Page 34 - Marketing the Basics 2nd

26 Marketing: the Basics
Michael Porter. His model suggests the user considers five key factors or forces: 1) Barriers to entry, or how hard it is to enter the market. An example of a barrier to entry in the high-tech industry might be a proprietary standard such as Apple’s iPhone. 2) Degree of rivalry in the industry, or how many firms are competing for the pie. The more players going after the same market typically means lower prices and hence lower profitability. 3) The power of suppliers, or how much power your suppliers have over your firm. If you need aluminium to make your product and the price goes up because of growing demand from China you will find it harder to bargain with Alcan or Alcoa. 4) The power of buyers, or how much power your buyers have over you. The automotive industry has dramatically reduced the number of their parts suppliers; the result is that Ford and the other big players have severely squeezed the profits of auto parts manufacturers. 5) The threat of substitutes, or if your price goes too high do your customers have real alternatives? For example, if the price of oil or gas goes up, wind power and solar power become more viable alternatives of energy sources.
Business uniT coRpoRaTe sTRaTegy
Once the corporate strategy plan has been established, the next stage of the strategic plan is to create the business unit corporate strategy. Many large-sized companies organize their business units into semi-autonomous units called strategic business units (SBU). SBUs are given nearly full autonomy to conduct their affairs because they are closer to the customer and are more likely to respond quickly to changes in the market than a more centralized company. Each SBU develops strategies tailored to fit their resources and capabilities to fulfil the overall corporate objectives outlined by senior management.
SBUs develop and harness their core competencies. A core competency is a task, skill or resource that enables a company to have an advantage over their competitors. A core competency has the following three characteristics:
• difficult to imitate
• potentially opens access to a wide variety of markets
• increases perceived customer benefits.