Economies of Scale. Economies of scale refer to declines in unit costs of a product (or operation or function that goes into producing a product) as the absolute volume per period increases.

The final generic strategy is focusing on a particular buyer group, segment of the product line, or geographic market;

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

Achieving a low overall cost position often requires a high relative market share or other advantages, such as favorable access to raw materials.

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.

One broad approach is to use superior resources and capabilities to force an outcome skewed toward the interests of the firm, overcoming and outlasting retaliation—we might call this the brute force approach.

Although the framework and questions presented here are stated in terms of competitors, the same ideas can also be turned around to provide a framework for self-analysis.

Forecasting potential competitors is not an easy task, but they can often be identified from the following groups: • firms not in the industry but who could overcome entry barriers particularly cheaply; • firms for whom there is obvious synergy from being in the industry; • firms for whom competing in the industry is an obvious extension of the cor

Achieving differentiation may sometimes preclude gaining a high market share. It often requires a perception of exclusivity, which is incompatible with high market share.