Competitive Strategy: Techniques for Analyzing Industries and Competitors

The focus strategy always implies some limitations on the overall market share achievable. Focus necessarily involves a trade-off between profitability and sales volume.

Differentiation provides insulation against competitive rivalry because of brand loyalty by customers and resulting lower sensitivity to price.

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

Access to Distribution Channels. A barrier to entry can be created by the new entrant’s need to secure distribution for its product.

The state of competition in an industry depends on five basic competitive forces, which are shown in Figure 1-1. The collective strength of these forces determines the ultimate profit potential in the industry, where profit potential is measured in terms of long run return on invested capital.

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

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.

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?”

Product Differentiation. Product differentiation means that established firms have brand identification and customer loyalties, which stem from past advertising, customer service, product differences, or simply being first into the industry. Differentiation creates a barrier to entry by forcing entrants to spend heavily to overcome existing custome

The essence of formulating competitive strategy is relating a company to its environment.