background preloader

The Five Competitive Forces That Shape Strategy

The Five Competitive Forces That Shape Strategy
Editor’s Note: In 1979, Harvard Business Review published “How Competitive Forces Shape Strategy” by a young economist and associate professor, Michael E. Porter. It was his first HBR article, and it started a revolution in the strategy field. In subsequent decades, Porter has brought his signature economic rigor to the study of competitive strategy for corporations, regions, nations, and, more recently, health care and philanthropy. In essence, the job of the strategist is to understand and cope with competition. As different from one another as industries might appear on the surface, the underlying drivers of profitability are the same. The Five Forces That Shape Industry Competition If the forces are intense, as they are in such industries as airlines, textiles, and hotels, almost no company earns attractive returns on investment. Forces That Shape Competition The configuration of the five forces differs by industry.

Porter's Five Forces - Problem Solving Techniques from MindTools Assessing the Balance of Power in a Business Situation Assess the balance of power in a business situation, with James Manktelow & Amy Carlson. The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. Understanding the Tool Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. From "How Competitive Forces Shape Strategy" by Michael E. Using the Tool

Activity Map | Business Strategy What is it? An activity map is a diagnostic tool to identify your organisations competitive advantage. It connects your organisation’s value proposition to the activities of your organisation that enable you to deliver this value proposition better than any competitors. When is it useful? Drawing the activity map is not easy. However, once you have a good one, it is a very insightful strategic tool. Make incremental decisions about whether a new idea or opportunity fits the strategy. An Example? Southwest Airlines has a very robust strategy – one of the reasons it has been the most consistently profitable airline in the US. It’s activity map shows great fit – everything that it does is tailored to delivering its low cost, convenience, on-time, friendly but limited customer service. The interlinkages indicate that it is very hard for competitors to copy their strategy – a competitor would have to match them on multiple different areas at the same time. How do you do the analysis? c. Like this:

The Big Lie of Strategic Planning All executives know that strategy is important. But almost all also find it scary, because it forces them to confront a future they can only guess at. Worse, actually choosing a strategy entails making decisions that explicitly cut off possibilities and options. An executive may well fear that getting those decisions wrong will wreck his or her career. The natural reaction is to make the challenge less daunting by turning it into a problem that can be solved with tried and tested tools. That nearly always means spending weeks or even months preparing a comprehensive plan for how the company will invest in existing and new assets and capabilities in order to achieve a target—an increased share of the market, say, or a share in some new one. This is a truly terrible way to make strategy. In this worldview, managers accept that good strategy is not the product of hours of careful research and modeling that lead to an inevitable and almost perfect conclusion.

Featured case: ZARA: Staying Fast and Fresh | The Case Centre, for educators Felipe Caro, UCLA Anderson School of Management, discusses his award-winning case ZARA: Staying Fast and Fresh. Zara, the flagship brand of the Spanish retail conglomerate Inditex, is one of the leading retailers of fast-fashion, churning out frequent in-season assortment changes of knockoffs of popular runway styles and trendy fashions. The company has received a lot of attention for its centralized distribution model. In the past 10 years Inditex, and more specifically Zara, has been studied by MBA students, the world over, to understand its success in distribution and supply chain efficiency. Why Zara? Zara is definitely a success story in the apparel world - comparable to Toyota in the automobile industry - and big part of the success is due to its operations. Making contact My initial contact with Zara goes back to 2005 when I had just finished my PhD. Improving the case After completion I find that the best way to improve a case is teaching it in the classroom. Teaching objectives

Salesman Vegetable seller at a market in Porto Covo, Portugal. A sale is the act of selling a product or service in return for money or other compensation.[1] Signalling completion of the prospective stage, it is the beginning of an engagement between customer and vendor or the extension of that engagement. Sales methods[edit] A beach salesman showing necklaces to a tourist in Mexico. A sale can take place through:[2] Sales agents[edit] Agents in the sales process can represent either of two parties in the sales process; for example: Inside sales vs. The relationships between sales and marketing[edit] Marketing and sales differ greatly, but have the same goal. The field of sales process engineering views "sales" as the output of a larger system, not just as the output of one department. The sales department would aim to improve the interaction between the customer and the sales facility or mechanism (example, web site) and/or salesperson. Industrial marketing[edit] See also[edit] References[edit]

Startup Post-Mortems Offer All Sorts Of Surprising Lessons Startup "success" is a matter of luck and timing--but mostly it's a matter of persistence. Companies that fail don't usually do so by objective measures--they just become so miserable to operate that the founders decide to euthanize it. CB Insights collected 51 accounts of startup failures in multiple industries from 2007 to the present day to try to make sense of what compels people to pull the parachute in their early stage venture. After reading them all, I thought startup founder Brianne Garcia summed up the struggle well in her obituary for her company Parceld: Most of us don’t have big wads of cash and time to burn, so we have one shot and then we have to figure out how to pay the rent and feed ourselves. Yes, it helps to already be rich and lucky--but while every failed startup implodes in its own unique car crash of money, relationships, and broken dreams, a few common themes emerged. Define Founder Roles And Expectations Your Product Is Just A Checkbox Stop Reading.

Closing the Chasm Between Strategy and Execution - Doug Sundheim by Doug Sundheim | 11:00 AM August 22, 2013 Setting strategy is elegant. It’s a clean and sophisticated process of collecting and analyzing data, generating insights, and identifying smart paths forward. Then the trouble starts. The implication is obvious — strategists and executors must work together better to bridge these two worlds. When things fall apart, each points a finger at the other side. The easy solutions for this divide are the process solutions: better project management, clearer rules of engagement, and tighter operating policies. Strategy and execution is a false dichotomy, unnaturally sheared apart in order to divide labor in increasingly complex organizations. The best strategists and executors don’t see a hand-off between strategy and execution. The best strategists believe: If I can’t see and articulate how we’re actually going to make this strategy work, it probably won’t work. The best executors believe:

Do 9 out of 10 strategies really fail? I don’t think so!, in 4G Balanced Scorecard Given the Balanced Scorecard approach is now twenty years old, it is worth looking back at the assumptions, myths, and where it has come from: Also where it is now. In this article we look at a really common statistic that was popularised with Norton & Kaplan’s approach: you may have come across the “statistic” that 90% business strategies fail due to poor execution. Now, I have never believed it, though it is attributed to Fortune Magazine in the early 90′s. It is also frequently cited in Balanced Scorecard literature as Norton & Kaplan also refer to the article. So, in response to a question put on Linkedin about where it came from and whether it is still true, I want to explain what really lay behind this figure and what it really means. I should explain, I worked for Norton & Kaplan’s Strategic Balanced Scorecard consultancy, Renaissance, back between 1995 & 2000. In summary: leading to… Now, the original source for 9/10 figure was Fortune Magazine. However, note that I hope this helps..

Lean manufacturing Overview[edit] The difference between these two approaches is not the goal itself, but rather the prime approach to achieving it. The implementation of smooth flow exposes quality problems that already existed, and thus waste reduction naturally happens as a consequence. The advantage claimed for this approach is that it naturally takes a system-wide perspective, whereas a waste focus sometimes wrongly assumes this perspective. Both lean and TPS can be seen as a loosely connected set of potentially competing principles whose goal is cost reduction by the elimination of waste.[5] These principles include: Pull processing, Perfect first-time quality, Waste minimization, Continuous improvement, Flexibility, Building and maintaining a long term relationship with suppliers, Autonomation, Load leveling and Production flow and Visual control. Origins[edit] Lean aims to make the work simple enough to understand, do and manage. A brief history of waste reduction thinking[edit] 20th century[edit]

Connector The Tipping Point: How Little Things Can Make a Big Difference is the debut book by Malcolm Gladwell, first published by Little Brown in 2000. The three rules[edit] Malcolm Gladwell describes the "three rules of epidemics" (or the three "agents of change") in the tipping points of epidemics. The Law of the Few[edit] "The Law of the Few", or, as Malcolm Gladwell states, "The success of any kind of social epidemic is heavily dependent on the involvement of people with a particular and rare set of social gifts".[3] According to Malcolm Gladwell, economists call this the "80/20 Principle, which is the idea that in any situation roughly 80 percent of the 'work' will be done by 20 percent of the participants".[4] (see Pareto Principle) These people are described in the following ways: Connectors are the people in a community who know large numbers of people and who are in the habit of making introductions. Salesmen are "persuaders", charismatic people with powerful negotiation skills.