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The Adjuvancy, LLC

Corporate Headquarters

Post Office  Box 25766

Alexandria, Virginia 22313


2017 will be great!
A real networking and business development experience.

Business Strategy: Are We  At A Crossroads?

Roy A. Ackerman, Ph.D., E.A.


Michael Porter (Harvard Professor, Tau Beta Pi honoree) propounded the concept of using five competitive areas when examining a business segment or industry:  the threat of new entrants; the buyer’s bargaining power; the threat of substitute products or services; suppliers’ bargaining power; and the competition among existing industry providers.  Over the years, it has been determined that Dr. Porter is right:  His five forces analysis applies to all industry participants, even as it affects each of them differently.   

When analyzing your business practices, it behooves your to break your enterprise by discipline.  (As an example, in our case, this means tax analysis, computer systems, biotechnology development, clinical trial management, and corporate management services.  Get the idea?) You can then position yourself defensively (against competitive forces), attempt to influence those forces, and, most importantly, anticipate shifts in the marketplace that provides you with a strategic advantage when compared with your competitors.

Dr. Porter observes that fundamental changes are more likely to occur within mature professions, than with newer technology entrants (such as nanotechnology).  If you are not in a breakthrough industry, you should search for: 

  • More intense competition for market share.
  • More selling to experienced, repeat buyers.
  • Competitive focus shifting toward price and service.
  • Cautious additions to capacity and personnel.  (This is harder to discern in the current downturn.)
  • Reorientation of a firm’s production processes, marketing and selling.
  • International competition increases caused by standardization and price pressure.
  • Industry profits falling during the transition to maturity, a change that may be either temporary or permanent.

Every one of our enterprises reacts differently, based upon our corporate goals, resources, ability (and willingness) to change, as well as our perception/aversion towards risk.   


Force 1: Threat of Entry of New Competitors

One factor in this force is barriers to entry into an industry. In our medical area, this would be FDA approval requirements.  In professional services (knowledge-based businesses), the barrier is technical proficiency and expertise.  Another common barrier is the investment needed to enter the industry.  Are the barriers being lowered in your industry?  Or raised?  (Think about the web design business- over the past decade, the barriers have almost been erased, unless specific technology for a web application is required.  It’s why high school kids are selling their services for $ 50.) 

In our tax business, the heightened competition has resulted in commodity pricing.  Most clients have no clue what a difference in knowledge, expertise, and creativity can be to their bottom line- and their safety from challenges.  In the latter case, it comes about way too late.  In the three former cases, they never find out (unless they speak to us).  This is the challenge we need to address.  What’s yours?  That’s what you need to find out- now.   

Force 2: Bargaining Power of Customers

The prime component here is buyer price sensitivity. Given the Great Recession, everyone is looking for ways to cut their costs.  But, when clients need highly specialized or complex services or where competition is lower (such as the health care industry and for getting clients out of IRS hot water) the client’s determination to obtain lower costs is much weaker.  And, as stated above, another factor behind this force is repeat business.  In our client management services, we assume (hope, plan) that repeat business does not exist.  We need to help the firm manage its way out of a crisis (or inflection point) and train the permanent holder of the position for which we are providing temporary services.  (We do hope they recommend us to others, when we leave… Hint, hint, hint...) One should recognize that repeat customers sometime require lower prices (say, our tax business, or clinical trial management- so we continually increase our expertise and technology to maintain our pricing currency.  Of course, constantly changing regulations certainly help us buffer that storm, as well.) 

Force 3: Threats of Substitution (Services or Products)

This force considers alternative choices for your service or product that are available to the marketplace.  customers. In the tax business, as an example, some clients consider the use of “off-the-shelf” tax programs to be an alternative.  Of course, these programs have well known errors (and, that is no defense against fines and penalties from the IRS), as well as being only as good as the taxpayer’s knowledge of potential savings situations.   

Force 4: Intensity of Competition

This force considers how and why the current business incumbents respond to the actions of competitors. For example, when one airline lowers fares, the competitors almost immediately follow.  In intensively competitive industries, the segment is less attractive for entry.  But, using price is way too easy.  Moreover, when fees or prices are not generally advertised, the competition is less impressed by it.  And, the more important competitive forces (from survival’s point of view) are innovation and quality.  Think GE, for example.  

Some tax firms are changing their processes by outsourcing their work overseas (to a country where English is spoken and not still well understood by us).   Our primary observation is that the deliverables seem mechanical and demonstrate less-than-sound professional judgment- kind of like the “off-the-shelf” tax programs, at the pricing of a professional service.  (Now, there’s the worst of both worlds…) 

Force 5: Supplier Bargaining Power

For our professional services, the “suppliers” are our professional employees who provide you the services. In the current “Great Recession”, the salary push is very strong (really).  If we supplied standard tax services, then the need for salary and benefit increases would be non-existent.  However, with our full service model, and with our corporate management services, we need multi-disciplinary, creative, and quick, decisive individuals.  These are in high demand by the larger firms- as well as their desire to create their own businesses.  What is the situation in your businesses? 


Michael Porter states in his book Competitive Strategy: Techniques for Analyzing Industries and Competitors that we have three potential strategies to augment our performance and position within our business segments. 


The firms must differentiate its services and products as unique from others.  (Did we succeed here J?)  Successful differentiation should mean higher margins and protection from the other forces. 


This means segmentation, the focus upon a particular group of clients (such as law firms, physician offices, and biotech firms), a particular type of service (like people who own companies or run businesses, have capital gains in the tax arena) or a particular geographic region. By narrowing your focus, the entity becomes efficient and/or effective than its competitors. 

Cost leadership

This concept requires your business process (or volume) to yield lower unit costs, when compared with your competitors.  When we were running our dialysis manufacturing business, our business concept involved small, regional production facilities, with centralized marketing, quality assurance, and logistics controls.  The biggest cost item in our pricing was transportation- by shipping locally, we kept our product costs extremely competitive, even with our higher quality requirements and better components. 


In today’s markets, your enterprise must be proactive.  You will have to work (even) harder to provide your services and products- without losing your focus on existing clients and referral sources.

If you don’t have a specialized product or service, you should consider specialization, moving away from more competitive (generic) areas. A better tactic is to focus even harder on client service—you should meet or exceed client/customer expectations to earn their future business and recommendations. And, in all cases (above and beyond focusing on selling and marketing), we should continually examine our internal processes, insuring we work more efficiently and effectively.


RC Kislev 5771




The Adjuvancy, LLC

 Post Office Box 25766

Alexandria, Virginia 22313



Copyright © 2016 The Adjuvancy, LLC
Last modified: October 27, 2016