With strategy,
we try to obtain sufficient profits to guarantee the survival of a
company. At the same time, with our products and service we try to
create value for the clients and the society in general.
If our
products/services are of a high quality and they create value for
those that enjoy them, we can increase the price. However, this depends
on the conditions of those that are competing, the structure of the
sector, the intensity of the competition,....
To summarize,
the profits obtained by the companies in a determined sector depend
on:
•
the value of the product or service for the client
•
the intensity of the competition
•
the power of relative negotiation at different levels of the production
chain.
The structure
of the sector is a fundamental aspect to consider. If we know the
structure of our sector, our company can predict its trends, and the
behaviour of the competition, all of which means our company has to
be dynamic, as if this is the case we can benefit from economic profits.
In the following picture, you can see the typology of sectorial structures.
Tipología
de estructuras sectoriales (Typology of sectorial structures); Competencia
perfecta (Perfect competition); Oligopolio (Oligopoly); Duopolio (Duapoly);
Monopolio (Monopoly)
Concentración
(Concentration); Muchas empresas (Many companies); Pocas empresas
(Few companies); Dos empresas (Two companies); Una empresa (A company)
Barreras
de entrada y salida (Barriers of entry and exit); No hay (None); Barreras
significativas (Significant barriers); Importantes (Important)
Diferenciación
del producto (Differentiation of the product); Productos homogéneos
(Homogeneous products); Posibilidad de diferenciación (Possibility
of differentiation)
Información
(Information); Flujo perfecto (Perfect flow); Imperfecta (Imperfect)
In strategy
there is an important concept to consider and it's when we talk about
a sector's strategy. It is known as Paradigm ERC and it expresses
the idea that a sector's structure conditions the a company's behaviour
and results.