The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business

situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations. Understanding the Tool: Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. These are: 1. Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are. 2. Buyer Power: Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on. If you deal with few, powerful buyers, then they are often able to dictate terms to you. 3. Competitive Rivalry: What is important here is the number and capability of your competitors. If you have many competitors, and they offer equally attractive products and services, then you'll most likely have little power in the situation, because suppliers and buyers will go elsewhere if they don't get a good deal from you. On the other hand, if no-one else can do what you do, then you can often have tremendous strength. 4. Threat of Substitution: This is affected by the ability of your customers to find a different way of doing what you do for example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it. If substitution is easy and substitution is viable, then this weakens your power. 5. Threat of New Entry: Power is also affected by the ability of people to enter your market. If it costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it. These forces can be neatly brought together in a diagram like the one in figure 1 below: Figure 1 - Porter's Five Forces

Example:
Martin Johnson is deciding whether to switch career and become a farmer he's always loved the countryside, and wants to switch to a career where he's his own boss. He creates the following Five Forces Analysis as he thinks the situation through: Figure 2 - Porter's Five Forces Example - Buying a Farm

POERTERS GFENERIC STRATEGY These three approaches are examples of "generic strategies", because they can be applied to products or services in all industries, and to organizations of all sizes. They were first set out by Michael Porter in 1985 in his book Competitive Advantage: Creating and Sustaining Superior Performance. Porter called the generic strategies "Cost Leadership" (no frills), "Differentiation" (creating uniquely desirable products and services) and "Focus" (offering a specialized service in a niche market). He then subdivided the Focus strategy into two parts: "Cost Focus" and "Differentiation Focus". These are shown in Figure 1 below.

The Cost Leadership Strategy Porter's generic strategies are ways of gaining competitive advantage in other words, developing the "edge" that gets you the sale and takes it away from your competitors. There are two main ways of achieving this within a Cost Leadership strategy: Increasing profits by reducing costs, while charging industry-average prices.

Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you've reduced costs.

Remember that Cost Leadership is about minimizing the cost to the organization of delivering products and services. The cost or price paid by the customer is a separate issue!

The Cost Leadership strategy is exactly that it involves being the leader in terms of cost in your industry or market. Simply being amongst the lowest-cost producers is not good enough, as you leave yourself wide open to attack by other low cost producers who may undercut your prices and therefore block your attempts to increase market share. You therefore need to be confident that you can achieve and maintain the number one position before choosing the Cost Leadership route. Companies that are successful in achieving Cost Leadership usually have: Access to the capital needed to invest in technology that will bring costs down.

Very efficient logistics. A low cost base (labor, materials, facilities), and a way of sustainably cutting costs below those of other competitors.

The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost reduction are not unique to you, and that other competitors copy your cost reduction strategies. This is why it's important to continuously find ways of reducing every cost. One successful way of doing this is by adopting the Japanese Kaizenphilosophy of "continuous improvement".

DIFFRENTIATION STRATEGY Differentiation involves making your products or services different from and more attractive those of your competitors. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support and also brand image that your customers value. To make a success of a Differentiation strategy, organizations need: Good research, development and innovation.

The ability to deliver high-quality products or services. Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings.

Large organizations pursuing a differentiation strategy need to stay agile with their new product development processes. Otherwise, they risk attack on several fronts by competitors pursuing Focus Differentiation strategies in different market segments. The Focus Strategy Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low cost or wellspecified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers. This makes their particular market segment less attractive to competitors. As with broad market strategies, it is still essential to decide whether you will pursue Cost Leadership or Differentiation once you have selected a Focus strategy as your main approach: Focus is not normally enough on its own. But whether you use Cost Focus or Differentiation Focus, the key to making a success of a generic Focus strategy is to ensure that you are adding something extra as a result of serving only that market niche. It's simply not enough to focus on only one market segment because your organization is too small to serve a broader market (if you do, you risk competing against better-resourced broad market companies' offerings.) The "something extra" that you add can contribute to reducing costs (perhaps through your knowledge of specialist suppliers) or to increasing differentiation (though your deep understanding of customers' needs).

Generic strategies apply to not-for-profit organizations too. A not-for-profit can use a Cost Leadership strategy to minimize the cost of getting donations and achieving more for their income, while one with pursing a Differentiation strategy will be committed to the very best outcomes, even if the volume of work they do as a result is lower. Local charities are great examples of organizations using Focus strategies to get donations and contribute to their communities.

Definition of 'Core Competencies' The main strengths or strategic advantages of a business. Core competencies are the combination of pooled knowledge and technical capacities that allow a business to be competitive in the marketplace. Theoretically, a core competency should allow a company to expand into new end markets as well as provide a significant benefit to customers. It should also be hard for competitors to replicate.

To identify your core competences, use the following steps: 1. Brainstorm the factors that are important to your clients. 2. If you're doing this on behalf of your company, identify the factors that influence people's purchase decisions when they're buying products or services like yours (make sure that you move beyond just product or service features and include all decision-making points.) 3. If you're doing this for yourself, brainstorm the factors (for example) that people use in assessing you for annual performance reviews or promotion, or for new roles you want. 4. Then dig into these factors, and identify the competences that lie behind them. As a corporate example, if customers value small products (e.g. cell phones), then the competence they value may be "component integration and miniaturization". 2. Brainstorm your existing competences and the things you do well. 3. For the list of your own competences, screen them against the tests of Relevance, Difficulty of Imitation and Breadth of Application, and see if any of the competences you've listed are core competences. 4. For the list of factors that are important to clients, screen them using these tests to see if you could develop these as core competences. 5. Review the two screened lists, and think about them:

If you've identified core competences that you already have, then great! Work on them and make sure that you build them as far as sensibly possible. If you have no core competences, then look at ones that you could develop, and work to build them. If you have no core competences and it doesn't look as if you can build any that customers would value, then either there's something else that you can use to create uniqueness in the market (see our USP Analysis article), or think about finding a new environment that suits your competences.

6. Think of the most time-consuming and costly things that you do either as an individual or a company. 7. If any of these things do not contribute to a core competence, ask yourself if you can outsource them effectively, clearing down time so that you can focus on core competences.

Holistic Marketing is a term used to describe a strategy that enables you to look at your marketing efforts as a 'whole', which in turn helps you develop an overall or 'holistic marketing' plan. Most small businesses look at their marketing and select marketing formats to action that they are comfortable with, and therefore, omit to undertake or incorporate marketing actions that are less comfortable for them.

A quick look of component of holistic marketing:1. Integrated Marketing: -The Marketers task is to devise marketing activities &assemble fully integrated marketing programs to create, communicate and deliver value for the customers. McCathy classified these activities as marketing mix tools of four broad kinds, which he called the four Ps of Marketing Product, Price, Place & Promotion. 2. Internal Marketing: -Holistic marketing incorporates internal marketing, ensuring that everyone in the organization embraces appropriate marketing principals, especially senior management. Internal marketing is the task of hiring, training, and motivating able employees who want to serve customer. 3. Relationship Marketing: - a key goal of marketing is to develop deep, enduring relationship with people & organization that could directly indirectly affect the success of the firms marketing activities. Relationship marketing aims to build mutually satisfying long-term relationship with key constituents (components) in order to earn or retain the business. [Marketing partners (channels, supplies, distributors, dealers, agencies)] 4. Performance Marketing: -Holistic marketing incorporates performance marketing and understanding the returns to the business from marketing activities and programs, as well as addressing borders concern & their legal ethical, social & environment effects.Financial Accountability should be there in the company. Social responsibility marketing is also a part of performance marketing.

Relationship marketing is designed to develop strong connections with customers by providing them with information directly suited to their needs and interests and by promoting open communication. This approach often results in increased word-of-mouth activity, repeat business and a willingness on the customers part to provide information to the organization. Relationship marketing contrasts with transactional marketing, an approach that focuses on increasing the number of individual sales. Most organizations combine elements of both relationship and transaction marketing strategies. 7 PS OF SERVICE MARKETING The product marketing mix consists of the 4 Ps which are Product, Pricing, Promotions and Placement. These are discussed in my article on product marketing mix the 4 Ps. The extended service marketing mix places 3 further Ps which include People, Process and Physical evidence. All of these factors are necessary for optimum service delivery. Let us discuss the same in further detail. Product The product in service marketing mix is intangible in nature. Like physical products such as a soap or a detergent, service products cannot be measured. Tourism industry or the education industry can be an excellent example. At the same time service products are heterogenous, perishable and cannot beowned. The service product thus has to be designed with care. Generally service blue printing is done to define the service product. For example a restaurant blue print will be prepared before establishing a restaurant business. This service blue print defines exactly how the product (in this case the restaurant) is going to be. Place - Place in case of services determine where is the service product going to be located. The best place to open up a petrol pump is on the highway or in the city. A place where there is minimum traffic is a wrong location to start a petrol pump. Similarly a software company will be better placed in a business hub with a lot of companies nearby rather than being placed in a town or rural area. Promotion Promotions have become a critical factor in the service marketing mix. Services are easy to be duplicated and hence it is generally the brand which sets a service apart from its counterpart. You will find a lot of banks and telecom companies promoting themselves rigorously. Why is that? It is because competition in this service sector is generally high and promotions is necessary to survive. Thus banks, IT companies, and dotcoms place themselves above the rest by advertising or promotions. Pricing Pricing in case of services is rather more difficult than in case of products. If you were a restaurant owner, you can price people only for the food you are serving. But then who will pay for the nice ambience you have built up for your cust

omers? Who will pay for the band you have for music? Thus these elements have to be taken into consideration while costing. Generally service pricing involves taking into consideration labor, material cost and overhead costs. By adding a profit mark up you get your final service pricing. You can also read about pricing strategies. Here on we start towards the extended service marketing mix. People People is one of the elements of service marketing mix. People define a service. If you have an IT company, your software engineers define you. If you have a restaurant, your chef and service staff defines you. If you are into banking, employees in your branch and their behavior towards customers defines you. In case of service marketing, people can make or break an organization. Thus many companies nowadays are involved into specially getting their staff trained in interpersonal skills and customer service with a focus towards customer satisfaction. In fact many companies have to undergo accreditation to show that their staff is better than the rest. Definitely a USP in case of services. Process Service process is the way in which a service is delivered to the end customer. Lets take the example of two very good companies Mcdonalds and Fedex. Both the companies thrive on their quick service and the reason they can do that is their confidence on their processes. On top of it, the demand of these services is such that they have to deliver optimally without a loss in quality. Thus the process of a service company in delivering its product is of utmost importance. It is also a critical component in the service blueprint, wherein before establishing the service, the company defines exactly what should be the process of the service product reaching the end customer. Physical Evidence The last element in the service marketing mix is a very important element. As said before, services are intangible in nature. However, to create a better customer experience tangible elements are also delivered with the service. Take an example of a restaurant which has only chairs and tables and good food, or a restaurant which has ambient lighting, nice music along with good seating arrangement and this also serves good food. Which one will you prefer? The one with the nice ambience. Thats physical evidence. Several times, physical evidence is used as a differentiator in service marketing. Imagine a private hospital and a government hospital. A private hospital will have plush offices and well dressed staff. Same cannot be said for a government hospital. Thus physical evidence acts as a differentiator. This is the service marketing mix (7p) which is also known as the extended marketing mix.

Types of Attack Strategies Frontal attack Flank attack Encirclement attack Bypass attack Guerrilla attack

FRONTAL ATTACK Seldom work unless The challenger has sufficient fire-power (a 3:1 advantage) and staying power, andThe challenger has clear distinctive advantage(s) e.g. Japanese and Korean firms launched frontal attacks in various ASPAC countries through quality, price and low cost FLANK ATTACK Attack the enemy at its weak points or blind spots i.e. its flanksIdeal for challenger who does not have sufficient resourcese.g. In the 1990s, Yaohan(japanese dept store) attacked Mitsukoshi and Seibus flanks by opening numerous stores in overseas markets ENCIRCLEMENT ATTACK Attack the enemy at many fronts at the same timeIdeal for challenger having superior resources e.g. Seiko attacked on fashion, features, user preferences and anything that might interest the consumer BYPASS ATTACK By diversifying into unrelated products or markets neglected by the leader Could overtake the leader by using new technologies e.g. Pepsi use a bypass attack strategy against Coke in China by locating its bottling plants in the interior provinces GURILLA ATTACK By launching small, intermittent hit-and-run attacks to harass and destabilize the leader Usually use to precede a stronger attack e.g. airlines use short promotions to attack the national carriers especially when passenger loads in certain routes are low