Stragegy

What is Strategy?

* Strategy is the creation of a unique and valuable position, involving a different set of activities.

Strategic position emerges from three distinct sources:

1. Serving few needs of many customers

2. Serving broad needs of few customers

3. Serving broad needs of man customers in a narrow market

* Strategy requires you to make trade-offs in competing-to choose what not to do

Gains in one area can be achieved only at the expense of another area. Require the firm to make a choose what not to do.

* Strategy involves creating “fit” among a company’s activities.

The degree to which a firm’s activities interact and reinforce each other.

* The sustainability of that position

1. Strategic Positioning

It means performing different activities from rivals, or performing similar activities in different ways

2. Operational effectiveness is not strategy

Operational effectiveness(OE) means performing similar activities better than rivals perform them.

The 5 Forces

1. The fear of new Entrants

* New entrants have advantages:

Current with technology and business practices

Scan environment and better assess competition

Diversify from more lucrative industry

Bring substantial resources

* Key barriers to entry

Economies of Scale

Switching cost/ product differentiation

Capital requirements

Incumbency advantages (e.g experience)

Access to distribution channels

Government policy

Retaliation of incumbent

2. Threat of Substitute products

* What’s the threat?

Substitutes place a ceiling on prices

Limit the potential of an industry

It can kill an industry

* Main threat

Technology and science

Functional substitutes

Substitutes improving price performance trade-off

3. Supplier Power

* Define all suppliers

Don’t forget about labor as supply

* What is the problem here

Suppliers can raise price and reduce quantity/ quality

* Characteristics of supplier power...