment on the company’s mission and overall results.

2.1 Analysis of the Global Environment

This involves assessing the competitive business environment and the specific factors that influence it. The PEST analysis (Political, Economic, Sociocultural, Technological) is typically used for this purpose.

2.2 Competitive Environment Analysis

The company must systematically identify competitors and the factors that directly influence its competitive capacity. These forces determine the level of competition within a specific sector.

Potential Entrants (Threat of New Entry)

This involves studying the reasons why entities not currently in the sector might gain access. The threat of new entry is determined by:

  • The rate of growth of the sector.
  • The rate of return on the sector.
  • The barriers to access (entry barriers).

Buyer Bargaining Power

Buyer power is significant because it creates pressure to reduce prices, improve quality, and add services. Buyer power increases when:

  • The purchaser base is concentrated.
  • Buyers purchase a large volume of total sales.
  • Switching costs are low.
  • The product or service represents a significant portion of the buyer’s total cost.
  • Buyers pose a credible threat of backward integration.
  • The buyer is not dependent on the seller.
  • Buyer information is readily available.

Supplier Bargaining Power

Supplier power increases when:

  • Suppliers are highly concentrated.
  • The purchased input represents a small part of the buyer’s total sales turnover.
  • Switching costs are very large (high).
  • Few substitute products or services exist.
  • Suppliers pose a credible threat of forward integration.
  • The supplier’s product is critical to the buyer’s business value.
  • Supplier information is readily available.

Threat of Substitute Products/Services

This refers to products or services offered by other industries that satisfy the same customer needs.

Intensity of Rivalry Among Existing Competitors

The level of competition in a sector is higher when:

  • There is a large number of equally sized competitors.
  • Fixed costs are large.
  • Industry growth is slow.
  • Products or services have a high degree of standardization (lack of differentiation).
  • The market is saturated.
  • The sector is of great strategic interest to competitors.
  • Exit barriers are large.

2.3 Value System Analysis

A value system is a group of companies engaged in activities that add value to a product or service, from resource exploitation until it reaches the final buyer. This analysis is not limited to direct suppliers and clients, but takes into account the entire value chain of suppliers and customers, both upstream and downstream. Researching a particular value system helps to understand the value creation process and determine the percentage of value added by each participant.

  1. Value systems developed by other companies can be integrated through vertical integration (acquisition, operations).
  2. Changes in the value chain system can shift the level of engagement. This occurs through various commercialization methods (e.g., own stores, franchises, telephone sales, or the Internet).
  3. Exiting certain parts of the value chain can weaken the company’s strategic position in those channels.