Competitive & Business Strategy Frameworks

Competitive & Business Strategy Frameworks

• These frameworks support businesses in analyzing competition and developing strategies.
• These strategies help businesses gain a competitive edge.

Porter’s Five Forces (Industry Competitiveness)

• This framework helps in understanding industry structure and profitability.
• Aids in assessing market attractiveness prior to market entry.
• The threat of new entrants is lower where barriers to entry are high.
• High barriers to entry include: high capital requirements, strong brand loyalty, and economies of scale.
• Example: The airline industry requires massive investment, deterring new entrants.
• The bargaining power of suppliers is high if only a few suppliers control the market.
• Powerful suppliers can increase prices or reduce quality.
• Example: Boeing & Airbus have significant power over airlines because they dominate aircraft manufacturing.
• The bargaining power of buyers is high if customers have many alternatives.
• Powerful customers can demand lower prices or better service.
• Example: Supermarkets negotiate bulk discounts from suppliers due to their buying power.
• The threat of substitutes arises from alternative products or services that can replace existing ones.
• Example: Streaming services are replacing cable TV.
• Intense industry rivalry can lead to price wars and reduced profitability.
• Example: The fast-food industry experiences intense competition.
• Use this framework when entering a new market or evaluating competition.
• This framework helps a company decide whether to expand, actively compete, or exit an industry.

Resource-Based View (RBV) (Internal Competitive Advantage)

• This framework focuses on a firm’s unique resources and capabilities as sources of lasting competitive advantage.
• RBV examines what the company possesses that competitors cannot easily replicate.
• Tangible resources are physical assets such as factories, real estate, and inventory.
• Intangible resources include brand reputation, patents, proprietary technology, and company culture.
• Organizational capabilities include an efficient supply chain, effective R&D teams, and excellent marketing.
• The VRIO model includes the competitive advantage criteria: Valuable, Rare, Inimitable, and Organized.
• Valuable: Resources that add value to the company.
• Rare: Resources that are unique.
• Inimitable: Resources that are difficult for competitors to copy.
• Organized: The company can effectively utilize its resources.
• Example: Coca-Cola’s brand value is an intangible asset that is nearly impossible to replicate.
• Example: Google’s algorithm is rare, valuable, and difficult to imitate.
• This framework is best utilized when evaluating internal strengths and for long-term strategic planning.

The Delta Model (Customer-Centric Strategy)

• This model broadens the competitive focus to include customer relationships and ecosystem creation.
• The Best Product strategy focuses on competing based on quality, price, and efficiency.
• Example: Apple
• A Total Customer Solutions strategy aims to build strong, lasting customer relationships.
• Example: IBM’s consulting model
• System Lock-In involves creating an ecosystem that makes switching costly for customers.
• Example: Microsoft Office Suite
• Apple’s ecosystem locks users into the Apple brand.
• This framework is most effective when customer loyalty and ecosystem-building are high priorities.

Value Chain Analysis (Identifying Operational Strengths)

• This analysis identifies where a business adds value and where it can reduce costs.
• Primary activities include: inbound logistics, operations, outbound logistics, marketing & sales, and service.
• Inbound logistics involves managing raw materials.
• Operations involves transforming raw materials into finished products.
• Outbound logistics involves delivering finished products.
• Marketing & Sales efforts are focused on driving customer demand.
• Service encompasses after-sales support.
• Support activities include: procurement, HR management, technology development, and firm infrastructure.
• Amazon's warehouse and logistics operations provide a competitive advantage.
• The advantage comes from reducing costs and speeding up delivery.
• This analysis is useful for cost-cutting and efficiency improvements.

Academic & Business Market Frameworks

• These frameworks are applicable to both academic and business environments.

Supply & Demand Analysis (Market Pricing & Profit Forecasting)

• Supply and demand analysis determines optimal pricing and production levels.
• Appliation: Used in pricing strategy and forecasting profitability.

The 3Cs Model (Company, Competitors, Customers)

• The 3Cs define the major factors influencing business success.
• Application: Used in marketing and strategic positioning.

The 4Ps of Marketing (Product, Price, Place, Promotion)

• The 4Ps are used to develop marketing and product launch strategies.

Logical & Decision-Making Frameworks

Profitability Framework (Revenue vs. Cost Analysis)

• Used to analyze and fix profitability issues.

Root Cause Analysis (Problem Identification)

• Used in troubleshooting and process improvements.

Process Mapping (Operational Optimization)

• Helps identify bottlenecks and inefficiencies.

Case Interview & Problem-Solving Frameworks

How to Improve Profits

• Increase revenue or reduce costs.

How to Grow a Business

• Expand in current markets or enter new markets.

How to Cut Costs

• Identify elimination, efficiency, and negotiation opportunities.

How to Launch a Product

• Focus on target market, pricing, and promotion strategy.

How to Optimize a Process

• Reduce inefficiencies and improve workflow speed.

How to Respond to Competitive Threats

• Mitigate, replicate, or collaborate with the competitor.

Frameworks for business competition analysis and strategy development are discussed. Porter's Five Forces helps understand industry structure and profitability, and assess market attractiveness. High barriers to entry deter new entrants and powerful suppliers can control prices.