Identifying Key Industry Factors for Competitive Advantage

MGMT 475 MODULE 3 Part A Reading Understanding the Competitive Forces that Shape Strategy One aspect of assessing the quality of a firm’s strategy is to test if it aligns, or fits, with the nature of their market. To assess this, we need to know the most critical things firms operating in this industry (who we call “producers” since they produce the good or service that defines the industry) must have or do to be successful (i.e. achieve a superior level of performance…remember that is the goal). So – begin with the end in mind. Our objective in this phase is to identify: Industry Key Success Factors – what must producers have or do to achieve competitive advantage? First we must get clear on what industry we are analyzing. Defining the industry is critical. Consider the primary products or services your focal firm and its main competitors offer. That often gets you to a good industry definition. If needed, look up the firm’s NAICS classification (just Google the company and NAICS). Once you are clear on the industry, be sure you are clear on the basic characteristics of Producers, Buyers, and Suppliers. “Who” are we talking about when we examine this industry? Producers / Sellers (think of these as your firm’s competitors) – the set of all firms offering the primary industry good/service. Don’t name them but describe their common characteristics (for example: a few large ones? Many small mom-and-pops? Local firms vs international? Manufacturers or just resellers? etc.) Buyers – describe in broad terms the people (or organizations) that are the primary purchasers of the goods/services the producers offer. (e.g. Urban families on a budget or people with high discretionary income? fashion-conscious women aged 18-35 or budget-conscious mothers?; small businesses or only large enterprises?) Suppliers – describe in broad terms the major types of suppliers the producers need for the raw inputs they need to produce their goods/services. (e.g. for restaurants: Fresh meat and produce distributors… for automobile manufacturers: plastic, aluminum and steel producers…. For the paint industry: major chemical producers…for real estate developers: architects