Business Landscaping for Strategic Advantage: Evidence from a Multi-Sector Study

AbstractThis paper sets out to make a significant contribution to research both by introducing a quantitative approach to landscaping the intensity of industry competition, and then demonstrating its applicability using cross-industry data. The underlying framework is Porter's Five Forces Model, which has wide acceptance in landscaping competitive intensity because of its simplicity, adaptability and flexibility, but is frequently hard to operationalise because it does not specify procedures for quantifying competitive factors. This paper presents a multivariate approach (i.e., the ICM framework) that enables the operationalisation of Porter's model in a quantitative manner, both at a firm and industry level. This framework is then applied to a total of 19 Australian industries. The results indicate that the degree of competition varies widely among Australian industries, characterized by high intensity of rivalry, low bargaining power of buyers, minimal bargaining power of suppliers, high threat of new entrants and wide-ranging threat of substitutes.KeywordsAustralian Industry CompetitivenessPorter's 5-Forces ModelCross Industry studyBusiness Landscaping(ProQuest: . denotes formulae omitted.)IntroductionThe origins of management accounting can be traced to Commerce along the 'Silk Road', where traders calculated the cost of the venture and the profit they could make by undertaking such trade.Because competition is the "heart of our economic system" (Schoeffler et al., 1974), strategic marketing requires constant monitoring of the competitive landscape. Many authors have written on its dynamic, comparative, multi-dimensional and complex nature (Clark, 1961; Economic Planning Advisory Council, 1991; Day and Reibstein, 1997; Hooley et ah, 1998). Hunt and Morgan (1995) distinguished marketing orientation from the marketing concept because it includes a focus on competition, not customers alone. It has been shown that in the area of competition, there has been a strong interrelationship and a migration of ideas between strategic management and marketing (Brownlie, 1989; Brownlie, and Moutinho, 1989). A number of different approaches are available to map the competitive landscapes. The primary purpose for such analysis is to formulate a strategy that enables a company to take a relatively higher position on the landscape in terms of long-term economic profitability (Ghemawat et ah, 1999). Among the different approaches, the competition- based framework postulated by Michael Porter (1980; 1985) is a widely accepted model.Many companies as well as business schools use it (Ghemawat et ah, 1999). A survey by the consulting firm Bain suggests a very high (25 per cent) usage rate within a decade of its conceptual introduction (Rigby, 1994). Because of its relative ease of application, the Porter model has been extensively used to map single industries (Boyle et al.,, 1993; Munk and Shane, 1994; Ratnatunga, 1995). Evidence from cross-industry mapping, however, is limited. What cross-industry evidence exists come from case studies of different industry sectors. We lack a direct application of the Porterian model in a quantitative manner across a number of industries at the same time, that is, in a multivariate manner at both the firm and industry level simultaneously.Cross-industry evidence can increase our understanding of the competitive factors in a more systematic way. It can address some of the criticisms aimed at the Porter model, including criticisms that few of the signals command strong empirical support ((Schmalensee, 1985, 1989) or that the model adds extra links and dimensions - of rivals, substitutes and new entrants - that exceed scientific evidence (Ghemawat et ah, 1999). A quantitative approach to competitor analysis will provide significant, if not complete, mapping of a strategic landscape.The organization of the paper is as follows. …