The strength of each of these threats determines the attractiveness and profitability of the market:

• Intense competition results in minimal profit margins
• Mild competition allows wider profit margins

The goal of the strategy consultant is to determine whether a firm should enter/exit the industry or to find a position in the industry where the company can best defend itself against these forces or can influence them in its favor.

Part II - Strategy Generation Model

The following is a summary of Kenichi Ohmae’s 1982 book The Mind of the Strategist. Four ways of strengthening a company’s position to that of its competitors are:

1. Business strategy based on identifying the key factors for success in the industry concerned and utilizes opportunity to gain significant advantage over its competitors.

2. Business strategy based on relative superiority.  Make use of the technology, sales network, profitability, and so on.

3. Business strategy based of those of its products which are not competing directly with the target competitors

4. Business strategy based on aggressive initiatives.  Changes the rules of the game

5. Business strategy based on opening up new markets or through the development of new products.

The principal concern is to avoid doing the same thing on the same battleground as the competition.  First gain relative advantage through measures a competitor cannot follow, and then extend that advantage still further.

Ohmae’s Strategic Triangle:

The strategic triangle consists of three players: the corporation itself, the customer, and the competition.  The job of the strategy consultant is to achieve superior performance, relative to the competition, in the key factors for success of the business while matching the strengths of the corporation with the needs and objectives of clearly defined markets.  The three different business strategies are:

1.   Customer-Based Strategies –Attempts to establish a strategic edge over the competition by segmenting the market and focusing on one or more subsets where it can have an advantage.

2.   Corporate-Based Strategies – Attempts to maximize the enterprise’s strengths relative to the competition in the functional areas that are critical to success in the industry and  to design and deliver cost-effective functions.  This can be done in three ways: (a) reduce cost more effectively than the competitions, (b) exercise greater selectivity in terms of orders accepted, products offered, or functions performed, and (c) share certain key functions across the enterprise’s other businesses or even with other companies

3.   Competitor-Based Strategies – Attempts to establish differentiation in functions ranging from purchasing, design and engineering to sales and servicing.  The main point is that any difference must be related to profit, volume, and/or cost.

There are three major constraints which affect strategy: (a) reality of the customer, the competition, and the company’s competence, (b) ripeness –the time is ripe for the proposed strategy or it will fail, and (c) resources - availability