BM22 Strategic Management · Module 2
Industry and competitive strategy
Erasmus RSM
Industry and rivalry
Industry = firms with in essence the same product/service; all competitors, not all rivals. Never write "competition" for rivalry. The analysis is about the industry, not about one firm.
Five Forces
| Force | Strong with |
|---|---|
| Threat of entry | low barriers: no scale/experience, low switching costs, little capital needed, open access to distribution |
| Threat of substitutes | from outside the industry; good price/performance; low switching costs |
| Buyer power | concentrated, low switching costs, backward integration, price sensitive |
| Supplier power | few suppliers, high switching costs, differentiated, forward integration |
| Rivalry | equal players, little differentiation, low growth, high fixed costs, high exit barriers |
Forces are mutually independent. High entry barriers are good for the players in the industry.
Six steps
1 Define the industry (vertical, product, geography) - 2 players - 3 factors and strength - 4 attractiveness - 5 changes - 6 position (exploit, neutralise, influence). Steps 5 and 6 weigh most.
Industry life cycle
Development - growth (rivalry low) - shake-out - maturity (barriers higher, buyer power higher, experience curve) - decline (high exit barriers: extreme rivalry).
Strategic groups and segments
Strategic group = similar strategy (scope, resource commitment); mobility barriers between groups. Segment = customers with the same needs.
Generic strategies (Porter)
- Cost leadership: systematically lowest costs with sufficient quality. Four drivers: input costs, economies of scale, experience curve, product/process design. Not necessarily lowest price, not a price fighter.
- Differentiation: price premium through product features, customer relationship, complements.
- Focus: cost focus or differentiation focus; distinct needs, distinct value chains, viable economics.
- Protects against the forces relative to the average player.
Ecosystems
Complementors, coopetition, ecosystem leader, network effects, non-generic unique complementarities.
Business model
Value creation, value configuration, value capture (Teece); not a synonym for strategy. Canvas, 9 blocks: customer segments, value proposition, channels, customer relationships, revenue streams, key resources, key activities, key partners, cost structure. Elements logically consistent. Patterns: razor and blade, freemium, peer-to-peer, multi-sided platform.
Exam tip
Per question: term - definition - fact from the case - conclusion (stronger/weaker, advice, judgement).
Key terms (never translate)
industrycompetitorsrivalryFive Forcesindustry analysisthreat of entrybarriers to entrythreat of substitutesprice/performance ratiobuyer powersupplier powerswitching costsbackward integrationforward integrationexit barrierseconomies of scaleexperience curveindustry life cycleshake-outmaturitystrategic groupmobility barriersmarket segmentgeneric strategiescost leadershipcost leaderinput costsproduct/process designdifferentiationprice premiumfocusbusiness ecosystemcomplementorscoopetitionecosystem leadernetwork effectsbusiness modelBusiness Model Canvasrazor and bladefreemiummulti-sided platform