February Business Insight


Strategy Series

 

The first step in strategic analysis is to define the industry, which can be very difficult to determine in some cases. It is very important to define the industry where the competition actually takes place. Many mistakes are made in the task of developing strategy when the industry is defined too broadly or too narrowly.

 

When an industry is defined too broadly the result is a loss in the focus needed to distinguish the differences of factors that are directly tied to competition, strategy and of course profitability. Also, if an industry is defined too narrowly then one loses sight of the common factors and the potential linkages that would be vital to staying ahead of the competition. Another factor to take into account is the dramatic shift of the industry’s boundaries.

 

This is important when determining an industry’s attractiveness using Porter’s five forces for analyzing competitiveness. All competing organizations including your own should be viewed as a group as opposed to individually for a better assessment. The outcome of the macro-analysis is whether the industry is attractive or unattractive as the foundation of this theory is profitability. The final assessment of the five forces will determine their probable impact on the chosen industry’s profitability.

 

To learn more about Porter’s five forces analysis, click on this video link from Harvard Business Review (2014).

 

Another point that stands out is the number one purpose of strategy is alignment. This means that all employees of an organization are to make good choices in support of the company’s strategy. All of the team members are responsible to reinforce each of the individual choices knowing and trusting that everyone within the company is pursuing a common way to gain the best competitive advantage. This sounds like an introduction to the root of the culture definition of a company.

 

Harvard Business Review. (2014, June 10). The Explainer: Porter’s Five Forces. Retrieved from https://hbr.org/video/3590615226001/the-explainer-porters-five-forces