Strategy by Michael porter
Info: The basics of strategic competition
1. Understand competitive behavior
2. Understand how a strategy will rebalance competitive equilibrium
3. Understand commitment of resources even if deferred benefits
4. The ability to predict risk and return enough to make a commitment
5. The willingness to act
Barriers to entry
1. Scales to production, research, and marketing are barriers
2. To create barriers companies combine economies of scale with brand
3. Capital requirements limit entry into many markets
4. Entrenched companies may have cost advantage not available to potential reviles
5. A new product must displace existing product by cost reduction, promotions, intense selling efforts, or new distribution channels
6. Regulation can limit entry into a business
Suppliers can exert bargaining power by reducing profitability by raising prices or reducing the quality of their products
A supplier is strong if it does not have to contend with other products in the industry
Buyers find alternate suppliers and play one against another to reduce price or improve quality
Highly profitable buyers are less price sensitive . The buyer is interested in quality
Consumers are more sensitive to price purchasing an undifferentiated product where quality is not an issue
A company improves its strategic position by finding buyers and suppliers that can not a adversely affect it.
Strategy can be thought of as a defense against competition
Know how must be kept a secret to yield an advantage
Access advantages are vulnerable to shifts in availability or prices and sensitive to consumer preferences
Sustainable advantage is greatest when based on several kinds of advantages.
Industries that grow slowly offer more room to sustain advantages
Manufacturers are rebuilding their excellence in production
Stages of manufacturing effectiveness
Stage 1 Detailed management control systems are means to monitor performance
Stage 1 struggles to provide adequate production, help suppliers with problems, and keep equipment up to date. Stage 1 relies on consultants for advice and knowledge. Stage 1 represents a build and assemble mentality.
Stage 2 Capital investment is the means to catch up with competition. Stage 2 avoids introduction of major discontinuous changes in product or process. Stage 2 follows industry practices. Stage 2 believes production rates due to new equipment as the measure of efficiency. Stage 2 have research and development labs they turn to in addition to consultants and suppliers. Stage 2 is increased in capacity gains.
Stage 3 Long term developments trends are developed systematically . Stage 2 is looking out for long term developments and trends that may affect the companies ability to meet needs. Companies arrive at stage 3 through the natural consequences of success in developing business strategy based on formal planning. Stage 3 view technology enhancement as the consequence of changes in business strategy
Stage 4 Long term programs are put into place to acquire capabilities in advance of needs
Stage 4 anticipates new manufacturing practices and technologies. Stage 4 develop long term business plans where manufacturing capabilities play an important role. Manufacturing is a strategic resource.
The inertia of most large companies favors, a gradual, systematic, and cumulative movement through stages
Teamwork and problem solving is better than command and control
Moving to stage 4 involves changing how the organization thinks about manufacturing
Tighter intergration of product design and capabilities leads to flexibility
Mastery of activities at one stage provide the underpinnings for a successful transition to the next stage
Posted:11/10/2012