Question

Corporate-level strategy involves deciding which industry the firm will operate in. What should organizations be looking for when thinking about an industry (we discussed this with Porter’s Five Forces and industry analysis)

Answer 1

Answer: Whenever an organization makes decisions regarding which industry they need to operate they first need to estimate that whether they can earn above average profits in that industry and create a competitive advantage. First thing that they need to estimate is the level of competition in the industry and what competitive advantage they have or can develop in the industry. It is not worthy to enter into a highly competitive industry without a competitive advantage. Second thing that they need to establish is that there are no significant substitute products available that can replace the company’s products. Thirdly they need to ensure that there are sufficient suppliers in the industry to support their needs of raw materials. Fourthly they need to establish that entry barriers are present in the industry and it is not easy for new players to establish themselves in the industry. Lastly they need to establish that bargaining power of the customers is limited so that they may not force the company to lower its prices and give up profit margins. If all these conditions are favorable ,then the company should consider entering the industry in its corporate level strategy.