How industry specific factors influence strategy formulation and  how such factors impact on a firm’s competitive advantage ?Strategy could be regarded as the link between a firm and its...

How industry specific factors influence strategy formulation and  how such factors impact on a firm’s competitive advantage ?

Strategy could be regarded as the link between a firm and its environment.

Expert Answers
clamo88 eNotes educator| Certified Educator

The transportation industry is currently going through this type of analysis.

Fuel costs, if stable, aren't such a huge factor in the industry's strategy unless they are trying to find new fuels.  Each firm in the industry will factor in the fuel costs when developing its strategy.  But when fuel costs are unstable, especially if they are rising, the firm cannot rely on its previous cost formulas.  They'll need to find ways to trim other costs to accommodate rising fuel prices.

The firm that finds a way to accommodate rising fuel costs without sacrificing product quality and quantity, while also keeping the customer satisfied, will have a competitive advantage over those firms that do not do this as well.  Strategy meetings will focus on this area to try to maintain the firm's competitive advantage or to even gain higher advantage than it had previously.

Note that over the past few years, rising fuel costs led to higher transportation costs and affected many other industries.  Food prices increased, for example, and you could follow the increase not just to the delivery of the food to the store, but also to the delivery of grains to the farms that fed the animals or grew the food we eat.

The rising price of flour alone led to increased pizza prices and many customers thought the increases were unfair.  Pizza parlors had to print out explanations of their increased costs so customers understood the higher prices.