Porter's Five Forces
Bargaining Power of Suppliers
Threats of substitutes
Rivalry among existing competitors
Bargaining Powers of Buyers
The threat of new entrants
What are the five forces Porter mentioned?
To show that the firm offers different products and services from its competitors, and its competitors cannot easily replicate the firm's products.
What are the advantages of differentiation for the firm?
Strengths and Weaknesses, The resource-based view focuses on the resources and capabilities a firm needs to compete.
Which two areas is the resource-based view related to in SWOT?
Value
Rarity
Imitability
Organisation
What does VRIO stand for?
Ensure switching costs are high- e.g. Loyalty Points
What can a firm do to reduce the bargaining power of buyers?
low-cost compromise value that customers want
others can also copy
overemphasis on price competitiveness
What are the disadvantages of cost leadership?
Financial: ability to generate internal funds, ability to raise external capital
Physical: location of plants, offices; access to raw materials, and distribution channels.
Technological: Possession of patents, trademarks, copyrights.
Organizational: integrated management information system. formal planning, command, and control systems.
What are some examples of tangible resources and capabilities(financial, physical, technological, and organizational)? Give one example for each.
This framework emphasizes the importance of unique resources and capabilities internal to the firm in achieving a competitive advantage.
What is the VRIO framework?
Competitive advantage gives a firm an edge over its competitors and allows it to achieve superior performance in the market-place.
What does understanding and manipulating Porter's Five Forces create?
It is dangerous to over-focus as technology may change e.g. quarts vs analogue watches.
What are the disadvantages of focusing on a niche?
Human: Knowledge, trust, talent
Innovation: Research and development capabilities, A supportive atmosphere for new ideas.
Reputational: Perceptions of product quality and reliability among customers. Reputation as a socially responsible citizen.
What are some examples of intangible resources and capabilities (human, innovation, reputational)? Give one example for each.
Throughout the 1980s and 1990s, IBM sold PCs but this became competitive as consumers did not see much value in buying the IBM PC.
What is an example of customers seeing the value of the firm's product?
It is when barriers to entry are high, rivalry is low, the firm dominates both buyers and suppliers, and no substitute is available.
What is the firm's optimal competitive position?
Yes, others are unlikely to catch up due to specialized knowledge of the niche and can enjoy high margins in the long run.
Is focusing on a niche beneficial for the long-term growth of the company? Yes or no? How?
No, Tangible resources are easily copied and therefore do not contribute to the firm's sustainable competitive advantage in the long run.
Do tangible resources contribute to a firm's strategy in the long run? Yes or no? Why?
1. Direct Duplication – the Toyota way of lean production was difficult to imitate previously
2. The substitute - resource or product might not be as good – iTunes was a good substitute of Sony Walkman and therefore killed the latter.
What are the two ways to imitate?
One solution to manage the bargaining power of suppliers or buyers is to resort to vertical integration either backward acquiring suppliers or forward to be closer to customers. Now it is not needed because Firms can outsource.
What are some criticisms of Porter's five force Framework?
It is stuck in the middle, it does not have a clear strategy/direction on how to compete in the industry/market and will therefore suffer from low profitability and profit growth.
According to Porter what will happen to the firm if it does not use any of these strategies?
What are some criticisms of Porter's three generic competitive strategies?
Yes, the firm needs to develop its intangible resources which are difficult to copy and therefore enable the firm to develop a sustainable competitive advantage generating above-average returns in the long run.
Do intangible resources contribute to a firm's competitive advantage in the long run? Yes or no? Why?
Only valuable, rare, and hard-to-imitate resources/capabilities backed by distinctive organizations can allow a firm to earn above-average returns.
What can a firm do to achieve sustainable competitive advantage?