 Products, Customers, Geography, and Stages  Industry vs. Market  Does industry matter?

1. Threat of New Entrants 2. Bargaining Power of Customers 3. Bargaining Power of Suppliers 4. Threat of Substitution 5. Jockeying Among Current Rivals

1. Attractiveness Test 2. Cost of Entry Test 3. Better-off Test

 The relative profitability of rival firms depends on the nature of their competitive position  Lowest cost and Differentiation  Competitive Scope

 Market share is an important determination of long-term profitability  Profit Impact of Market Strategy

Functional Area IntroductionGrowthMaturityDecline Marketing Resources/skill s to create awareness Est. brand recognition, find niche Promoting products to new markets and holding existing ones Strong company image, and customer loyalty Production, Operations Limit # of designs, develop standards Improve product quality; centralize production Improve product and reduce cost, subcontractin g Simplified inventory control; cost advantage in production, location Finance Resources to support high net cash flow and use leverage effectively Ability to finance expansion, and support product improvements Effective cost control systems Ability to reuse or liquidate equipment; control system accuracy

Tactical means to do things better:  Short term technological advantages.  Not equipped for environment change. Strategy means to do things differently:  Long term vision w/ flexibility and learning.  Preservation of meaningful differences.

 Physical Assets › Manufacturing facilities or service locations.  Financial Strength › Cash flow  Human Resources › Strong leadership and continuous employee development.  Organizational Assets › Knowledge, intellectual capital and brand equity.

 Knowledge and Intellectual Capital › Explicit › Implicit  Patents  Brands- develop and maintain loyal customers  Core Competencies & Hamel and Prahalad’s test › Do they allow your company to enter several markets? › Do they differentiate your core products and services? › Are they hard to imitate?

 Low Cost Production - industry structure  Differentiation – customer tastes -Are not mutually exclusive -existing together results in sustained profitability ∘ TQM – encompasses both improved quality and lower costs Caterpillar, Inc. – single strategy harm

1. Organic or Internal Growth 2. Growth Through Acquisition 3. Growth Through Alliance-Based Incentives Also known as the “Build, Buy, or Bond” Paradigm

 Concentrated Growth › Directing its resources to the profitable growth of a single product category, in a well-defined market, and possibly with a dominant technology  Horizontal Integration › Increasing the range of products and services offered to current markets or expanding the firm’s presence into a wider number of geographic locations. Vertical Strategy of increasing a corporation’s vertical participation in an industry’s value chain.  Diversification › A Strategy of entering product markets different from those in which a company is currently engaged