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The Competitive Forces Model...
a tool to formulate strategy by examining the environment in which your
forces create the
- In order to be competitive in an industry, you must
- LOWER one of these forces
- 1. Buyer power – high when consumer has many choices
- 2. Supplier power – is high when a company has few
- choices from whom to buy.
- Industries – Oil,
- Diamonds, M$FT
- 3. Substitute force – high when there are many
- 4. New competition force – high when it is relatively
- easy for new entrant to set up business
- companies don’t
- want others to eat into their market share
- *the internet
- helped this force to stay high – easy to start a website
- restaurant is
- high, real estate brokerage is high
- 5. Current competition force is high when there are many
- competitors going after the same customers
- many companies in
- the industry offering undifferentiated products or services
Countering Competitive Forces
- four strategies:
- Low-cost leadership – ex. Walmart,Southwest
- Product differentiation – ex. Apple created a game changer in iPod and iPhone
- eBay bought Paypal
- Focus on market niche – look for a segment to capture instead of being all things to all people
- Linkage (strengthen customer loyalty, build in switching
- costs, strengthen supplier intimacy)
- creating tighter
- alliance with buyers or suppliers
- making it tough
- to switch to a competitor
The Value Chain Method
views the organization as a chain - or series - of activities, each of which adds
value to the product or service for the customer.
chain processes fall into two categories:
Identify Specific Activities That Require IT Support
- the value chain method, business activities requiring IT support are
- identified, and the result is a list of IT systems to develop.
- An important part of
- this method is identifying key linkages in interdependent activities.
How do you create a sustainable
advantage with the value chain method?
- If you can create something among the
- linkages, your rival will have a harder time to perceive these linkages
nThree Ways of Enhancing
- nStrategic Alliances: formpartnerships with other organizations
- nTQM: engage in best practices and benchmark performance
- nAchieve operational excellence: find ways to become more efficient
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