Strategic Management: Formulation and Implementation

Putting The Four Components Together

After the competitor's future goals, assumptions, current strategies, and capabilities are analyzed, a competitor response profile is developed. This profile, designed to indicate how a competitor is likely to respond in its competitive environment, is based on the answers to four questions:

  1. Is the competitor satisfied with its current position?
  2. What likely moves or strategy shifts will the competitor make?
  3. Where is the competitor vulnerable?
  4. What will provoke the greatest and most effective retaliation by the competitor? (Michael E. Porter).

Structural Analysis Within Industries

Definition of an industry is not the same as definition of where the firm wants to compete. In many industries, there are firms that have adopted very different competitive strategy and have achieved differing levels of market share.

The following strategic dimensions usually capture the possible differences among a firm's strategic options in a given industry: specialization, brand identification, push versus pull, channel selection,product quality, technological leadership, vertical integration, cost position, service, price policy, leverage, relationship with parent company, and relationship to home and host government.

Therefore, a more useful concept than total industry definition is often the identification of strategic groups within industries. This concept bridges the gap between looking at the industry as a whole and considering the standing of each firm separately.

Michael Porter points out that

"the first step in structural analysis within industries is to characterize the strategies of all significant competitors along these dimensions. This activity then allows for the mapping of the industry into strategic groups. A strategic group is the group of firms in an industry following the same or similar strategy" and having similar strategic characteristics.

"A industry could have only one strategic group if all the firms followed essentially the same strategy. At the other extreme, each firm could be a different strategic group. Usually, however, there are a small number of strategic groups which capture - the essential strategic differences among firms in the industry."