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Analyze Trade-Offs
Exercise Judgment.
The Zone of Strategic Decisions
Relative Strategic
Game Theory
Management
Nature of
Performance
Cognitive Psychology Motivational Research
Absolute & &
Behavioral Economics Positive Thinking
Tradeoffs
Goals
Nested choices
Relative performance
Assumptions
Analysis and Judgment
The SCP Model
Focus of Structural
Analysis (Strategic
Management)
Forces that Impinge on Firm Profitability
Vertical
(Value Chain)
Power
Horizontal Horizontal
Competition Competition
Vertical
(Value Chain)
Power
Porter’s Five Forces that shape Competitive Strategy
Power of
Suppliers
Rivalry Among
Existing Firms
Threat of Threat of
Entry Substitutes
Power of
Buyers
EXIT BARRIERS
LOW HIGH
Industry Complementors
Growth Rate Power of
Suppliers
Rivalry Among
Existing Firms
Threat of Threat if
Entry Substitutes
Power of
Buyers
Technology &
Innovation Government
Thereby…..
Differentiation
Competitive Advantage: Moving from Manifestations to Sources
Competitive
Advantage Cost Leadership
Differentiation
A firm has competitive
advantage over its (industry)
The objective of Business
rivals if it has driven a wider
(Competitive) Strategy is to
wedge (relative to those
create and sustain competitive
rivals) between the
advantage
willingness to pay it
generates among buyers and
the costs it incurs
Moving from Industry Analysis to Business Strategy
Broad
Cost Differentiation
Leadership
Competitive
Scope
Focus
Narrow
Cost Competitive Advantage Differentiation
firm infrastructure
technological development
support
activities procurement
service
operations
marketing
outbound
& sales
logistics
inbound
logistics
primary activities