Both industry attractiveness and competitive position can be shaped by a firm, and this is what makes the choice of competitive strategy both challenging and exciting. While industry attractiveness is partly a reflection of factors over which a firm has little influence, competitive strategy has considerable power to make an industry more competitive strategy has considerable power to make an industry m( or less attractive. At the same time, a firm can clearly improve or erode its position within an industry through its choice of strategy. Competitive strategy, then, not only responds to the environment but also attempts to shape that environment in a firm's favor. These two central questions in competitive strategy have been at the core of my research." he essential complement to the pathbreaking book Competitive Strategy, Michael E. Porter's Competitive Advantage explores the underpinnings of competitive advantage in the individual firm. Porter, M. E. (1989). From competitive advantage to corporate strategy. In D. Asch & C. Bowman (Eds.), Readings in strategic management (pp. 234–255). London: Palgrave. This success is linked, at least partially, to its use of value chain management. Pellet (53) describes Southwest Airlines as a company that found creative ways to make improvements, with these improvements especially related to reducing the downtime of aircraft, improving scheduling, and making maintenance more efficient. At the same time, Southwest Airlines needed to improve cost-effectiveness so it could offer a lower price to its customers, but still maximize profits. Southwest Airlines based its success on identifying the industry value chain.

Structural change can shift the relative balance among the generic strategies in an industry, since it can alter the sustainability of a generic strategy or the size of the competitive advantage that results from it. The automobile industry provides a good example. Early in its history, leading automobile firms followed differentiation strategies in the production of expensive touring cars. Technological and market changes created the potential for Henry Ford to change the rules of competition by adopting a classic overall cost leadership strategy, based on low-cost production of a standard model sold at low prices. Ford rapidly dominated the industry worldwide. By the late 1920s, however, economic growth, growing familiarity with the automobile, and technological change had created the potential for General Motors to change the rules once more -- it employed a differentiation strategy based on a wide line, features, and premium prices. Throughout this evolution, focused competitors also continued to succeed. In any particular industry, not all of the five forces will be equally important and the particular structural factors that are important will differ. Every industry is unique and has its own unique structure. The five-forces framework allows a firm to see through the complexity and pinpoint those factors that are critical to competition in its industry, as well as to identify those strategic innovations that would most improve the industry's -- and its own -- profitability. The five-forces framework does not eliminate the need for creativity in finding new ways of competing in an industry. Instead, it directs managers' creative energies toward those aspects of industry structure that are most important to long-run profitability. The framework aims, in the process, to raise the odds of discovering a desirable strategic innovation.In many industries, however, the three generic strategies can profitably coexist as long as firms pursue different ones of select different bases for differentiation of focus, Industries in which several strong firms are pursuing differentiation strategies based on different sources of buyer value are often particulary profitable. This tends to improve industry structure and lead to stable industry competition. If two or more firms choose to pursue the same generic strategy on the same basis, however, the result can be a protracted and unprofitable battle. The worst situation is where several firms are vying for overall cost leadership. The past and present choice of generic strategies by competitors, then, has an impact on the choices available to a firm and the cost of changing its position. urn:lcp:competitiveadvan00port:epub:175fd377-c361-435a-92e4-90492528743d Extramarc University of Pennsylvania Franklin Library Foldoutcount 0 Identifier competitiveadvan00port Identifier-ark ark:/13960/t6ww8687z Isbn 0029250900

Changes in industry structure can affect the bases on which generic strategies are built and thus alter the balance among them. For example, the advent of electronic controls and new image developing systems has greatly eroded the importance of service as a basis for differentiation in copiers. Structural change creates many of the risks. Now an essential part of international business thinking, Competitive Advantage takes strategy from broad vision to an internally consistent configuration of activities. Its powerful framework provides the tools to understand the drivers of cost and a company's relative cost position. Porter's value chain enables managers to isolate the underlying sources of buyer value that will command a premium price, and the reasons why one product or service substitutes for another. He shows how competitive advantage lies not only in activities themselves but in the way activities relate to each other, to supplier activities, and to customer activities. Competitive Advantage also provides for the first time the tools to strategically segment an industry and rigorously assess the competitive logic of diversification. Mauborgne, R., & Kim, W. C. (2005). Blue ocean strategy. Boston: Harvard Business School Publishing Corporation. Now beyond its eleventh printing and translated into twelve languages, Michael Porter’s The Competitive Advantage of Nations has changed completely our conception of how prosperity is created and sustained in the modern global economy. Porter’s groundbreaking study of international competitiveness has shaped national policy in countries around the world. It has also transformed thinking and action in states, cities, companies, and even entire regions such as Central America. The strength of each of the five competitive forces is a function of industry structure, or the underlying economic and technical characteristics of an industry. Industry structure is relatively stable, but can change over time as an industry evolves. Structural change shifts the overall and relative strength of the competitive forces, and can thus positively or negatively influence industry profitability. The industry trends that are the most important for strategy are those that affect industry structure.

Linkages among value activities arise from a number of generic causes, among them the following: The same function can be performed in different ways...The cost or performance of direct activities is improved by greater efforts in indirect activities...Activities performed inside a firm reduce the need to demonstrate, explain, or service a product in the field...Quality assurance functions can be performed in different ways." Given the pivotal role of competitive advantage in superior performance, the centerpiece of a firm's strategic plan should be its generic strategy. The generic strategy specifies the fundamental approach to competitive advantage a firm is pursuing, and provides the context for the actions to be taken in each functional area. In practice, however, many strategic plans are lists of action steps without a clear articulation of what competitive advantage the firm has or seeks to achieve and how. Such plans are likely to have overlooked the fundamental purpose of competitive strategy in the process of going through the mechanics of planning. Similarly, many plans are built on projections of future prices and costs that are almost invariably wrong, rather than on a fundamental understanding of industry structure and competitive advantage that will determine profitability no matter what the actual prices and costs turn out to be. Cost is strongly affected by share or interrelationships, Cost leadership and differentiation may also be achieved simultaneously where cost position is heavily determined by market share, rather than by product design, level of technology, service provided, or other factors. If one firm can open up a big market share advantage, the cost advantages of share in some activities allow the firm to incur added costs elsewhere and still maintain net cost leadership, of share reduces the cost of differentiating relative to competitors (see Chapter 4). In a related situation, cost leadership and differentiation can be achieved at the same time when there are important interrelationships between industries that one competitor can exploit and others cannot (see Chapter 9). Unmatched interrelationships can lower the cost of differentiation of offset the higher cost of differentiation. Nonetheless, simultaneous pursuit of cost leadership and differentiation is always vulnerable to capable competitors who make a choice and invest aggressively to implement it, matching the share of interrelationship. One of the major changes is that computer software has become an important tool in the process. Computer software has been developed to identify problems and opportunities for improvement in the value chain. This is largely focused on the manufacturing process, but can also be applied to any process where efficiency is desired. Another significant trend is that the value chain is extended further, both upline and downline. For example, many organizations are considering the internal processes of their suppliers.