1 Strategic Planning: Key Concepts Steps in Planning Market Segmentation Attractiveness: 5 Forces Generic Strategies The Firm Value Chain 1-8 Strategic Management John Macomber2 Industry and Segment Selection (Ch. 7) • You can select a segment in which tocompete based on how profitable the structure shouldbe in the long term. • You can decide how to compete based on industry structure and the resourcesyou have. • You can shape your firm so that you canexecute on this strategy with deliberation and efficiency. Strategic Management John Macomber3 Indicators of Segment Profitability: Barriers to Entry Barriers to Exit Supplier Bargaining Power Buyer Bargaining Power Existing Rivalry Availability of Substitutes Attractiveness of an Industry of these forces. Use them in selection of segments.Strategic Management John Macomber “Five Forces” Model - M. Porter or of a Segment is a function segments - and in defense of4 About the Five Forces (Ch. 1) • The collective strength of the five competitiveforces determines the ability of firms in anindustry to earn high rates of return on their invested capital. • The strength of the five forces varies fromindustry to industry, and can change over time. • The five forces model can be applied to an entireindustry, or to segments of an industry. • The five forces determine industry profitabilitybecause they influence the prices, costs, and elements of return on investment. Strategic Management John Macomber required investment of firms in an industry - the5 Generic Competitive Strategies • Positioning determines whether a firm's profitability isabove or below the industry average. • A firm can have many strengths or weaknessesrelative to competitors, but: • There are two basic types of competitive advantage:low cost, or differentiation. • There are two scopes of activity: broad or focused. • Achieving competitive advantage requires a firm tomake a choice. Being "all things to all people" is a recipe for strategic mediocrity and below averageperformance, because it often means that a firm hasno competitive advantage at all. Strategic Management John