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Competitive Strategy

MBA-Day

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Company

S&W

Industry

O&T

Personal

Values of

C.E.O.

Broader

Societal

Expectations

Competitive

strategy

Internal

factors

External

factors

Context in which Competitive Strategy is Formulated

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P

rocess for formulating C.S. What is the business doing now?

-identification, implied assumptions

What is happening in the environment?

-industry analysis, competitor analysis,societal analysis, strengths & weaknesses

What should the business be doing?-tests of assumptions and strategy,strategic

alternatives, strategic choice

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The Structural Analysis of

Industries: The 5-forces model

Michael E. Porter

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Industry Competitors

Rivalry among

Existing firms

Potential entrants

substitutes

suppliersbuyers

Suppliers

Potential Entrants

Substitutes

Buyers

Threat of

new entrants

Bargaining

Power of

suppliers

Threat of substitute

products &services

Bargaining power

of buyers

The Structural Anal sis of Industries

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Threat of New EntryBarriers to

entry Economies of scale

Product differentiation

Capital requirements

Switching costs

Access to distribution channels Cost disadvantages independent of scale

Government policy

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Barriers to entry Expected retaliation

The entry deterring price

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Intensity of Rivalry among

existing competitors Numerous or equally balanced

competitors

Slow industry growth

High fixed or storage costs

Lack of differentiation or switching costs

Capacity augmented in large increments

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Intensity of Rivalry. High strategic stakes

High exit barriers

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P

ressure from substitute products Advantageous price-performance tradeoff

with industrys product

Substitutes industries earning high profits

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BargainingP

ower of Buyers It is concentrated or purchases large

volumes relative to seller sales

The products it purchases from theindustry represent a significant fraction ofthe buyers costs or purchases

The product it purchases from the industryare standard or undifferentiated

It faces few switching costs

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BargainingP

ower of buyers. It earns low profits

Buyers pose a credible threat of backward

integration

The industrys product is unimportant to

the quality of the buyers product or

services

The buyer has full information

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Bargaining Power of Suppliers

Dominated by few cos. and is more conc.

than the industry it sells to

It is not obliged to contend with substitutes

The industry is not an imp. customer of the

supplier group

The suppliers product is an imp. input to

the buyers business

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Bargaining power of suppliers-----

The suppliers products are differentiated

or it has built up switching costs

The supplier group poses a credible threat

of forward integration