Key Concepts Flashcards
activities
discrete economic processes, such as operating a sales force, developing products, or physical delivery to the customer; usually involves people, technology, fixed assets, sometimes working capital, and various types of information
barriers to entry
the hurdles a new entrant would have to surmount in order to enter an industry; when these are low, it lowers the industry’s average profitability
barriers to imitation
the hurdles facing a rival within an industry who tries to move from one positioning to another in order to copy another company’s strategy; these slow the process of competitive convergence
clusters
geographic concentrations of companies, suppliers, related industries and specialized institutions; draw on local assets and institutions; crucial driver of competitiveness, entrepreneurship, and new business growth
competition
the tug-of-war over profits that occurs not just between rivals but also between a company and its customers, its suppliers, makers of substitutes, and potential new entrants
competitive advantage
differences in relative price or relative costs arise because of differences in the activities being performed
competitive convergence
when companies imitate and match each others moves, compete to be the best; differences are replaced by a standard offering, leaving customers to choose on price alone, and limited choice
competitiveness of a location (nation)
defined by Porter in terms of how well a place uses its human and natural resources as well as its capital; how well it uses inputs to produce valuable goods and services, not from the inputs it has; from choices, not endowments
competitor analysis
intelligence gathering and analysis aimed at helping a company deal with competitive dynamics by assessing the intentions and capabilities of rivals
continuity
term to refer to the stability in the core value proposition
corporate strategy
the overall strategy for a corporation that consists of diversified businesses in multiple industries; goal should be to enhance the competitive advantage of its multiple business units
cost driver
the factors that influence cost; in analyzing a companies cost position, look at each distinct activity to see which factors influence the cost of that activity
diamond theory
from Porter’s ‘Competitive Advantage of Nations,’ framework that explains why some nations and regions achieve greater success in a given industry than others
differentiation
in marketing, used to describe how one offering is positioned in relation to other; Porter narrows to refer to a companies ability to command a higher relative price than rivals b/c offering increases customers willingness to pay
diversification
expansion of a company into different businesses; in Porter’s thinking, it’s directly linked to the value chain and its activities
execution/operational effectiveness
companies ability to perform the same or similar activities better than rivals; every functional area has its current best practices
fit
when the value or cost of one activity is affected by the way other activities are performed; can amplify competitive advantage and sustainability of strategy
five forces
Porter’s seminal framework for assessing competition in any industry by analyzing the industry’s structure
generic strategies
broad characterizations of the key themes of strategic positioning; focused and differentiation strategies can be integrated into effective strategy
industry structure
the basic, underlying economic and technological characteristics of an industry that shape the competitive arena in which strategy must be set
outsourcing
the decision to buy from a third party an activity that your organization once performed internally
positioning
the choice of a value proposition made against a specific and relevant set of industry rivals
relative buyer value
how much the customer is willing to pay for a good or service versus other offerings
relative cost
your cost per unit relative to that of your rivals; advantage in this can come from performing the same activities better or choosing to perform different activities
