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Industry Analysis

The first component of the strategy logic flow is industry analysis.  To determine where to play, you must assess the industry landscape.  You must ask, what might be the distinct segments of the industry in question (geographically, by consumer preference, by distribution channel, etc.)?  Which segmentation scheme makes the most sense for the given industry today, and what might make sense in the future?  And what is the relative attractiveness of those segments, now and in the future?

Segmentation

Industry segments are distinctive subsets of the larger industry along lines such as geography, product or service type, channel, customer or consumer needs, and so on.

Attractiveness

Once you have articulated existing and new segments, you must understand the structural attractiveness of the different segments.  Other things being equal, a firm would want to play in segments that are the most attractive.

Customer Value Analysis

Armed with a map of the playing field and an analysis of the structural attractiveness of the individual segments, we can move to the second major category in this framework: an analysis of customer value.  Regardless of whether a firm wishes to be a cost lead or a differentiator, it needs to understand precisely what customers value.

What are things our channel customers value?

What are things our end consumers value?

Analysis of Relative Position

With an understanding of the industry and customers, the next step is to explore your own relative position on two levels: capabilities and costs.

Capabilities

In terms of relative capabilities, the question is, how do your capabilities stack up, and how could they stack up, against those of your competitors in meeting the identified needs of customers?  How would your capabilities be configured to translate to a measurable, sustainable competitive advantage?

What are some of our existing capabilities that are in line or ahead of our competitors?

What new capabilities would be necessary to differentiate ourselves from our competitors, providing value to both channel customers and end consumers?

Costs

The other half of an analysis of relative position relates to cost and the degree to which the organization can achieve approximate cost parity with competitors or distinctly lower costs than competitors.  Does the organization have a scale, branding, or product development advantage that enables it to deliver a superior value offering at the same cost as the cost incurred by competitors?  Or, does it have a scale advantage, a learning curve advantage, a proprietary process, or a technology that enables it to have a superior cost position?

Competitive Analysis

Thinking through these first 6 areas should produce a range of potential where to play and how to win choices.  Before even thinking about deciding between these possibilities, you need to evaluate these potential places to play and ways to win for robustness against your current competitive strategies and anticipated competitor reaction.

Is there some competitive response that could undermine or trump the where to play and how to win choices?