Interpreting the industry analysis - Strategic Management

All the points that are mentioned here are strategically important to us and have been used in formulating our own strategies.

  1. The industry is fragmented. There are numerous competitors, no one organisation has more than a 10 per cent market share (although shares are higher in specific segments), and there are numerous buyers.
  2. There are no universal patterns by which the buyers organise their management training activity. It is not possible to look at an organisation from the outside and predict whether management training is centralised, decentralised or a mix of both; or to identify the level at which management development decisions are taken, how much training is performed or what proportion is undertaken by the organisation’s own staff.
  3. Entry barriers to the industry in general are low, but few new entrants are able to grow into significant competitors, although an exception is when the new entrant is a spin-off from an existing competitor. Barriers are much higher in some segments than in others.
  4. Not only do most buyers undertake a proportion of their management training with their own resources, but a number effectively become competitors by offering their services to other organisations.
  5. In addition to the sectors shown on the map, there are numerous segments. Competitors can be grouped roughly into those who offer a ‘commodity’ product, and those who are highly differentiated and who support their activities with proprietary approaches. For example, we do not compete with most of the 600 organisations in the UK management training market, and the number of competitors in our chosen segments usually varies between one and twenty. The story would be very different if we were at the commodity end of the spectrum, and I suspect that we would be a much smaller firm.
  6. There are ‘switching’ costs, although they are not large enough to hold a dissatisfied buyer. The nature of these costs is that only differentiated competitors are likely to benefit from them.
  7. The product is perishable in that much of what is offered is time based. Yesterday’s unused consultancy time has no resale value.
  8. Interesting issues surround the way that most buyers make their buying decisions. Management development/training departments are controlled through budgets that measure the costs of training rather than the benefits. Not surprisingly actions follow what the system appears to demand, and most buyers would rather save £500 in the costs of an initiative (on which they are measured), than spend an extra £500 in order to gain an additional £10,000 of benefit from training (on which they are not measured).
  9. Many relationships between competitor and client exist at the personal level, with the advantages and disadvantages that this suggests. The key for an organisation that wishes to grow is to add a parallel relationship between the consultancy and client organisations, while not destroying personal relationships.
  10. As the range of subjects and methods within management training is so great, there is always an opportunity to innovate. The cost of concept development is a growth barrier to the independent one-person business. All this can be summed up in the statement that 600 competitors are not frightening if you can take strategic actions that result in your competing with a manageable number. The opportunities to add value are very great, and the more that this is done, the greater the distance the differentiated firm can gain over the bulk of the competitors.

The purists might query whether all these conclusions could have been read from the example of the industry map presented here. As it is abridged, some could not have been read off this map, although more can be seen from the originals that we use ourselves. However, all conclusions could have been reached through the exercise of completing the map, while the mapping process itself throws up areas where the ‘facts’ do not make sense, shows clearly where there is a lack of knowledge and often helps missing information to be arrived at by logical deduction.

All rights reserved © 2020 Wisdom IT Services India Pvt. Ltd DMCA.com Protection Status

Strategic Management Topics