Competitive Strategy

Summaries

Porter’s 5 forces:

1)      entry barrier

2)      substitutes

3)      supplier’s bargaining power

4)      buyers’ bargaining power

5)      rivalry

These 5 forces determine the industry attractiveness and profitability, and ROI (cost, price, cost of capital)

The long term attractiveness of an industry is not controllable by a firm

Who will get the “value added component”? Will it be diluted away?

Competitive advantage

cost leadership

–        has to be the only one to access the lowest cost

–        differentiation parity (customers perceive it to be the same as others even lower cost)

differentiation

-          charging higher for the differentiated products

-          can be several differentiators along different product

-          cost parity (has the same overall cost structures)

cost focus:

-          cost leadership in a subsector

differentiation focus

-          differentiation in a segment of an industry

Stuck-in-the-middle firms: failed to achieved both the cost leadership and differentiation

Cost leaders and differentiators can easily lose to focusers.

Generic strategy is the roadmap to achieve competitive advantage and strategy planning