Competitive Advantage & Profitability

Competitive Advantage & Profitability

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EZB Consulting will use industry analysis tools for your business’s structural analysis: Porter’s Five Forces, the Value Net, and the Resource-Based View. These frameworks are valuable tools because they enable business leaders to look toward and plan for the future.

Five Forces is a suitable framework for understanding what’s going on in an industry, your industry.  It’s based upon formal economic analysis. We look at five forces:

  1. Internal Rivalry: we analyze your firm and those firms that you compete against most directly.
  2. Suppliers
  3. Buyers
  4. Entry Threat
  5. Substitutes

We will work with your team to decipher what goes on inside each of the five forces. Five Forces is all about understanding the profitability of firms, more than from accounting or perhaps a bit about finance. The Five Forces is all about understanding the sources of profitability.  This structural analysis enables us look forward into the future, more than just looking backwards.

The Value Net is another framework through which we can analyze the competitiveness of a firm. It is similar to Porter’s Five Forces and includes many of the “forces” considered in that model, including suppliers, buyers (customers), and competitors. However, whereas the Five Forces model assesses threats to profits, Value Net assesses opportunities. Toward this end, Value Net analysis includes a force that is not found in the Five Forces model: Complementors.  This framework is based on the notion that not all aspects of the external market environment are threats. On the contrary, some companies or forces in the market influence the success of your company in a positive way.

The Resource-Based View (RBV) of the firm is a framework we use to look at the internal strengths and weaknesses of your firm. By looking at the resources that your firm controls, we can understand your firm’s profitability and whether your strategy will be successful in your market. By looking at your own firm’s resources, you will understand your own profitability. For your strategies to be successful, they must flow from your firm’s resources.

EZB Consulting’s structural analysis will yield strategies that will be “internally consistent” with its resources. That is, its strategies, like its competitive advantage, must be built on its resources.

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