As you analyse companies and develop strategies you need to
Added on -2020-11-30
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As you analyse companies and develop strategies you need to answers to :1. where do we compete?2. what unique value do we bring?3. what resources and capabilities do we utilize?4. how do we sustain our value?strategy is a firm’s answer to two fundamental questions: Where should we compete, and how should we compete?The purpose of strategy is to create a competitive advantage that generates superior, sustainable financial returns. There are two requirements for doing this successfully. The first is an understanding of the business landscape: the forces that shape competition, the dynamics among players, and the drivers of industry evolution. This informs where the firm chooses to engage with itscompetition. The second is the choice of a position on this landscape. The second is the choice of a position on this landscape. The firm’s positioning shapes the choice of a business model and the underlying set of activities that sustains it.The Five Forces Framework developed by Michael Porter, an economist at Harvard Business School, remains one of the most widely used tools for industry analysis. Porter’s introduction of the framework in 1979 marked a critical evolution in the use of economic theory to inform business strategy.7 Classical economics had posited supply and demand curves in which many suppliers sold undifferentiated goods to many buyers, thus achieving an equilibrium of price and quantity for the market. In this theoretical construct, no single firm had any influence over pricing. For the purposes of strategy, the trouble with this supply-anddemand analysis was its limited application to industries in which participants could influence price. For example, some industries had very few suppliers or very few buyers, thus changing the relative balance of power. A company with a superior product could command a higher price from customers, and an enforceable patent could help it maintain that advantage. Studies conducted by economists in the 1950s suggested that structural factors suchas those helped explain why one industry was more or less profitable than another. Porter’s framework systematically evaluates those structural factors, focusing on how they influence industryprofitability. Its power lies in its incorporation of the real-world, commonsense variables, or forces, that can make a particular industry an easy or difficult environment. Interactive Illustration 1 illustrates each of the forces.use this link to access the interactive illustration: bit.ly/hbsp2pHKWuJThere are two fundamental considerations in any business model: the value proposition and the target marketPositioning on the Business Landscape: Achieving External ConsistencyNow suppose the firm surveys the business landscape and weighs a number of different strategic options: a different target market, a different business model, different positioning and a different target market, and a different business landscape.
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