1. General Environment: PEST (Political, Economic, Socio-Cultural, Technological)
2. Competitive Env: Porter’s 5 force (attractive market/good position)
**Define boundaries & players.
Threat of new entrants: Motivation to enter, capital req., switching costs, economies of scale and learning curve.
Suppliers Power: symbiotic relationship; need each other to survive. **switching costs
Power relationship a) availability b) importance of resources
supplier threat of forward integration, buyer's threat of backward integration.
Buyers Power: # of buyers to sellers, product diff, switching cost, buyer's profit margin, multiple sources, threat of integration, volume ...view middle of the document...
Assumptions: a) resource heterogeneity (all firms have diff. resources) b)
resource immobility (difficult to acquire and move)
VRIO: Valuable (relevant), Rare, Imitation (Barriers: History dependent, causal
ambiguity, social complexity, legal condition.
7. Value Chain: Activities adding to value and margin. A) relationship to other firms (comp, suppl, providers) can add value? B) how competitors are doing
Primary Actv: physical creation/sale/distrib of product to end user (in/outbound logistics, M&S, operations).
Support Actv: adds value indirectly (procurement, tech dev, HR, firm infrastructure)
Business Level Strategy: PCV Model (Price, Cost, Value)
1. Overall Cost Leadership
a. Easy to Imitate? Economies of Scale: Yes, just need capital. Learning Curve: No, takes time.
a. Five Forces – having the lowest cost of production protects you against price wars
b. Protects a firm against rivalry from competitors
c. Protects a firm against powerful buyers
d. Provides more flexibility to cope with demands from powerful suppliers for input cost increases
e. Provides substantial entry barriers from economies of scale and cost advantages
f. Puts the firm in a favourable position with respect to substitute products
g. Too much focus one one/few value chain activities
h. Common input of raw materials available to rivals
i. Strategy easily imitated
j. Lack of parity on differentiation
k. Erosion of cost advantage when pricing information being available to customers increases
2. Differentiation – can come from anywhere in value chain
a. Requirements: Brand Image, Quality, Technology, Innovation, Features, Customer Service and Dealer Network.
b. Five Forces
a. Creates higher entry barriers due to customer loyalty
b. Provides higher margins that enable the firm to deal with supplier power (Unique material req!)
c. Reduces buyer power because buyers lack suitable alternative (loyalty, switching costs)
d. Reduces supplier power due to prestige associated with supplying to highly differentiated products
e. Establishes customer loyalty and hence less threat from substitutes
f. Uniqueness not valuable
g. Too much differentiation – beyond desire of customers
h. Excessively high price premium
i. Strategy easily imitated
j. Dilution of brand identification through product-line extensions
k. Perceptions of differentiation vary between buyer/seller
* Sustaining: a) increase customer loyalty (more value) b) lower down L.C ASAP
* Both? No. C.L>manufacturing & process inno. Vs. P.D>R&D & Marketing (diff. req.)
Corporate Strategy: Diversification
* Motives: growth, reduce risks...