Competitive strategy refers to how a company competes in a particular business (note: overall strategy for diversified firms is referred to as corporate strategy).Competitive strategy is concerned with how a company can gain a competitive advantage through a distinctive way of competing.
A companys profitability depends in part on the structure of the industry in which it competes. Industry structure resides in five basic forces of competing: the intensity of rivalry among existing competitors; the threat of new entrants; the threat of substitute products or services; the bargaining power of suppliers; and the bargaining power of buyers. Industry structure is relatively stable, but industries are sometimes transformed by changes in buyer needs, regulation, or technology. Companies can shape industry structure rather than passively react to it.
Profitability is the only reliable measure of the
economic value of a company. Other metrics of performance mislead investors
while producing bad corporate decisions. The Institute, in collaboration with
Professor Anita McGahan at Boston University, has assembled a large body of data
on the performance of all publicly traded business segments and companies in the
United States over the 1981 to 1999 period. This data not only sheds light on
the causes of company performance, but also provides benchmarks for
practitioners to compare performance across companies and industries.
Competition is increasingly crossing borders. However, location still matters, with the most successful competitors in an industry often based in the same few geographic areas. Companies must harness the advantages of locations but compete with a regional or global strategy.
Corporate strategy refers to the overall strategy for a diversified company. It is concerned with the mix of businesses the company should compete in, and the ways in which strategies of individual units should be coordinated and integrated.
The Internet is a powerful new technology. The question is not whether to deploy the Internet, but how to understand its impact on each particular industry and integrate the technology into overall strategy.
The obligation of a social
enterprise is to create social value. A strategic focus can help to frame
the choices that need to be made in determining for whom, how, and with whom an
organization serves to most optimally create this social value.
Health care is on a collision course with patient
needs and economic reality. Without significant changes, the scale of the
problem will only get worse. Rising costs, mounting evidence of quality
problems, and increasing numbers of Americans without insurance are unacceptable
and unsustainable, but the future of health care is not
predetermined. It is a mistake to extrapolate and attempt to respond to trends
within the current structure. Instead, the most pressing task for leaders in
health care is to create a new and better structure. Effective leaders have the
insight to revisit the fundamental purpose of an organization and imagine a
different and more effective way to attain it. Government control in health care
is not inevitable. Indeed, countries with government-dominated systems are
moving away from that model. America can move now to a system based on the right
kind of competition that will serve patients far better than either a
government-run model or the current U.S. system.