Contemporary Strategy Analysis

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Contemporary Strategy Analysis
Robert M Grant, 7th Edition

Chapter 3: Industry Analysis: The fundamentals
Introduction and objectives
* Identify the sources of profit in the external environment. * Focus of environmental analysis: industry analysis. Relevant both to corporate lvl & business-lvl strategy. * Corporate strategy: deciding which industries the firm should be engaged in and how it should allocate resources among the. – Assemsment of the atrrativeness of different industries in ters of profit potential. This chapter focus onunderstanding how the competitive structure og an industry determines its profitability. * Business strategy - concerned with establishing competitive advantage. Identify general sources of competitive advantage: Key success factors. From environmental analysis to industry analysis

* Business environment consists of al external influences that affect its decisions and performance. * Prerequiite for effective environmental analysis is to distinguish the vital from the merely important. * The core of the firms business environsment is formed by the relationships with: customers, suppliers and competitors – this is the industry environment. * Macro-level factors still importat – the key issue is how these more general environmental factors affect the firms industry environment. Fig 3.1 The determinants of Industry Profit: Demand and competition

* Starting point is simple: What determines the level of profit in an industry. * The prerequisite for profit is the creation of value for customers. * Surplus distributed depending on the forces of competition. * Firms profit determined by 3 factors.

* The value of the product to customers
* The intensity of competition
* The bargaining power of producers relative to their suppliers and buyers * The joys of niche markets
* Perfect competition / monopoly / barriers -> table 3.2 * Porters Five Forces Figure 3.2 p....
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