Analytical Framework for Formulating Competitive Strategy in Fragmented Industries
Compete in fragmented industries
This framework provides a step-by-step approach to formulating competitive strategy in fragmented industries. It involves conducting industry and competitor analysis, identifying the causes of fragmentation, and assessing the potential for overcoming fragmentation through innovation or strategic change.
- Conduct thorough industry and competitor analysis to understand the competitive forces and structure of the industry.
- Identify the causes of fragmentation and assess their relationship to the economics of the industry.
- Evaluate the potential for overcoming fragmentation through innovation or strategic change.
- Conduct Industry and Competitor AnalysisAnalyze the industry and competitors to identify the sources of competitive forces, industry structure, and competitor positions.Pro tipUse tools like the Five Forces framework to analyze the industryWarningBe aware of the limitations of industry and competitor analysis in fragmented industries
- Identify Causes of FragmentationIdentify the causes of fragmentation in the industry and assess their relationship to the economics of the industry.Pro tipConsider factors like technological uncertainty, strategic uncertainty, and high initial costsWarningBe cautious of assuming that all competitors have the same overhead and objectives
- Assess Potential for Overcoming FragmentationEvaluate the potential for overcoming fragmentation through innovation or strategic change.Pro tipConsider the role of innovation and strategic change in altering the industry structureWarningBe aware of the risks of overreacting to new products or technologies
- Select Best Alternative for Coping with FragmentationSelect the best alternative for coping with the fragmented structure, considering factors like resources, skills, and industry trends.Pro tipConsider the use of strategic group analysis to identify potential competitorsWarningBe cautious of assuming that a single approach will work for all companies in the industry
The solar heating industry is a fragmented industry with many small, privately held firms. Companies in this industry must navigate the challenges of technological uncertainty, strategic uncertainty, and high initial costs.
The personal computer industry is an example of an emerging industry with rapid growth and technological change. Companies in this industry must be able to adapt quickly to changing market conditions and technological advancements.
The framework was developed by Michael E. Porter, a renowned expert in competitive strategy, as part of his work on industry analysis and competitive strategy.