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