aches aculuss) ‘CORE CONCEPT un 2 Whatare tne ivi forces nh indus. and what Impect wl hey have on compoteve mens ard Iraury pro? ‘THIS CHAPTER WILL HELP YOU UNDERSTAND: POSTE eb oss ns Deca aca patra ey ea nap) oho 1. Howto recognize the factors ina companys boas Samonents itn poston and no vt? Imereti ay have eae 4. wnat stele mves ae ls ey toma nex? 2, Howto use analy tols 0 dagrose the > Economie Se et Compettveconters na company’s nay > Socal 6 ete rouse otc cond 1 good ttt? 8, Howto map the market postions of ey groups of > Teco indy vas peel 4, How to use multiple ramewors to determine > aga whether an indus outlook presents a company with suticientlyatvactive opportunites for grown Sand prota + The ve compote forces + Competion rom hal sors a FIGURE G1 From Thinking Stratogically about ‘cope ton peneme noapic PENNER *PESTELArahe + Supe arsig power eae Sana tetessanone ‘once meaty pone {Economie cncons (cal wore) * Teemoopelacors 4 Erurcmenl oem (he natal ruta) 4 Lata epateryconatons GN ed eee nue eed re ter eee ieee CORE CONCEPT «urn “The macro-environment encompasses the broad environmental context in which a company’s Industry is situated that includes strategicaly felevant components over which the fim has no direct control - . " (ieee! «+ Entry teat considerations + Expected elnive reactors of neunbert firs + Svenghofsers to ewy + pocveness of paral mares ron ‘demand are pret pore + Copies and rescues lotr eats + Ent oxsing cant ro mat segraris Sahih ey have seat presence. eer eaters RIVALRY AMONG COMPETING SELLER: + Due demande rning sty odoin ¢ stacey ter sith rac, + Subamnteprodusconlderatons PCa aa Nasa Renae rd stoops? + auey resis ar ovo erect Hae eres Ravi + omnes need con ergh eerap cos, «Incumbent cost advantages related learning = = «Tuner congas asa athey a0 and experince, proprietary patents and Coen ee sae eager ae encore reg ere eerie Cover fixed © Indalrs of subtle compete stength «The gery otcorpter i noaang cost, ‘neon ee of gown ae esses 1 hho bras apt em enn ety, oo 1 sista pain aig nen et esc + Stong "network effects” in customer demand > hemes pect of mat dca 4 High capital requirements eee eed + Buiding a network a ditibutors or dealers and Deel securing adequate space on retaers' shelves Lee «+ Resticve regulatory and ade policies ELARUScoLnunca eu eten) Whether an industry’ entry barter ought tobe Considered high a low dopends on the resourcos ‘hd capabilies possessed by the pool f potential cntrant, High entry barors and weak onty threats today ‘rot alvay ranslata nto high enty barre and ‘weak ony Bets tomorow.+ Supplier bargaining power depends on: 1 Sant era od ea’ pres ers pose terres nota etanet 1 Seeardnumaers! gpa tate endy members + Post aoa ingan so pe’ nay Get eee eT Perit ts en teeter deo ag Magee kere Tel rode Naneaie nad ‘Is the state of competion inthe industry stronger than normal? ‘+ Can industry fms expect to eam decent profits ‘iven prevaling competitive forces? ‘+ Are some of the competitive forces sufficiently powerful to undermine industry profitability? + Even one powetlfce may be enought make the Inds uetrachve in terms of promt pon cael CORE CONCEPT fam «+ Buyer bargarng power considerations 1 Senghl aye ema rat pote 1 epee twhch nun grr tector 1 rete magn nts eta ay “The strongest ofthe fve forces determines the ‘extent ofthe downward pressure on an industiy's profitability, Having more than one strong force means that an a industy has muliple compettive challenges with 1 bayer decor soy puctnee which to cope. + Ses en ion te tpn CORE CONE en Fer eer eens Driving forces are the major underiying causes of ‘change in industry and competitive conditions, CORE CONSETT Maemo on aaa) Caer eusaeunes + insemination raga ne net apis rd apes + ite bye damages * Tectnsagenl harge ans mancteng ces nciton + coangng soot conan ates, en Sisco geen) “The most important part of driving forces analysis fs to determine whether the collective impact of the driving forces will ncrease or decrease market {demand, make competition more o less intense, ‘and lead to higher or lower industry profitability. CComplomentors are the producers of complomentary products, which ar products that fenhance the value ofthe foal fr procs when they ae used together. + Diving foroes analysis has thee stops + Hort what ev ces are eile sig ae be nym + Detemiarg what 2etey changes ae needed 2 ‘repre forth pact of he dang focae ‘Effectively matching a firm's business stratogy te prevailing competitive conditions has two aspects + Pursuing avenues tht sil he te om as many ‘corpetivepossues 35 posse + Itating scons cloud to shit compete forces inthe is aver by aterngundering factors ig te eens Saas TNC eA an claeten) ‘A company's strategy is increasingly effective the ‘more it provides some insulation from competitive pressures, shits the competitive bate inthe ‘company’s favor, and postions fms to take advantage of atractive growth opportunites Tee ORL aah as + How the value net ifr from the five forces + Foes on he recone ot nt panepanis ‘wth a parc (ea company + Daas ho category of compottr tnt the fecal inset competors, nasty vals, the sills of subebe produc, and poe eian + teduess a now catagory of indus patipaa— riorsprodices of produ tal enhance ‘eae ote trl rs poste when hey ae sed together «+ Are the dving forces, on balance, acting to ‘cause demand forthe industy's producto Ineroase or decrease? «Is the coletive impact ofthe criving forces ‘making compettion more or less intense? ‘+ Will he combined impacts of the devin forces lead io higher or lower industry proftabaiy? Speco auc sy aa olgtteed ‘The real payot of driving forces analysis st help managers understand what stategy changes are needed to prepare forthe impacts ofthe driving forces. POU aaa ahaa ban «+ What strategy adjusiments ll be needed to deal win the impact of he diving forces? + hat avsmenis must be made meio? + nat acne cureny beng taken shuld be es brabandoned? + hat can we do row propa for adusimets wo arcopate making me fae?Sc O Les ‘Strategic group fexeMaunt + Consis of those dusty mombers wih sar ‘competve approaches and postions nthe market “+ Price and aly ane (igh mum.) + rea conan gue bash + Geopapic coverage (oa ronal rato, ob | + Enea the se anton reals + Product no oa (o,raw) 7 |_| - > cpenegen cet rtpelaraontee + Dopo ct sovce tres (ri, ts, at) | + eng ee sanepraic tae abu ¢ Dati chanes lle, tere, i > eng sess ad ee eines rato) ‘+ Dos of vera repr (none pri i) {+ Doge ol dereliction fp ater (noe, ‘Sine canst) SS CORE CONCEPT «7 GUIDELINES FOR CREATING GROUP MAPS |r amining the Comparative Market Positions of A strategie group isa duster of industry vals "Yaad op acest SIENA Ne a that nave similar Gompettve approaches and 2. Vater grants) dteerees__« Which stratogic group i loatedin the least [ies snort serene favorable market poston? Which group isin Strategie group mapping i a technique for 5 Voads maybe qurtate,cotruos dsc. ot guano meen? bese aly shat pd receded ies nome suretense recone eer nee haeney 4. Donn gence peer oe conned + Which strategic group is tkely to experience satan each rip wife be este szee” increased inragroup competion? 5: Deonngmape sng tet pele wi + Which groups ate most threatened by the tikely Stonttatcertanesinepectonrgrecicnhes ” stategc moves of members of nearby satogic econ rannys rua sroups? essere Osa ease Stratege group maps reveal which fms are close ampotors and wc ae detent compet. sea ae eee Some strategic groups are mor favorably + Constructing @ strategic group map Positioned than others because they confont + lenty We cmpeve chaacetis hat delineate Bene approaches wedi helt + Pot het ona wosarabe map wsing pais of fompetive nares + Assign fms oepina about te same map cation SRN enue agnegits tothe sane sang oa. MPETITOR FIRM (so + Draw ces tune ech statenc oun, mating he Eres proportional he sz of re gran’ share of tal induaty sles rverues ‘competitive forces or because they are favorably impacted by industry criving forces. + Current sratogy + Hows the conpetior poston in he market? RE + at ea ua compat aararoge? Indeatr af expected rh leo? + Objectives + What ats rani arormance objectives? + What rts sate objects? 4+ Nota map postions are equally atracive + How wos tperoming mesg ts cjctves? + Provaing compete presses for Pe ndash 1 ettunia pose prove promos? Stage ope vary NUM 2, industry diving forces may favor some strategic lS groups and hur oer. Maps are useul in identitying which industry rmemoers are close rivals and which are distant rivals. ‘+ Ingicators ofa rival fr’ likely SUP sclag seat strategic moves and countermoves Theil fe'scarrentstatogy PMWM acest +The al fms objectives ‘+ Resources and capabities +The al en's eapabites + Whatis he competi cent et of resources and COMPETITOR ANALYSIS eames petites? + Compete intligence shout self ands ndsty ieee * nrmaton abut vas ati ttn anaing «nich capabtes ist aking eto oc ther nes aage moves ‘© Assumptions «Signals ofthe ketnood of strategic moves: + Waldo the compet’ lp managers beleve about + Ral under pressure inprove thancia tat sag stusbon? atorrance + How wither bets affect ne compet’ behavior «+ Rais aeoting Wo nrease matt stancing CORSON Laas Inthemanet? 1 Publ statements of val ntentons 1 Profs developed by competitive intligonce us NS ncauuii eee eer eee) ‘+ Whicn competes ar eeng inthe marketplace or badly doe ncease owt sales and marketshare? Key Success factors (KSFS) + Which is a ey make major movesto enter now + Avie satay lores, product and sovice Se ause Mauch erat _goaraphic markas or ncease sales and market 8 oe eo =e Share na pacar geographic regon? compete capabies tat erase or ‘ompetve succes by any anda fms nan Studying competitors’ past behavior and + vn al can pando tins oetrraw ay Preferences provides a valuable assist in protic segnenswherethay donot havea presen? TA nut and over ie anticipating what moves tvals are likely lo make «Which iva can be aeaiea? ich va re ‘iat e barn ncumry_and ngonanecn av vers next and ovimanewvering them inthe matketplace. nancaly abe and ooking to make an acqusson? ‘of enange and compete condone hangCORE CONCEPT vrat7) Key success factors are the strategy elements, product and service attributes, ‘operational approaches, resources, and competitive capabilities that are essential to surviving and thriving in the industry. IDENTIFICATION OF KEY SUCCESS FACTORS ‘¢ On what basis do buyers of the industry's product choose between the competing brands of sellers? What product attributes and service characteristics are crucial to competitive success? ‘¢ Given the nature of competitive rivalry prevailing in the marketplace, what resources and competitive capabilities musta firm have to be competitively successful? ‘¢ What shortcomings are almost certain to put a firm at a significant competitive disadvantage? SU INU Ae le ReLelse FOR PROFITABILITY ‘¢ An industry environment is fundamentally attractive if it presents a company with good opportunity for above-average profitability ‘¢ An industry environment is fundamentally Lnattractive if a firm's profit prospects in the industry are unappealingly low. FACTORS TO INDUSTI Resa essen ‘+ How hem impact bythe state of the macto-enrcament + Whether tong compte forces are squeezing industy Protabiy wo subpar loves + Whether the prosence of complomentors andthe possibly ot cooperative actons marove he companys prospects ‘Whether incsty proftabity wi be favorably or unfavorably atc bythe prevaing eng {+ Whether the fim occupies stronger market positon han rials ‘+ How welt tens seatouy delves on nut Key success Ut Niscloa ANAC NLM (el aE) The degree to which an industry is attractive or unattractive is not the same for all industry participants and all potential entrants. INDUSTRY ATTRACTIVENESS IS NOT THE SAME FOR ALL PARTICIPANTS ‘Industry outsiders may conclude that they have the resources to easily hurdle the bariers to entering an attractive industry while other outsiders may find the ‘same industry unattractive because they do not want to challenge market leaders and have better opportunities elsewhere. ‘+ A particular industry’ attractiveness depends in large Part on whether a company has the resources and Capabilities to be competitively successful and profitable in that environment. WHAT SHOULD A CURRENT COMPETITOR DECIDE ABOUT ITS INDUSTRY? When a competitor decides an industry is attractive, it should invest aggressively to capture the opportunities it sees and to improve its long-term competitive position in the business. « When a strong competitor concludes its industry is relatively unattractive and lacking in opportunity, may elect to protect its present position, investing cautiously if at all and looking for opportunities in other industries. « Acompetitively weak company in an unattractive industry may see its best option as finding a buyer, perhaps a rival, to acquire its business.