Business strategy underpins all aspects of managing a business even before a business\u2019 inception. One crucial aspect of business strategy is external strategy considerations. This describes the sources of profit in the external environment that you can exploit to generate a competitive profit. These external sources of profit depend on your industry. However, certain strategy analysts have devised methods to appraise the external environment regardless of industry. If you undertake a robust external strategy analysis, you will ensure your startup stays competitive. This article explains some crucial external strategy considerations for startups. <\/p>\n\n\n\n
In the context of business strategy, external strategy refers to the way in which you organise your business to stay competitive based on factors that are external to your startup.<\/p>\n\n\n\n
There are several different methodologies business strategists have devised over the years to do this. One of the most favoured external strategy approaches is the \u201cFive Forces\u201d model Michael Porter developed. The Five Forces model identifies five factors that businesses across any industry can identify in the external environment to find the sources of profit. By identifying which are the most relevant factors in your industry, you can develop specific ways to maximise your short-term and long-term business strategy.<\/p>\n\n\n\n
Porter\u2019s Five Forces are the:<\/p>\n\n\n\n
We will look at these five factors in more detail.<\/p>\n\n\n\n
This factor asks how much bargaining power your customers have. Some industries have customers with substantial bargaining power. Other industries are defined by customers with weak bargaining power. It is usually apparent who your customers are. The real challenge is appraising the extent of their bargaining power.<\/p>\n\n\n\n
As a rule of thumb, where there are comparatively few customers, bargaining power is higher. This describes industries that supply goods to large international retailers like Sainsbury’s. Likewise, certain heavy industry manufacturers’ assets<\/a>, like ships and planes, do not have many ready buyers.<\/p>\n\n\n\n On the other hand, if you have lots of customers, you may have more bargaining power. Alternatively, if you possess the sole right to manufacture or distribute a product, you have no real competitors. This allows you to set much higher prices. This is common in industries where acquiring patents<\/a> is essential, like life sciences and biotech.<\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n