RSM392H1 : RSM392 Review Notes (Full)
Document Summary
What is strategy: a plan that specifies tradeoffs. 5 forces is more flexible: works where assumptions of supply/demand don"t hold: the two work hand in hand, supplier power affects marginal costs, substitutes affect slope, shape of demand curve, entry barriers affect how steep supply curve is. It"s a framework to identify the most important industry changes, a starting point for strategy. It allows firms to understand the structure of an industry, and take a position that is profitable. All 5 forces are sources of competition, and they drive profits in any industry. Industry structure, not the product it produces, emerging or mature, high or low tech, regulated or not. While many factors can affect profitability in the short run, it is industry structure that affects it in the medium-long run. Managers use this framework to position strategically, enter or exit a business by analyzing its potential, exploit industry change, shape industry structure by redividing or expanding the pie.
