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Porter's 5 Forces Analysis for Competitive Strategy
- 3. Growing
- 10. Defense, defense
- 11. Attack, Attack
- 15. Nicher
Editor's Notes
- Competition is so ingrained into the American psyche, and especially business, that the term does not need introduction. The latin word, competre, consists of the roots attack, and together. This can translate to attacking in a coordinated fashion But it is useful to remember that one of the latin definitions means agreement.
- Porter’s 5 forces helps to determine how attractive your market is for potential competitors.. But, I think it is safe to say though, that if you are achieving economic profits, unless you have proprietary technology or entrance is for some reason limited You WILL have significant competition.
- You can also assume that the competition is increasing. Globalization means that challengers can come from any country The internet allows competitors to enter into markets and distribution channels easily. Venue and speed of attacks MegaStores are private labeling, and MegaBrands are expanding categories. Today, Without a proactive competitive strategy your business is a sitting duck.
- But before you can figure who your competitors are, you need to know who You are; WHAT need are you fulfilling? WHO is your target market ? HOW MUCH marketshare do you WHICH role? WHERE do you want to go? CLICK Once you have self-knowledge it’s time to turn your focus outward and identify your competition
- Coke vs Pepsi is easy and an example of direct competition. But indirect competitors are anyone that satisfies the same need that you do. When personal computers first came out Smith Corona didn’t see a competitive threat to their typewriters. And NBC couldn’t imagine their impact on entertainment. Be creative and include the broadest view of all possible suspects
- From your big list Determine who is pursuing the same Target markets And Strategy (as in high quality and low vertical integration) This is referred to as the strategic group . These are your core competitors
- For each of these first determine their objectives: Marketshare, Profitability, Thought leadership, short vs. long term profits. Perhaps most important, what are their expansion plans ! Where will the battles be fought ???
- Then map each of their strengths and weaknesses Be objective and don’t be biased towards your own product Also, understand that the market’s perception may be more important than actual capability . And also the consumer’s perception . This exercise helps you to determine who, how, and what to attack .
- But the most important factor for strategy is based on what your market role is. In bike racing terms: Are you the market leader? Are you defending your yellow jersey? Are you a Challenger waiting for the right time and place to attack the leader?? Are you a Follower back in the peleton letting others do the work? Or are you a Nicher looking to be the best at a specialized skill like sprinting?
- Market leaders already own the market, so defend their market by blocking attacks. Strategies include Position defense, counteroffensive defense, mobile defense, and the preemptive defense which defends markets you aren’t even in yet. Reactive strategies launch counter attacks . Such as fed ex going after UPS ground business after UPS attacked their air business. A proactive strategy is position defense , that covers the market to prevent any toeholds. P&G’s dominance of shelf space for example. Pre-emptive defense puts competitors off balance before they attack. Mirosoft and Oracle attack competitors in segments they don’t even have products for through pre-announcements . Another strategy is to attack youself by creating better or competing products. High tower, Star Bucks anti-starubucks. CLICK
- Market Challengers attack the leader. I noticed that there were a lot of quotes from Mao and Patton when researching this area.. Deciding which strategy is determined by the strength of the leader’s position But even if they seem vulnerable, remember they probably have superior resources
- Frontal Attacks take on the leader head on. They are risky, but have huge payoffs . Flank attacks look for markets, geographies, and channels where the leader is week. Budget rent a car grabbed the low-end car rental ; and haagen dahz took over the premium ice cream market ByPass attacks are indirect attacks by jumping into channels or categories where the leader has yet to deploy. . And Blue Ocean Strategies are also an example of this.
- My personal favorite is Guerilla warfare. It is deployed often when a social cause may be involved. The formal goal is “to harass and demoralize your opponent.” It seems to be encompass quite a bit depending on who you speak to: Viral Marketing, Ambient Marketing, Wait Marketing, Grass Roots Marketing, Astro Turifing, presence marketing are in this category,
- If you are the Market Follower you are a copy cat and belive that product imitation is more profitable than product innovation. Their strategy produces and sells a substitute product for less Roles include the counterfeiter, cloner, imitator, and adapter. If you can produce value , you can one day challenge the leader. like Honda and Toyota are classic examples
- Niche marketing is the big fish in the little pond. Southwest is a classic an overused examle. It’s especially important to us It’s considered the best strategy for market entry by small firms. Sustainability is at this point a niche. There’s no shortage of examples her: Tom’s of Maine, Niman Ranch, and Tesla
- The text draws a distinction between being customer focused or competitor focused. Companies focused on competitors are too reactive to innovate . often can’t satisfy customers in the long run. But focusing only on the customers leaves you vulnerable t o attack. It’s not always the best product that winds up as the market leader.
- Traditional marketing in traditional spaces is About fighting, winning, and losing. It’s a zero sum game. But in this day in age, especially in sustainability, Is there another way to compete?
- Some say there is And Aikido presents a good metaphor for this. Core concepts of the sport are There is no such thing as winning or losing Success is predictaed on constant awareness Attackers energy should be used to disable them And that you have a responsibility for the wellbeing of your opponent This is important in sustainability, where the movement’s goals will require the success of many.
- This is important in sustainability, where the movement’s goals will require the success of many. In this industry and others there is more emphasis on less combative strategies. Coopetition strategies leveraging: Partnerships Alliances This approach can produce more aggregate sales, and success.
- You can compete on price or features or even on fraud. But the greatest competitive advantage might be in Pursuing an authentic mission and attracting customers based on that Remember, " The only Competition worthy a wise man is with himself. "
- You can compete on price or features or even on fraud. But the greatest competitive advantage might be in Pursuing an authentic mission and attracting customers based on that Remember, " The only Competition worthy a wise man is with himself. "