The point of industry analysis is not to declare the industry attractive or unattractive but to understand the underpinnings of competition and the root causes of profitability. P.29.
Competition on dimensions other than price – on product features, support services, delivery time, or brand image, for instance – is less likely to erode profitability because it improves customer value and can support higher prices. p.32.
If a firm can spot an industry in which the fragmented structure does not reflect the underlying economics of competition, this can provide a most significant strategic opportunity. A company can enter such an industry cheaply because of its initial structure. Since there are no underlying economic causes of fragmentation, none of the investment costs or risks of innovations to change underlying economic structure need be borne.
The strongest competitive force or forces determine the profitability of an industry and become the most important to strategy formulation. The most salient force, however, is not always obvious. P. 26.
As important as the dimensions of rivalry is whether rivals compete on the same dimensions. When all or many competitors aim to meet the same needs or compete on the same attributes, the result is zero-sum competition. P. 33.
General management is more than the stewardship of individual functions. Its core is strategy: defining and communicating the company’s unique position, making trade-offs, and forging fit among activities.
Indeed, one of the most important functions of an explicit, communicated strategy is to guide employees in making choices that arise because of trade-offs in their individual activities and in day-to-day decisions. Improving.
Substitutes are always present, but they are easy to overlook because they may appear to be very different from the industry’s product p.31.
This is analogous to the situation in which the robber says, “stick ’em up, I want your money,” and the deranged-looking victim says “If you take it, I will explode this bomb and kill us both!
Approaches to differentiating can take many forms: design or brand image, technology, features, customer service, dealer network, or other dimensions.
Thus a low-cost position protects the firm against all five competitive forces because bargaining can only continue to erode profits until those of the next most efficient competitor are eliminated, and because the less efficient competitors will suffer first in the face of competitive pressures.
A production line with high levels of model variety is more valuable when combined with an inventory and order processing system that minimizes the need for stocking finished goods, a sales process equipped to explain and encourage customization, and an advertising theme that stresses the benefits of product variations that meet a customer’s special needs.
The more competitors perceive the prospect of dogged, bitter retaliation to the point of severely hurting everyone’s profits, the less likely they are of initiating the chain of events in the first place. This is analogous to the situation in which the robber says, “stick ’em up, I want your money,” and the deranged-looking victim says “If you take it, I will explode this bomb and kill us both!
Cash Cows: Businesses with high relative share in low-growth markets will produce healthy cash flow, which can be used to fund other, developing businesses.
Understanding industry structure is also essential to effective strategic positioning P. 26.
Managers must clearly distinguish operational effectiveness from strategy.
In essence, the job of the strategist is to understand and cope with competition. P. 25.
Strategy is the creation of a unique and valuable position, involving a different set of activities.
Strategy is making trade-offs in competing. The essence of strategy is choosing what not to do.
A strategy is an internally consistent configuration of activities that distinguishes a firm from its rivals.