Professional Documents
Culture Documents
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Can you summarize your company’s strategy in
35 words?
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Strategy: Finding the Sweet Spot
Competitors’ Customer’s
offerings needs
Company’s
capabilities
SWEET SPOT
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
iPhone @2007: Sweet Spot?
Competitors’ Customer’s
offerings needs
Company’s
capabilities
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Tomorrow’s Sweet Spot?
Customer’s
needs
Competitors’
offerings
Company’s
capabilities
SWEET SPOT
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Thus, what is Strategy?
(Source: Porter, 1996)
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Strategic Positioning
Industry STRUCTURE
Number of Competing Firms, Homogeneity of Products, Costs of
Entry and Exit
Firm CONDUCT
Price Taking, Volume, Product Differentiation, Tacit Collusion,
Exploiting Market Power
Firm PERFORMANCE
Efficiency, Profit, Growth
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Spectrum of Industry Structures
Perfect
Oligopoly Duopoly Monopoly
Competition
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
What is Industry?
(Source: Porter, 2008)
Higher Level of Rivalry i.e. players would High Bargaining Power of Customers
compete for higher market share Low price and Decrease in price or demand of higher
profitability Lower Industry attractiveness quality Low Profitability Lower
Industry Attractiveness
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Threat of Entry
Higher Threat of Entry OR Low Entry barriers Allow new players to enter
They will bring new capacity Race to gain market share High competition
Low profitability Lower Industry Attractiveness
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Bargaining Power of Suppliers
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Power of Customers/Buyers
High Bargaining Power of Customers Can lead to decrease in price or
demand of higher quality Low Profit Lower Industry Attractiveness
• Concentration of buyer: wholesalers v/s individual customers
• Differentiation in products/services offered by industry to its customers:
vegetables v/s pharmaceutical products
• Switching costs for customers to move to another firm in the industry: Telecom
sector with and without mobile number portability
• Proportion of customers’ purchase from the industry out of their total costs:
Motherboard v/s backpack for Dell Laptops
• Pressure on customers to cut costs: Buyer of intermediate products will transfer it
back
• Contribution of industry’s supplies to the quality of customers’
output/consumption: Intel Motherboards, Samsung semiconductors
• Impact/criticality of industry’s supplies to the overall performance of customers’
business: Intel Motherboards, Samsung semiconductors
• Customers’ threat of backward integration: Oil refinery v/s tourism industry
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Threat of Substitutes
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Rivalry among Competitors
Higher Level of Rivalry i.e. players would compete for higher market share
Lower price and profitability Lower Industry attractiveness
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Defining Industries: Are you myopic?
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Think, what industry you are in?
1996
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Think, what can be your industry?
1999
2007
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Nokia and its Glorious Past!
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Nokia and its Glorious Past!
• 1999: Nokia launches the Nokia 7110, a phone capable
of rudimentary web-based functions
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
But, where Nokia went wrong?
• 2004: Nokia reveals that although it is still the market
leader it is losing share to its rivals, with its 35%
share comparing with a target of 40% as it falls
behind with its new product range.
• 2005: Nokia sells its billionth phone – a Nokia 1100 –
in Nigeria, and global mobile phone subscriptions
pass 2 billion.
• 2007: One of the world's largest product recalls after
it admits the batteries in 46m phones could be faulty.
Meanwhile, Apple launches the iPhone!
• 2008: Nokia reports a 30% fall in third-quarter
profits. Nokia smartphone sales fall by 3.1% during
the quarter, while sales of Apple iPhones grow by
327.5%.
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Think, what has changed?
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Factor, Not Forces!
COMPLEMENTS ?
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Kodak and its Glorious Past!
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
The (Tragic) Saga of Kodak!
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Industry can evolve!
S T R AT E G I C M A N A G E M E N T . A PA L A K K H AT U A
Thank You!