Threat of substitute products
Bargaining power of customers
Industry Rivalry Industry growth Fixed cost / value added Intermittent overcapacity Product differences Brand identity Switching costs Concentration & balance Information complexity Diversity Corporate stakes Exit barriers
Strategic Advantage
Broad Strategic Target
Narrow
Broad Cost
Focus Cost
Broad Differentiation
Focus Differentiation
Low Cost
Differentiation
Sources: Porter's Writings
The Value Chain Successive stages of value-added
-3-
Structure versus Behavior
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WHY STRUCTURAL SEGMENTS MATTER
The Premises of Traditional Competitive Theory
-4-
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DIFFERENCES BETWEEN BCG'S AND PORTER'S CONCEPTS OF STRATEGY
BCG: The ‘Missionary’
Prescriptive
Refutable
Specific
Challenging
Generalizing from the isolated 'experiment'
SEGMENT POSITIONING
Experience Curve
.. .. . ..
Buyer Power Bargaining leverage Buyer concentration Buyer volume Buyer switching costs Buyer information Ability to backward integrate Substitute products Pull-through Price sensitivity
Proprietary learning curve Access to inputs Product design Government policy Expected retaliation
Supplier Power Input differentiation Seller switching costs Presence of substitutes Supplier concentration Importance of volume Cost relative to total purchases Threat of forward integration
Structural segments can be identified objectively They can be measured They are stable They differentiate among competitors Differences in structural segments explain differences in profits The value of dominating structural segments can be specified The method for dominating structural segments can be specified
Profit
. .
. . .
Market Share
The Corporate Portfolio
CasChagsehnuersaintigng
Market Growth
Market Growth
RelRaetilvaetivMe aMrakrkeet tSShhaarree
PORTER'S CENTRAL IDEAS
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Entry Barriers Economies of scale Proprietary product differences Brand identity Switching costs Capital requirements Access to distribution Absolute cost differences:
Bargaining power of suppliers
Substitution Threat Relative price/ performance of substitutes Switching costs
Threat of new entrants
The industry Jockeying for position among current competitors
THE CONCEPT OF STRATEGY
HENDERSON'S CENTRAL IDEAS
The Experience Curve
Real Unit Cost
. ..
. ..
. .
(85% slope)
..
Cumulative Experience
The Value of Market Share
Porter: The ‘Schoolman’
Descriptive
Tautological
General
Resonating
Synthesizing from multiple iets
C os t
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The Structural Paradigm of Strategy Content