Page 105 -

CHAPTER 3 • THE EXTERNAL ASSESSMENT 71

Competitive Forces
The top U.S. competitors in four different industries are identified in Table 3-8. An impor-
tant part of an external audit is identifying rival firms and determining their strengths, weak-
nesses, capabilities, opportunities, threats, objectives, and strategies.
Collecting and evaluating information on competitors is essential for successful strat-
egy formulation. Identifying major competitors is not always easy because many firms
have divisions that compete in different industries. Many multidivisional firms do not pro-
vide sales and profit information on a divisional basis for competitive reasons. Also,
privately held firms do not publish any financial or marketing information. Addressing
questions about competitors such as those presented in Table 3-9 is important in perform-
ing an external audit.
Competition in virtually all industries can be described as intense—and sometimes as
cutthroat. For example, Walgreens and CVS pharmacies are located generally across the
street from each other and battle each other every day on price and customer service. Most
automobile dealerships also are located close to each other. Dollar General, based in
Goodlettsville, Tennessee, and Family Dollar, based in Matthews, North Carolina, com-
pete intensely on price to attract customers. Best Buy dropped prices wherever possible to
finally put Circuit City totally out of business.
Seven characteristics describe the most competitive companies:
1. Market share matters; the 90th share point isn’t as important as the 91st, and
nothing is more dangerous than falling to 89.
2. Understand and remember precisely what business you are in.

TABLE 3-8 The Top U.S. Competitors in Four Different Industries

2008 Sales % Change 2008 Profits % Change
(in millions) from 2007 (in millions) from 2007
Beverages
Coca-Cola $31,944 +11 $5,807 -3
Pepsi Bottling 13,796 +2 162 -70
Coca-Cola Enterprises 21,807 +4 (4,394) -718
Molson Coors Brewing 4774 -23 388 -22
Pharmaceuticals
Johnson & Johnson 63,747 +4 12,949 22
Pfizer 48,296 0 8,104 0
Merck 23,850 -1 7,808 138
Abbott Laboratories 29,528 +14 4,881 35
Wyeth 22,834 +2 4,418 -4
Construction and Farm Equipment
Caterpillar 51,324 +14 3,557 0
Deere 28,438 +18 2,053 +13
Terek 9,890 +8 72 -88
Agco 8,425 +23 400 +62
Cummins 14,342 +10 755 +2
Computers
Hewlett-Packard 118,364 +13 8,329 +15
Sun Microsystems 13,880 0 403 -15
Dell 61,101 0 2,478 -16
Xerox 17,608 +2 230 -80
Apple 32,479 +35 4,834 +38
Source: Based on Fortune, April 30, 2008, F50–F73.