Competition and Positioning
Strategy and Performance Management
Neu-Ulm University of Applied Sciences
August 4, 2025
Learning objectives
After this section, you should have a solid understanding of
- the nature and purpose of an external audit in formulating strategies;
- major external forces that impact organizations;
- Porter’s Five-Forces Model and its relevance in formulating strategies;
- Porter’s three generic strategies and their application;
- Ansoff’s growth matrix and strategic alternatives;
- and the impact of megatrends on strategic management.
Reflection
What is strategy?
External perspective
External audit
Scanning the environment to identify key variables so that strategies can be formulated to take advantage of the opportunities and reduce the impacts of the threats.
PESTEL framework
External forces can be systematically analyzed using the PESTEL framework (David & David, 2016):
Political, economic, social, technological, environmental, and legal forces.
Visualization
Porter’s Five-Forces Model
The essence of strategy is coping with competition.
Thus, in addition to the PESTEL forces, also competitive forces need to be analyzed.
Porter proposed a framework for competitive analysis of a specific industry based on five basic forces that determine the ultimate profit potential of that industry.
Visualization
Megatrends
Long-term, global trends
that bring about fundamental changes and transformations
in various domains
and at multiple levels.
Examples
The Zukunftsinstitut identifies 12 long-term, transformative forces that impact all aspects of society, economy, and individual lives:
Globalisation, urbanization, silver society, health
new work, knowledge culture, connectivity,
mobility, neo-ecology, individualization, gender-shift,
and security.
Positioning
Porter’s generic strategies
To gain competitive advantage, organizations
can pursue three generic strategies:
Cost Leadership: becoming lowest-cost producer
Differentiation: unique products with distinct value
Focus: targeting specific market segment or niche
Ansoff’s Growth Matrix
The Ansoff matrix provides four growth strategies based on existing or new products and markets:
Market penetration: existing products, existing markets Market development: existing products, new markets
Product development: new products, existing markets
Diversification: new products, new markets
Blue ocean strategy
Create and capture value without intense competition by identifying uncontested market spaces through value innovation.
Four actions framework
Organizations should consider four key questions:
Eliminate factors well below industry standard
Reduce factors well below industry standard
Raise factors well above industry standard
Create factors industry never offered
Identifying blue oceans
Organizations can explore six paths to identify new market spaces and convert three tiers of noncustomers.
Six paths to blue oceans: look across industries, strategic groups, buyer groups, complementary offerings, functional/emotional appeal, and time.
Three tiers of noncustomers: soon-to-be noncustomers, refusing noncustomers, and unexplored noncustomers.
Trade-offs
Trade-offs are necessary to secure strategic position against activities that are incompatible.
The essence of strategy is choosing what not to do as much as choosing what to do.
Two-way door decisions
Some decisions are consequential and irreversible or nearly irreversible —one-way doors— and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that —they are changeable, reversible— they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups. Jeff Bezos, 2015 Letter to the shareholders
Excursus: Climate Change
Group exercise
Neo-ecology: climate change requires sustainable and environmental practices.
Form groups of three to four students, discuss the reading material provided by Hallegatte (2009), and create a summary of the key findings concerning the importance of climate change for contemporary firms, the difficulties encountered when dealing with it, and strategies for robust decision-making. Additionally, reflect on the implications these findings have for strategic management.
Each group should be prepared to present their findings in a five-minute presentation. Please prepare slides for this within the next 25 minutes.
Key takeaways
- External audit provides systematic approach to identifying opportunities and threats in the environment
- Five external forces (economic, SCDE, political/legal, technological, competitive) must be analyzed for strategic relevance
- Megatrends shape long-term strategic context and create both opportunities and threats over 10-20+ year periods
- Porter’s Five Forces help understand industry structure and competitive dynamics affecting profit potential
- Generic strategies offer frameworks for finding effective positions in the marketg and achieving competitive advantage (e.g., Porter’s generic strategies, Ansoff matrix, blue ocean strategy)
- Trade-offs are essential — strategy is as much about choosing what not to do as choosing what to do
- Climate change represents critical strategic factor requiring robust decision-making under uncertainty
Review and consolidation
The following questions are designed to review and consolidate what you have learned and are a good starting point for preparing for the exam.
- Describe the nature and purpose of an external assessment in formulating strategies.
- What is Porter’s Five-Forces Model and what is its relevance in formulating strategies?
- What are (legal) key sources of information for identifying opportunities and threats?
- Why is [a megatrend] considered as a megatrend? Justify your answer.
- How have external factors resulted in a major overhaul to the traditional retail industry as we once knew it?
- Describe how political elections can be an important external factor for companies to consider. Select an industry and reveal some key political factors impacting firms.
- Explain how Facebook, Twitter, and Instagram can represent a major threat or opportunity for a company in different industries.
- Discuss the following statement: Major opportunities and threats usually result from an interaction among key environmental trends rather than from a single external event or factor.
- Do you agree with Porter’s view that competitive positioning within an industry is a key determinant of competitive advantage(s)?
- Explain the effects of [a generic strategy] on the value stick framework.
- Why do anual reports often state external risk information in really vague terms; why should strategists avoid including such vagueness in external assessments (e.g., in developing an EFE Matrix)?
Homework
Read Mintzberg (1978) and make notes on following questions:
- Why and how does Mintzberg challenge the prevailing view of strategic planning as the primary approach to strategy formation?
- How does Mintzberg propose to think of strategy formation instead?
- Which patterns of strategy formation has Mintzberg identified?
- Choose a real organization and identify which pattern(s) it follows. What evidence supports your assessment?
- What practical implications can you draw from Mintzberg’s insights for strategic management practices?
- How has this reading changed your thinking about strategy?
Reading tip: Create a concept map while reading to visualize the relationships between different patterns and concepts.
Do some casual reasearch on Netflix’s strategic journey.