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Lecture Notes for Competitive Strategies in Technology Management
Draft document; October 2008
Lecture Notes for Competitive Strategies in Technology Management
(Note: these notes, intended to supplement your class notes, are excerpts from a larger
chapter on the same subject, which contains other frameworks and a detailed example.
This is a draft document: so please report any “typos”, and other errors; feedback is also
welcome.)
1. Introduction
“Successful and unsuccessful strategies shape a company’s destiny” – R.A. Burgelman,
Strategy is Destiny
Technology firms generally perform three important and inter-related activities: strategy,
planning, and operations, each having a different intent and time horizon. The function of
strategy, which has a time horizon of years, is, in general, to set the long-term direction or
position of the firm, for example define the technology, product, or service that the firm
intends to develop, and determine the intended market for the product or service. The
function of planning, which, in general, has a time horizon of several months to years, is
to translate long-term strategy into medium-term activities, e.g., the portfolio of projects
that the firm should execute the time-phased planning of these projects, and resource
allocation. The function of operations, which has the time-horizon of days to months, is,
in general, to translate medium-term planning activities into short-term product design,
development, and delivery activities such as prototyping, manufacturing, product release,
and shipment. In this chapter we address strategy.
There are several different types of strategy, including competitive strategy, technology
strategy, product market strategy, financial strategy, and supply-chain strategy. For a
technology company to be successful all these strategies need to be aligned with each
other, and with the business goals of the firm. Competitive strategy, which is the focus of
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this chapter, is the highest level of strategy in the firm, and is intimately related to the
mission and vision of the firm and also to setting the direction for all the other strategies
in the firm.
There are several schools of strategy formation: design, planning, positioning (Mintzberg,
1998). In this chapter we focus on two important schools or frameworks for strategycreation or “strategy-making” that are particularly important for high-technology
companies. The first framework is the so-called “positioning” approach due to Porter
(Porter, 1980), which views strategy-making as an analytic process performed at the
industry-market structural level. The second framework (not included in these notes),
due to Burgelman (Burgelman 2002), based on evolutionary organization theory, views
strategy-making as an evolutionary process performed at three levels: industry-company
level, company-level, and intra-company level. When these two frameworks are
combined, an integrated approach to competitive strategy emerges: from industry-market
level all the way to intra-company level. A unique aspect of creating competitive strategy
for a technology company, and in particular, a high-technology company, is that the timescales for the evolution of markets, industries, and technologies are, in general, much
shorter (“faster”) compared to other industries. Therefore, the strategy frameworks of the
positioning school needs to be augmented with functional maps (Clark and Wheelwright,
1993), which capture the evolution of the market, industry, and technology relevant to the
company, and which can therefore be used to create strategy.
1.1 Objectives of the chapter
The objectives of this chapter are as follows:
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1. describe the positioning framework for the creation of competitive strategy.
2. provide an integrated competitive strategy process which is useful in developing
competitive strategy in a technology company.
3. demonstrate the application of the process using a detailed example of a high
technology company (this is the INTEL problem assigned as homework: HW
#2, Problem 1 ).
1.2 Organization of the chapter
In Section 2, we establish the overall context for analyzing and designing the competitive
strategy in a firm. In this In Section 3 we describe the positioning framework, due to
Porter (Porter, 1980), for developing competitive strategy within a technology company.
The key elements of this framework, structural analysis of industry and development of
competitive strategy, are developed in this section. Section 4 describes the organizational
evolutionary theoretic approach for strategy-making. The creation and use of functional
maps is explained in Section 5. The positioning framework, the evolutionary organization
theoretic framework, and functional maps are combined in Section 6 to develop a process
for competitive strategy-making in a technology company. Section 7 demonstrates the
application of the process to an extended and detailed example, while Section 8
summarizes the chapter and draws conclusions.
2. Overall context and types of Strategy
We study competitive strategy within the overall context of technology firms, which
operate within a so-called industry, e.g., the computer industry, the consumer electronic
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industry, the cellular phone industry. Each industry, ideally, serves a market, which
denotes the buyers or customers of the products and services offered by the industry.
Figure 1 goes here
A structural representation of the technology company from the viewpoint of strategy is
shown in Figure 1, where four important types of strategy are identified: technology
strategy, marketing strategy, competitive strategy, and financial strategy. All strategies
must be driven by and aligned to vision and mission of the firm, as well as by business
goals such as desired market share, revenue, growth.
The objective of technology strategy (Clark and Wheelwright, 1993) is to guide the
technology company in developing, acquiring, and applying technology for competitive
advantage. An important part of technology strategy is the definition of technical
capabilities (e.g., advanced device design, rapid prototyping, automated assembly) that
provide competitive advantage.
The objective of product/market strategy is to clearly establish the following: define what
differentiates the product from its competitors; identify market segments for the product,
the customer needs of these segments, and the corresponding products (i.e., product lines)
that will be offered to these segments; etc. An important outcome of product/market
strategy is to define the product roadmap, including sales volume and price, necessary to
realize the business goals.
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Competitive Strategy, the focus of this chapter, is the high-level strategy used by the firm
to realize its business goals, in particular, profitability, in the face of competition.
Competitive strategy conventionally refers to how the firm competes at the industrymarket level (Porter, 1980). However, in the rapidly evolving industry and market
landscape of high-technology, competitive strategy, in turn, depends on three levels of
“strategy-making” as follows (Burgelman, 2002):
1. Industry-company level. At this level the firm must determine its strategic
position, its core competencies, and its strategic action.
2. Company level: At this level strategy-making involves induced strategy and
autonomous strategy.
3. Intra-company level: At this the internal level autonomous strategy is created.
In successful companies, it is the tight coupling of strategy these three levels of strategymaking with the highest-level (i.e., industry-market level) competitive strategy that,
results in successful strategic action where what the company actually does, e.g., the
product lines it develops and markets, results in the realization of its business goals.
The first strategy framework, described in Section 3, analyzes competitive strategy at the
industry-market level using the five forces approach to examine the structure of the
industry (Porter, 1980) and the resulting dynamics between functional groups of players
(e.g., competitors, suppliers) in the industry. In this positioning approach, strategy is
viewed as taking a generic position in a competitive market. The second strategy
framework, described in Section 4, analyzes strategy-making at the industry-level,
company level, and intra-company level using evolutionary organization theory
(Burgelman 2002). In this evolutionary organizational theory approach, each company is
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an organizational ecology within which strategy emerges through two basic mechanisms,
external selection and internal selection. When companies start, because they are new and
small¸ the external selection mechanism dominates. As a company grows in size and
becomes more established, internal selection plays an important role.
It is also useful to mention two other strategies that are closely related to competitive
strategy. Financial strategy includes issues such as capital budgeting and portfolio
management, i.e., deciding on which technology and product development projects to
fund in order to maximize the cumulative expected profit. Another important and related
strategy is supply chain strategy (Chopra), which specifies the service, distribution, and
operations functions, performed either in-house or outsourced, that the company should
do well in order to successfully realize its intended competitive strategy.
3. The “Positioning” Framework
We first present a historical overview of the positioning or analytic school of strategy.
Then, we develop the five forces framework (Porter, 1980) and the approach to creation
of competitive strategy that is closely related to the five forces framework. We will use
the personal computer industry to illustrate the approach.
Historical Overview
The analytical approach to strategy started in the 1960s and culminated in the year 1980
when Michael Porter published “Competitive Strategy”. Porter was influenced by the
field of industrial organization, which focused on analyzing industries rather than
individual firms.
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The positioning school of strategy which emerges from the competitive school is based
on the following assumptions (Mintzberg, 1998): the marketplace is competitive; strategy
is a generic position in the marketplace; strategy formation is the selection of a generic
position based on analysis. The underlying assumption is that industry or market structure
drives position which drives the organizational structure of the firm.
The Boston Consulting Group (BCG) introduced two techniques: the growth-share
matrix, and the experience curve. The growth-share matrix for a firm, developed in the
early 1970s, is a 2x2 matrix with “growth” along one dimension, and “market share”
along the other dimension. Each of these variables can take two values, “high” or “low”
resulting in a 2x2 matrix. Therefore, the product portfolio of a firm can be decomposed
into four combinations of growth and market share, each with a well defined meaning:
(High growth, high market share) or “stars”, (high growth, low share) or “question
marks”, (slow growth, high share) or “cash cows”, and (slow growth, low share) or
“dogs”. The approach to strategy using this matrix would be to have a portfolio balanced
mainly between cash cows (the stable business of the firm, e.g., “MAC” computers in the
case of Apple) and stars (e.g., the iPod, in the case of Apple).
The experience curve, developed in 1965-66, is based on the idea that accumulated
experience by a firm influences costs and prices. The claim “for the experience curve was
that for each cumulative doubling of experience, total costs would decline roughly 20%
to 30% because of economies of scale, organizational learning, and technical innovation”
(Ghemawat, 1999)
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In 1971, the consulting firm McKinsey came up with the GE/McKinsey nine-block
matrix called the Industry Attractiveness-Business Strength matrix (Ghemawat, 1999),
which plotted business strength [High, Medium, Low] along one axis, and industry
attractiveness [High, Medium, Low] along the other axis. The basic idea was to divide
the company into “strategic business units (SBUs)”, and then make the appropriate
strategic recommendations for each SBU depending on its “location” in the matrix.
These methods of portfolio analysis had the following problems. First, the
recommendations for each SBU were very sensitive to the method of portfolio analysis
employed. Second, the mechanical process of using historic industry and company data to
determine recommendations usually led to adjusting and modifying current initiatives
rather than addressing how to deal with existing and new forms of competition. To
improve this process, Gluck, in 1979, suggested a four-phase strategy process: financial
planning, forecast-based planning, externally-orientated planning, and strategic
management (Ghemawat, 1999). Portfolio analysis also came under attack from Hayes
and Abernathy in 1980, who contended that the methods used tended to focus on
reducing financial risk at the expense of technological innovation.
However, portfolio analysis brought out two important high-level determinants ( or
dimensions) of the profit potential or profitability of firms: industry attractiveness, which
is the profit potential of an industry (e.g., the personal computer industry) relative to
other industries; and the competitive position of the specific company (e.g., Dell, Apple)
within a given industry. These two determinants play an important role in Porter’s
analytical approach to competitive strategy that emerged in 1980, and which will be the
focus of the next section. The structural analysis of industry, a cornerstone of Porter’s
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approach, can be viewed as an extension of two earlier frameworks: the well-known
supply-demand analysis, and industrial organization (IO), that focused on the relation
between the structure of industries and their profit potential. Porter relaxed the two basic
assumptions of supply-demand analysis, namely, many competitors and homogeneity of
competitors, while expanding the focus of IO to business strategy.
The Five Forces Framework and Competitive Strategy
In this framework there are two high-level stages in the creation of competitive strategy,
each stage corresponding to a high-level determinant of profitability mentioned in the
previous section. The first stage is the assessment of the attractiveness of the industry in
which a given company is embedded based on a structural analysis of the industry. In this
stage, called the five forces framework, five forces that influence industry attractiveness
are identified, as well as the factors (e.g., number of competitors, size of competitors,
capital requirements) that determine the intensity of each force and therefore the
cumulative intensity of the five forces. The purpose of the five forces framework is to
relate the degree (or intensity) of competition in a given industry, as qualitatively
measured by the combined strength (or intensity) of five forces, to the attractiveness of
the industry, defined as its ability to sustain profitability. Based on the structural analysis,
a particular company may be in a very attractive industry (e.g., pharmaceuticals) or in an
unattractive industry (e.g., steel). However, though a firm exists in an unattractive
industry, it can still be highly profitable by choosing the proper competitive position
within the industry, for example, e.g., a mini-mill such as Nucor in the steel industry in
the nineteen-eighties (Ghemawat). The second stage of strategy creation addresses the
competitive strategy available to the firm in order to achieve a strong competitive
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position. Ideally, a firm would want to be in a very attractive industry (e.g.,
pharmaceuticals) and have a strong competitive position (e.g., large pharmaceutical firms
such as Smith Klein or Glaxo) within the industry.
The five forces framework for the structural analysis of an industry is as follows. First,
we define the following terms used in the structural analysis of the industry: industry,
market, competitors, new entrants, substitutes, buyers, and sellers. The term industry
denotes (1) the manufacturers (or producers) and (2) the suppliers of a primary product or
service, as well as (3) the manufacturers of alternative products and services that could
serve as a substitute. For example, the (conventional) personal computer (PC) industry
would include PC manufacturers like Dell and Apple, suppliers of semiconductor chips
like Intel and Micron, suppliers of disc drives like Seagate, suppliers of software such as
Microsoft, etc. Substitute products could be pen-based tablet PCs or small hand-held
personal digital assistants (PDAs). In the five forces framework described below,
manufacturers and producers will designated as (1) competitors in the industry if they
already have established products, or (2) new-entrants if they are trying to enter the
industry, or (3) substitutes, if they provide alternative (substitute) products. The term
market denotes the buyers (or customers) of the product or service. For example, the
market for PCs would include enterprises and individual consumers.
The analytical process of strategy analysis and creation can be decomposed into the
following five steps.
1. Create a map of the industry in which the technology company is embedded.
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There are five key sets of players that constitute the business landscape: competitors, new
entrants, substitutes, suppliers, and buyers. Identify key players (companies) for each
industry.
2. Perform a five forces analysis of the industry structure.
The five forces that influence the intensity of competition in a particular industry, and
therefore the profitability of the firms within the industry: Force 1: the degree of rivalry
(or competition) between the competitors; Force 2: the threat of new entrants (or the
inverse of this force, the barrier to entry); Force 3: the threat of substitutes; Force 4:
Buyer Power (to demand lower prices); Force 5: Supplier Power (to increase material
prices).
For each force, determine the key structural determinants which affect the intensity of the
force. Porter and Ghemawat provide a detailed set of the determinants for each force,
some of which are given in the table below. In the last column of this table we indicate
plausible values of each force for the PC industry in the nineteen nineties.
Table 1 goes here
3. In theory, one would, qualitatively determine the strength of each force, as indicated
in the third column of the above table, and then determine the cumulative or
combined intensity of the five forces. The collective intensity or strength of the forces
will determine the structural strength of the industry, as characterized by
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attractiveness, or the profit potential of the industry. The profit potential is measured
by the long term return on invested capital (ROIC). If the collective strength of the
forces is high, as in the steel industry, then the corresponding profit potential or
attractiveness is low, and vice-versa. At one extreme of this analysis is the perfectly
competitive free market, where there are numerous firms all offering very similar
products that cannot be differentiated (therefore, the force of rivalry is high), entry is
free (therefore, the threat of both new entrants and substitutes is high), and bargaining
power of both suppliers and buyers is low. Using the PC industry of the 1990’s as an
example, the qualitative values of the forces shown in the last column of the above
table would lead one to conclude that the cumulative strength of the five forces was
medium to high, and therefore the attractiveness of the industry, i.e., its profitability,
was medium to low. The PC industry in the nineteen-nineties would therefore not be
attractive to new entrants, and in fact, in the early 2000s, HP’s computer business was
unprofitable, and IBM sold its computer business to Lenovo. (It is important to note
that HP’s unprofitability in computer business in the early 2000s cannot be attributed
solely to industry attractiveness being low, but is also due to issues associated with its
acquisition of the computer company Compaq.)
4. Select a competitive positioning strategy
The basic premise of Porter and Hall was that for a firm to be successful (in a market) it
had to compete based on one of two sources of competitive advantage: cost, i.e., by
providing low cost products, or differentiation, i.e., by differentiating its products from its
competitors with respect to quality and performance. Porter also proposed that a firm
needs to select its strategic target: either offering a product to the entire market (“market12
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wide”), or offering a product for a particular market segment. Using these two
dimensions (source of competitive advantage, and strategic target), Porter proposed the
following three generic competitive strategies:
1. Cost Leadership: offering the lowest costs products to the entire market
2. Differentiated: offering highly unique products (as perceived by the customer) to
the entire market
3. Focus: offering products which serve the needs of a niche segment of the market
Porter’s claim is that for a company to be successful in the industry in which it operates it
must choose between one of the three generic strategies: cost leadership, differentiated,
and focus. If one uses the personal computer industry in the US during the 1990’s as an
example, then the competitive strategies of the major players was as follows: Dell was
the low-cost leader; HP had a differentiated strategy with high-quality products; Apple
had a focus strategy, targeting a narrow market segment of users who whom the userexperience (look, feel, and graphical user interfaces) were extremely important; and IBM
had a mixed strategy.
5. Link competitive strategy to strategic planning (Ghemawat 1999)
In order for a company to derive competitive advantage (or position) within its industry,
the company needs to maximize, relative to it competitors, the difference between the
buyer’s willingness to pay and the costs incurred in delivering the product to the buyer.
Therefore, the next step in the competitive analysis is for the company to link competitive
strategy to strategic planning by analyzing all the activities involved in differentiation and
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cost, and, to this end, a value chain (Porter, 1985) is an extremely important tool.
According to Porter, “the value chain disaggregates a firm into its strategically relevant
activities in order to understand the behavior of costs and the existing and potential
sources of differentiation.” A three step process for using these activities, first to analyze
costs, then to analyze buyer’s willingness to pay, and finally to explore different strategic
planning options to maximize the difference between willingness to pay and cost, is
developed in (Ghemawat, 1999).
Finally, it is important to keep in mind that competitive strategy needs to evolve,
especially in a high-technology company where markets, industries, and technologies, are
changing relatively rapidly. A good example of the evolution of competitive strategy is
IBM’s strategic decisions to evolve from a product-based company in the early nineties
to a services-led company at the present time. In the early nineties, when the company
was in trouble, IBM closely examined its business model and strategic direction, and
decided to “stay whole” by moving its focus from products and hardware to solutions.
One result of this strategic shift was the creation of IBM Global Services in the midnineties. By the late-nineties the company moved into e-business solutions, and extended
this model in the 2000’s to “business-on-demand”. One result of these shifts in strategy
was IBM’s decision to exit the Personal Computer Market by selling its PC business to
Lenovo.
A useful framework for understanding these shifts in competitive strategy within a
company is the Evolutionary Organizational approach, discussed in the following section.
A useful tool to guide the shifts in competitive strategy is the functional map described in
Section 5.
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4. Functional Maps
An important feature of our approach to developing competitive strategy in a technology
firm is the integrated approach to strategy for a technology company, which relates
company strategy to the company’s business goals, business strategy, technology
strategy, and product marketing strategy. Since, markets, industries, technologies, and
products for a technology company are continually evolving, an important concept that
plays a vital role in the creation of strategy, and, in particular, competitive strategy, is the
functional map (Clark and Wheelwright, 1993).
A functional map essentially is a time-based evolutionary map of a key metric for an
important organizational function, e.g., a product performance metric map for the
engineering function in a technology firm, e.g., the well-known Moore’s Law in the
semiconductor industry. Since the time-scales for the evolution of markets, industries and
technologies for technology companies, especially “high-tech” companies, is short
compared to other industries, the creation of the appropriate functional maps is critical to
strategy formation in a technology company. As an example, in the relatively short span
of four decades, information technology evolved from mainframes through workstations,
servers and personal computers to internet-based and mobile computing. Here are some
useful “dimensions” along which to create functional maps for strategy creation:
a) Evolution of the industry in which the enterprise operates (changes in technology,
customer needs, competitive landscape, etc.)
b) Evolution of strategy - business, technology, and market - of the enterprise
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c) Evolution of technology (including manufacturing), product platforms, and
product lines of the enterprise
d) The processes used for technology, product, and process development within the
enterprise
e) Growth (or decline) of the enterprise with respect to of market share, revenues,
costs, profits, etc.
f) Organizational structure of the enterprise
g) Key decisions made at different stages in the life of enterprise, and the drivers for
these decisions
h) The interconnections and relationships between all the above dimensions
A multi-dimensional functional map for Intel is given in the next section. A very
simple example of how functional maps can shape strategy is in the information
technology industry. A functional map of the Information Technology Industry from
the 1990s to the 2000s would reveal a shift from “products” to services”. The
Services business in 2007-08 is approximately $750 billion, with IBM, whose share
of this market is $54 billion, being the leader. HP, whose own share in the market is
$17 billion seeing this shift in the industry and the need to build competitive strength,
acquired EDS, whose share of the market is $21 billion. The combined share of HP
and EDS would then be $38 billion, allowing it to compete more strongly with IBM.
Another simple example of the use of a functional map in creating strategy is in the
software industry. In the 2000s the software market is moving from a “packaged”
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product to online software, where individuals can get software that is mostly free,
supported by advertising. Google is using its leadership on the Web to provide online
software that competes with Microsoft’s packaged software. Understanding this shift
from packaged to online, and the corresponding change in the revenue model from
direct sales (of product) to advertising, Microsoft is aggressively entering the online
advertising business.
5. Process for developing competitive strategy in a technology firm
If we combine the positioning framework for competitive strategy due to Porter, the
evolutionary organization theoretic framework due to Burgelman, and augment these
with the creation of relevant functional maps, then the resulting process of developing
competitive strategy in a company can be decomposed into four stages, as follows.
Stage 1: Company Analysis
1. Establish the business goals and objectives (ROI, %market share, revenue,
and growth aspirations).
2. Determine the technology strategy and product market strategy for the
company.
3. Define the overall development goals and objectives to align business goals,
technology, and market strategies.
4. Develop the functional evolutionary maps of the markets and industry in
which the company is embedded. Create functional maps (time-based
evolutionary maps) for technology, product market, and manufacturing
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strategy of the firm. These maps will be useful in the process of assessing and
creating competitive strategy.
Stage 2: Industry Analysis
1. Perform the structural analysis of the industry in which the company is either
an active competitor, or a new entrant, or a substitute. A convenient form for
performing this analysis is the table below. We have indicated a few simple
examples of what the entries in this table might look like from the viewpoint
of a new entrant. (Note that a sixth force, influence of competitors has been
included. For a discussion of this force, see Ghemawat, 1999).
Table 2 goes here
-----------------------------------------------------------------------------------------2. Determine the existing competitive strategy of the company within the
industry.
3. Determine the relationships between the company and the other players in the
industry.
Stage 3: Assessment and Evolution of the company’s strategy within the relevant
markets and industries
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1. Using the functional maps of the overall markets and industry in which the
company is embedded, as well as the company specific functional maps,
assess the evolution of the company’s competitive strategy.
2. Decide on what the company’s future competitive strategy should be, and the
corresponding
technology
strategy,
product
market
strategy,
and
manufacturing strategy.
6. References
Burgelman, R.A., “Strategy is Destiny”, The Free Press, New York, 2002.
Chopra, Sunil, and Peter Meindl, “Supply Chain Management, Strategy, Planning, and
Operations”, Third Edition, Pearson Prentice-Hall, 2007.
Clark, K. B., and S.C. Wheelwright, Managing New Product and Process Development,
Text and Cases, The Free Press, New York, 1993.
Edwards, Cliff, “Intel”, Business Week, March 8, 2004, Pages 56-64.
Ghemawat, Pankaj, Strategy and the Business Landscape, Text and Cases, Addison
Wesley, 1999.
Mintzberg, Henry and Bruce Ahlstrand, and Joseph Lampel, Strategy Safari, The Free
Press, New York, 1998
Porter, Michael, Competitive Strategy, New York, The Free Press, 1980
Porter, Michael, Competitive Advantage, The Free Press, New York, 1985
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Glossary
Autonomous Strategy (also see induced strategy). Autonomous strategy refers to
actions of individuals or small groups within the company that are outside the scope
of current high-level corporate strategy. While autonomous strategy is constrained by
the company’s distinctive (core) competencies, it usually (1) involves new
competencies that are not the focus of the firm, and (2) results in so-called “disruptive
technologies” that could change the strategic direction of the firm (Burgelman, 2002).
Company Structure (vertical vs. horizontal). A vertical company is one which uses
only its own proprietary technologies. A horizontal company is one which (usually
because of the existence of open-standards) which does not solely rely on its own
proprietary technologies, but usually uses technologies and products from other
suppliers. In the computer industry, traditionally, Apple is an example of a vertical
company, while Dell is an example of a horizontal company. The computer industry,
itself, moved from a vertical structure to a horizontal structure in the 1980s
(Ghemawhat, 1999).
Competitive Strategy. Competitive Strategy is the high-level strategy used by the
firm to realize its business goals, and in particular, profitability, in the face of
competition. Porter identified three generic competitive strategies: differentiated,
cost-leadership, and focus (Porter, 1980).
Corporate Strategy (official corporate strategy). Corporate strategy is top
management’s view of the basis of the company’s success. It includes distinctive
(core) competencies, product-market domains, and core values (Burgelman, 2002)
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Five Forces. Five forces that influence industry attractiveness are identified, as well
as the factors (e.g., number of competitors, size of competitors, capital requirements)
that determine the intensity of each force and therefore the cumulative intensity of the
five forces. The purpose of the five forces framework is to relate the degree (or
intensity) of competition in a given industry, as qualitatively measured by the
combined strength (or intensity) of five forces, to the attractiveness of the industry,
defined as its ability to sustain profitability (Porter, 1980).
Functional Map. A functional map essentially is a time-based evolutionary map of a
key metric for an important organizational function, e.g., a product performance
metric map for the engineering function in a technology firm, e.g., the well-known
Moore’s Law in the semiconductor industry (Clark and Wheelwright, 1993).
Generic Competitive Strategy (also see substantive strategy). Porter proposed that
for a company to be successful, it must adopt one of three generic competitive
strategies: differentiated, cost leadership, and focus. Generic strategy is derived from
a firm’s distinctive core competencies (Porter, 1980).
Industry. The term industry, e.g., the consumer electronics industry, denotes (1) the
manufacturers (or producers) and (2) the suppliers of a primary product or service, as
well as (3) the manufacturers of alternative products and services that could serve as a
substitute (Porter, 1980).
Induced Strategy (also see autonomous strategy). Induced strategy refers to actions,
e.g., new product development, on the part of operational and middle-managers that
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S.Desa, ISM 105/205
Lecture Notes for Competitive Strategies in Technology Management
Draft document; October 2008
are directed at gaining or maintaining leadership in the company’s core business
(Burgelman, 2002).
Market. The term market denotes the buyers (or customers) of the product or service.
Typically markets are segmented, for example, a two-dimensional segmentation
based on the types of product (product segmentation) along one axis, and the types of
customers (customer segmentation) along the other axis. The market, as represented
by “Buyers” is an important part of the industry analysis in Porter’s framework.
Substantive Strategy (also see generic competitive strategy). Substantive strategy is
the implementation of the company’s generic strategy in a particular product-market
domain (Burgelman, 2002).
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S.Desa, ISM 105/205
Lecture Notes for Competitive Strategies in Technology Management
Draft document; October 2008
Force
Rivalry between competitors
Barrier to entry
Threat of substitutes
Buyer Power
Supplier Power
Force
Rivalry between
competitors
Barriers to entry
Key Determinants
Concentration (number)
and size of competitors
Fixed costs/value added
Brand indentity
Economies of scale
Brand identity
Capital requirements
Price/Performance of
substitutes
Switching costs
Buyer concentration
Buyer size (volume)
Switching costs
Supplier concentration
Supplier size (volume)
Switching costs
Table 1
Key
Determinants
Concentration
Size
Etc.
Brand
Supplier Power
Buyer Power
Switching
costs
Etc.
Concentration
Size
Etc.
Concentration
Size
Medium to high
Low to medium
Medium to high
Low to medium
Analysis
Intensity
Force
4 players (Dell,..) Medium
1 dominant player high
High
identity
brand High
Capital
Requirement
Etc.
Threat of
Substitutes
Strength of the force
Medium to high
of Actions
to Entry into this
market would
be difficult
Since the PC
market is hard
to enter,
explore a
different
business model,
possibly
services
High
3 major suppliers
Influence of
complementors
Table 2
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S.Desa, ISM 105/205
Lecture Notes for Competitive Strategies in Technology Management
Draft document; October 2008


Vision
Mission
Business
Goals
Technology
Strategy
Market
Strategy
Purpose of the
company
Revenue ($),
Growth (%),
Etc.
Competitive
Strategy
Financial
Strategy
Figure 1: A strategic view of the
technology firm, showing different
types of strategy
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