Competitive Strategy: Techniques for Analyzing Industries and Competitors

Moves that do not threaten competitors’ goals are a place to begin in searching for ways to improve position.

Cost Disadvantages Independent of Scale. Established firms may have cost advantages not replicable by potential entrants no matter what their size and attained economies of scale. The most critical advantages are factors such as the following: • Proprietary product technology: product know-how or design characteristics that are kept proprietary thr

Finding a situation that catches the key competitor or competitors with conflicting goals is at the heart of many company success stories.

The five competitive forces—entry, threat of substitution, bargaining power of buyers, bargaining power of suppliers, and rivalry among current competitors—reflect the fact that competition in an industry goes well beyond the established players.

The significant characteristic of costs is fixed costs relative to value added, and not fixed costs as a proportion of total costs.

The focus strategy always implies some limitations on the overall market share achievable. Focus necessarily involves a trade-off between profitability and sales volume.

Switching Costs. A barrier to entry is created by the presence of switching costs, that is, one-time costs facing the buyer of switching from one supplier’s product to another’s.

Substitute products that deserve the most attention are those that (1) are subject to trends improving their price-performance tradeoff with the industry’s product, or (2) are produced by industries earning high profits.

Differentiation yields higher margins with which to deal with supplier power, and it clearly mitigates buyer power, since buyers lack comparable alternatives and are thereby less price sensitive.