Think of business as a combination of art & war. Preparation of strategy requires critical thinking, extensive research, foreplanning of potential problems, and execution.
Creating a strategy requires diverse ideology & knowledge of trends from those who are closest to the action. Such as your local university, local politicians, business leaders, and local chamber of commerce….etc.
Keeping a Competitive Advantage
Porters’s 5 Laws of competitive advantage helps establish powerful questions, and understandment of external analysis.
- Potential New Entrants – What new competitors might come into our marketplace? What barriers exist in our industry to deter new entrants? Strategically, which barriers can we develop or enhance to protect our business from new competition?
- Bargaining Power of Buyers – What type of bargaining power do your customers have? What can you do about it? As any account more than 15% ?
- Bargaining Power of Suppliers – What is your leverage with your suppliers? How can you increase your bargaining power as buyer?
- Potential Substitutes – Are there other ways for buyers to meet their needs? What can you do to lower the attractiveness of substitute products?
- Rivalry Among Existing Competitors – How intense is rivalry in your industry? How many competitors are there? Which competitors are most likely to respond to a specific competitive move?
My Key Take-Aways
This chapter reiterated some of the basics that we know we need to answer, but sometimes we forget to revisit. Understanding how outside factors can implement changes on your internal structure makes external factors a powerful variable.
As a consultant one of the main questions I like to ask is what impacts your business that is out of control. This question normally invokes a 3-5 second pause as they try to gather their thoughts, think through the question, and ponder.
Sometimes small businesses do not have the man power or financial capabilities of knowing about external analysis.
Simple updates on the questions mentioned above helps you document the trends, and quickly scan the external analysis.