{"id":343,"date":"2010-04-26T09:28:38","date_gmt":"2010-04-26T16:28:38","guid":{"rendered":"http:\/\/www.deansmailing.com\/rationalmarketing\/?p=343"},"modified":"2010-04-23T14:37:44","modified_gmt":"2010-04-23T21:37:44","slug":"competitive-forces-that-shape-strategy-4","status":"publish","type":"post","link":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/2010\/04\/competitive-forces-that-shape-strategy-4\/","title":{"rendered":"Competitive Forces That Shape Strategy"},"content":{"rendered":"<p>This is classic business strategy information. We thought you would appreciate an opportunity to think about competition and profitability in different ways.<\/p>\n<p>The <a href=\"http:\/\/cb.hbsp.harvard.edu\/cb\/web\/product_detail.seam;jsessionid=D93E9CDA269B6118AFB29C035D2AEF9F?R=R0801E-PDF-ENG&amp;conversationId=5199&amp;E=72578\" target=\"_blank\">Harvard Business Review<\/a> is selling an article by Michael E. Porter that updates a 1979 article.<\/p>\n<p>The article suggests that to sustain long-term profitability you must respond strategically to competition. Naturally you keep tabs on your established rivals. But as you scan the competitive arena, are you also looking beyond your direct competitors? Four additional competitive forces can hurt your prospective profits.<\/p>\n<ul>\n<li>Savvy customers can force      down prices by playing you and your rivals against one another.<\/li>\n<li>Powerful suppliers may      constrain your profits if they charge higher prices.<\/li>\n<li>Aspiring entrants, armed with      new capacity and hungry for market share, can ratchet up the investment      required for you to stay in the game.<\/li>\n<li>Substitute offerings can lure      customers away.<\/li>\n<\/ul>\n<p>Commercial aviation is one of the least profitable industries because all of the about forces are strong. Established <strong>rivals<\/strong> compete intensely on price. <strong>Customers<\/strong> are fickle, searching for the best deal regardless of carrier. <strong>Suppliers<\/strong>\u2014plane and engine manufacturers, along with unionized labor forces\u2014bargain away the lion\u2019s share of airlines\u2019 profits. <strong>New players<\/strong> enter the industry in a constant stream. And <strong>substitutes<\/strong> are readily available\u2014such as train or car travel.<\/p>\n<p>By analyzing these competitive forces, you can gain a picture of what\u2019s influencing profitability in your industry. You identify game-changing trends early, so you can swiftly exploit them. And you spot ways to work around constraints on profitability\u2014or even reshape the forces in your favor.<\/p>\n<p>By understanding how these competitive forces influence profitability in your industry, you can develop a strategy for enhancing your company\u2019s long-term profits. Porter suggests the following:<\/p>\n<p><strong>Position Your Company Where the Forces Are Weakest <\/strong><\/p>\n<p>Example: In the heavy-truck industry, many buyers operate large fleets and are highly motivated to drive down truck prices. Trucks are built to regulated standards and offer similar features, so price competition is stiff; unions exercise considerable supplier power; and buyers can use substitutes such as cargo delivery by rail. To create and sustain long-term profitability within this industry, heavy-truck maker Paccar chose to focus on one customer group where competitive forces are weakest: individual drivers who own their trucks and contract directly with suppliers. These operators have limited clout as buyers and are less price sensitive because of their emotional ties to and economic dependence on their own trucks. For these customers, Paccar has developed such features as luxurious sleeper cabins, plush leather seats, and sleek exterior styling. Buyers can select from thousands of options to put their personal signature on these built-to-order trucks. Customers pay Paccar a 10% premium, and the company has been profitable for 68 straight years and earned a long-run return on equity above 20%.<\/p>\n<p><strong>Exploit Changes in the Forces <\/strong><\/p>\n<p>Example: With the advent of the Internet and digital distribution of music, unauthorized downloading created an illegal but potent substitute for record companies\u2019 services. The record companies tried to develop technical platforms for digital distribution themselves, but major labels didn\u2019t want to sell their music through a platform owned by a rival. Into this vacuum stepped Apple, with its iTunes music store supporting its iPod music player. The birth of this powerful new gatekeeper has whittled down the number of major labels from six in 1997 to four today.<\/p>\n<p><strong>Reshape the Forces in Your Favor <\/strong><\/p>\n<p>Use tactics designed specifically to reduce the share of profits leaking to other players. For example:<\/p>\n<ul>\n<li>To neutralize supplier power,      standardize specifications for parts so your company can switch more      easily among vendors.<\/li>\n<li>To counter customer power,      expand your services so it\u2019s harder for customers to leave you for a      rival.<\/li>\n<li>To temper price wars      initiated by established rivals, invest more heavily in products that      differ significantly from competitors\u2019 offerings.<\/li>\n<li>To scare off new entrants,      elevate the fixed costs of competing; for instance, by escalating your      R&amp;D expenditures.<\/li>\n<li>To limit the threat of      substitutes, offer better value through wider product accessibility.<\/li>\n<\/ul>\n<p>Soft-drink producers did this by introducing vending machines and convenience store channels, which dramatically improved the availability of soft drinks relative to other beverages.<\/p>\n<p>Does this information inspire you to craft a new marketing message? Can we help you reach some customers with <a title=\"Deans Mailing\" href=\"http:\/\/www.deansmailing.com\/\" target=\"_blank\">Direct Mail<\/a>?<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This is classic business strategy information. We thought you would appreciate an opportunity to think about competition and profitability in different ways. The Harvard Business Review is selling an article by Michael E. Porter that updates a 1979 article. The article suggests that to sustain long-term profitability you must respond strategically to competition. Naturally you [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45,33],"tags":[8,62],"class_list":["post-343","post","type-post","status-publish","format-standard","hentry","category-business","category-marketing-strategy","tag-harvard-business-publishing","tag-marketing-strategy"],"_links":{"self":[{"href":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/wp-json\/wp\/v2\/posts\/343","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/wp-json\/wp\/v2\/comments?post=343"}],"version-history":[{"count":1,"href":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/wp-json\/wp\/v2\/posts\/343\/revisions"}],"predecessor-version":[{"id":347,"href":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/wp-json\/wp\/v2\/posts\/343\/revisions\/347"}],"wp:attachment":[{"href":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/wp-json\/wp\/v2\/media?parent=343"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/wp-json\/wp\/v2\/categories?post=343"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.deansmailing.com\/rationalmarketing\/index.php\/wp-json\/wp\/v2\/tags?post=343"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}