Competitive Strategy: Techniques for Analyzing Industries and Competitors

1. How likely is retaliation? 2. How soon will retaliation come? 3. How effective will retaliation potentially be? 4. How tough will retaliation be, where toughness refers to the willingness of the competitor to retaliate strongly even at its own expense? 5. Can retaliation be influenced?

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

moves?” “What is the meaning of that competitor’s strategic move and how seriously should we take it?” and “What areas should we avoid because the competitor’s response will be emotional or desperate?”

Finding strategic moves that will benefit from a lag in retaliation, or making moves so as to maximize the lag, are key principles of competitive interaction. However, seeking to delay retaliation cannot be made a principle of strategy without qualification. A slow but tough retaliation may leave the initiating firm worse off than a quick but less

Even though the focus strategy does not achieve low cost or differentiation from the perspective of the market as a whole, it does achieve one or both of these positions vis-à-vis its narrow market target.

The goal of competitive strategy for a business unit in an industry is to find a position in the industry where the company can best defend itself against these competitive forces or can influence them in its favor.

However, at the broadest level we can identify three internally consistent generic strategies (which can be used singly or in combination) for creating such a defendable position in the long run and outperforming competitors in an industry.

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.

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.