Further topics in industry and competitive analysis
This presentation is the property of its rightful owner.
Sponsored Links
1 / 20

Further Topics in Industry and Competitive Analysis PowerPoint PPT Presentation


  • 80 Views
  • Uploaded on
  • Presentation posted in: General

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:.

Download Presentation

Further Topics in Industry and Competitive Analysis

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Further topics in industry and competitive analysis

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


Does industry matter

Percentage of variance in firms’ return on assets explained by:

Industry effects

Firm-specific effects

Unexplained variance

Schmalensee (1985)

19.6%

0.6%

80.4%

Rumelt (1991)

4.0%

44.2%

44.8%

McGahan & Porter (1997)

18.7%

31.7%

48.4%

Hawawini et al (2003)

8.1%

35.8%

52.0%

Does Industry Matter?

Also, X-inefficiency (Liebenstein, 1966)


Dynamic competition

Dynamic Competition

Porter framework assumes:

  • industry structure drives competitive behavior

  • Industry structure is (fairly) stable.

    But, competition also changes industry structure:

  • Schumpeterian Competition: A “perennial gale of creative destruction” where firm strategies continually transforms industry structure innovation overthrows established market leaders

  • Hypercompetition: “intense and rapid competitive moves….creating disequilibrium through continuously creating new competitive advantages and destroying, obsolescing or neutralizing opponents’ competitive advantages

    Implication: Under dynamic competition, 5-forces framework is

    less useful—Competitive behavior and industry structure jointly determined by underlying conditions of technology, demand & costs


Further topics in industry and competitive analysis

Five Forces or Six? —Introducing Complements

The suppliers of

complements create

value for the industry

and can exercise

bargaining power

SUPPLIERS

Bargaining power of suppliers

INDUSTRY

COMPETITORS

COMPLEMENTS

Threat of

new entrants

POTENTIAL

ENTRANTS

Threat of

substitutes

SUBSTITUTES

Rivalry among

existing firms

Why does Sun give Java away from free?

Why does IBM support Linux and OpenOffice?

Bargaining power of buyers

BUYERS


Further topics in industry and competitive analysis

CUSTOMERS

COMPETITORS

COMPANY

COMPLEMENTORS

SUPPLIERS

The Value Net

(customers value your product less)

(customers value your product more)


Concept of coopetition

Concept of Coopetition

  • Think complementors as well as competitors.

    • Suppliers, competitors, customers can also be complementors.

  • Added value

    • Size of pie when you’re in– size of pie when you’re out

    • AV Card game (each black/red combo is worth $100)

      • Alan has 25 red cards, 25 other people have black cards

      • Barry has 22 red cards, 25 other people have black cards

    • Logically can’t get more than your added value

  • Should be complementors in making the market and competitors in dividing it.

    • Think about HD DVD standards – effective?

    • Changing the players, perceptions, added value, rules

    • Changing the rules can also affect value

      • English auction, Dutch auction, Australian auction

      • Right of first refusal can be powerful (American Idol)


Competitive positioning game theory

Competitive Positioning: Game Theory

  • Companies are players that are simultaneously making choices

  • The potential profitability varies depending on the strategy one company selects and the strategies that its rivals select

  • Sequential move and simultaneous move games

  • Look forward and reason back


A decision tree for ups s pricing strategy

A Decision Tree for UPS’s Pricing Strategy


A payoff matrix for gm and ford

A Payoff Matrix for GM and Ford

Examples: IPD & IPDEO – how does it change things?


Further topics in industry and competitive analysis

The Contribution of Game Theory

to Competitive Analysis

  • Main value:

  • Good way of representing problems: players/states/payoffs

  • Standard games can be used to predict optimal strategies

  • Some key concepts:

  • Competition and Cooperation – iterated prisoner’s dilemma

  • Deterrence—shoot all deserters

  • Commitment—burn the boats

  • Signaling—market for lemons

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.


A framework for competitor analysis

A Framework for Competitor Analysis

OBJECTIVES

What are competitor’s current goals?

Is performance meeting their goals?

How are its goals likely to change?

STRATEGY

How is the firm competing?

  • PREDICTIONS

  • What strategy changes

  • will the competitor

  • initiate?

  • How will the competitor

  • respond to our strategic

  • initiatives?

ASSUMPTIONS

What assumptions does the competitor

hold about the industry and itself?

RESOURCES & CAPABILITIES

What are the competitors’ key

strengths and weaknesses?


Segmentation analysis the principal stages

Segmentation Analysis: The Principal Stages

  • Identify key variables

    and categories.

  • Construct a segmentation matrix

  • Analyze segment attractiveness

  • Identify KSFs in each segment

  • Analyze benefits of

    broad vs. narrow scope.

Identify segmentation variables

Reduce to 2 or 3 variables

Identify discrete categories for

each variable

Potential for economies

of scope across segments

Similarity of KSFs

Product differentiation benefits

of segment focus


The basis for segmentation customer and product characteristics

  • Size

  • Technical

  • sophistication

  • OEM/replacement

The Basis for Segmentation: Customer and Product Characteristics

Industrial buyers

Characteristics

of the Buyers

  • Demographics

  • Lifestyle

  • Purchase occasion

Household buyers

  • Size

  • Distributor/broker

  • Exclusive/

  • nonexclusive

  • General/special

  • list

Distribution channel

Opportunities for

Differentiation

Geographical

location

  • Physical size

  • Price level

  • Product features

  • Technology design

  • Inputs used (e.g. raw materials)

  • Performance characteristics

  • Pre-sales & post-sales services

Characteristics

of the Product


Segmenting the european metal can industry

Segmenting the European Metal Can Industry

What about MBA market?


Segmenting the world automobile market

Segmenting the World Automobile Market

US& Canada W.Europe E.Europe Asia Lat America Australia Africa

Luxury cars

Full-size cars

Mid-size cars

Small cars

Station wagons

Passenger vans

Sports cars

Sport-utility

Pick-up trucks


Further topics in industry and competitive analysis

Vertical Segmentation & Industry Profit Pools

—The US Auto Industry

25%

20

Service & repair

Leasing

Operating margin

15

Warranty

Aftermarket

parts

Auto manufacturing

10

Auto rental

Auto insurance

Auto loans

New car dealers

5

Used car dealers

0

Gasoline

100%

0

Share of industry revenue


Segmentation and key success factors in the u s bicycle industry

SEGMENT

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.


Strategic group analysis

Strategic Group Analysis

A strategic group is a group of firms in an industry that follow the same or similar strategies

  • Identifying strategic groups:

    • Identify principal strategic variables which

  • distinguish firms.

    • Position each firm in relation to these

  • variables.

    • Identify clusters.


Strategic groups in the world automobile industry

Strategic Groups in the World Automobile Industry

Broad

GLOBAL, BROAD-LINE

PRODUCERS

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)

PRODUCT

RANGE

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

Narrow

National

GEOGRAPHICAL SCOPE

Global


Strategic groups within the world petroleum industry

Strategic Groups Within the World Petroleum Industry

INTERNATIONAL

UPSTREAM

COMPANIES

Premier

Oil

INTEGRATED OIL MAJORS

INTERNATIONAL

UPSTREAM,

REGIONALLY

FOCUSED

DOWNSTREAM

Apache

Adanarko

Kuwait Petroleum

PDVSA

INTEGRATED

DOMESTIC

OIL COMPANIES

  • NATIONAL

  • PRODUCTION

  • COMPANIES

Iran

NOC

00.51.01.52.0

Statoil

BP

Exxon

-Mobil

Vertical Balance

Chevron

Pemex

Petronas

THE

SUPER

MAJORS

Lukoil

Conoco Phillips

ENI

Elf-Fina-Total

Repsol YPF

Royal Dutch

Shell

PetroChina

Indian Oil

Phillips

Petrobras

ENI

Nippon

INTERNATIONAL

DOWNSTREAM

OIL COMPANIES

Repsol

Valero

Neste

Ashland

Sunoco

01020304050607080

NATIONALLY-FOCUSED

DOWNSTREAM COMPANIES

Geographical Scope


  • Login