Further Topics in Industry and Competitive Analysis. Extending 5-forces analysis Does industry matter? Complements Dynamic competition Game Theory Competitor Analysis Segmentation Strategic Groups. OUTLINE. Percentage of variance in firms’ return on assets explained by:.
Percentage of variance in firms’ return on assets explained by:
McGahan & Porter (1997)
Hawawini et al (2003)
52.0%Does Industry Matter?
Also, X-inefficiency (Liebenstein, 1966)
Porter framework assumes:
But, competition also changes industry structure:
Implication: Under dynamic competition, 5-forces framework is
less useful—Competitive behavior and industry structure jointly determined by underlying conditions of technology, demand & costs
Five Forces or Six? explained by: —Introducing Complements
The suppliers of
value for the industry
and can exercise
Bargaining power of suppliers
Why does Sun give Java away from free?
Why does IBM support Linux and OpenOffice?
Bargaining power of buyers
CUSTOMERS explained by:
The Value Net
(customers value your product less)
(customers value your product more)
Examples: IPD & IPDEO – how does it change things?
The Contribution of Game Theory explained by:
to Competitive Analysis
Problems of game theory:
Useful in explaining past competitive behavior—weak in predicting
future competitive behavior.
What’s the problem? Outcomes highly sensitive to small changes
in assumptions. Hard to identify all players/states/payoffs.
What are competitor’s current goals?
Is performance meeting their goals?
How are its goals likely to change?
How is the firm competing?
What assumptions does the competitor
hold about the industry and itself?
RESOURCES & CAPABILITIES
What are the competitors’ key
strengths and weaknesses?
broad vs. narrow scope.
Identify segmentation variables
Reduce to 2 or 3 variables
Identify discrete categories for
Potential for economies
of scope across segments
Similarity of KSFs
Product differentiation benefits
of segment focus
of the Buyers
of the Product
What about MBA market?
US& Canada W.Europe E.Europe Asia Lat America Australia Africa
Vertical Segmentation & Industry Profit Pools explained by:
—The US Auto Industry
Service & repair
New car dealers
Used car dealers
Share of industry revenue
SEGMENT explained by:Segmentation and Key Success Factors in the U.S. Bicycle Industry
KEY SUCCESS FACTORS
* Low-costs through global sourcing of components
& low-wage assembly.
* Supply contract with major retailer.
Leading competitors: Taiwanese & Chinese assemblers,
some U.S manufacturers, e.g. Murray Ohio, Huffy
Low price bicycles sold primarily
through department and discount
stores, mainly under the retailer’s
own brand (e.g. Sears’ “Free Spirit”);
*Cost efficiency through large scale operation and
either low wages or automated manufacturing.
*Reputation for quality (durability, reliability) through
effective marketing to dealers and/or consumers.
* International marketing & distribution.
Leading competitors: Raleigh, Giant, Peugeot, Fuji
Medium-priced bicycles sold
primarily under manufacturer’s brand
name and distributed mainly through
specialist bicycles stores;
*Quality of components and assembly, Innovation in
design (e.g. minimizing weight and wind resistance).
*Reputation (e.g. through success in racing, through
effective brand management).
*Strong dealer relations.
High-priced bicycles for enthusiasts.
Children’s bicycles (and tricycles) sold
primarily through toy retailers (discount
toy stores, department stores, and
specialist toy stores).
Similar to low-price bicycle segment.
A strategic group is a group of firms in an industry that follow the same or similar strategies
e.g., GM, Ford, Toyota, Nissan, Honda, VW, DaimlerChrysler
REGIONALLY-FOCUSED BROAD-LINE PRODUCERS
e.g. Fiat, PSA, Renault, Kia,
GLOBAL SUPPLIERS OF NARROW MODEL RANGE e.g., Subaru, Isuzu, Suzuki, Saab, Hyundai, Daihatsu
NATIONALLY FOCUSED, INTERMEDIATE LINE PRODUCERS
e.g. Tofas, Proton, Maruti
First Auto Works (China)
LUXURY CAR MANUFACTURERS
e.g., Aston Martin, BMW, Rolls Royce (owned by VW)
NATIONALLY- FOCUSED, SMALL, SPECIALIST PRODUCERS e.g., Bristol (U.K.), Classic Roadsters (U.S.), Morgan (U.K.)
PERFORMANCE CAR PRODUCERS e.g., Porsche, Ferrari (owned by Fiat) Maserati, Lotus
INTEGRATED OIL MAJORS
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