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Strategic Management for the Foundation Business Simulation ®:. Analysis and Assessment. Comparison of SIC and NAICS SIC code sequence for chewing gum, bubble gum manufacturers. NAICS code sequence for chewing gum, bubble gum manufacturers. Porter’s Model of Industry Competition.

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slide1

Strategic Management for the Foundation Business Simulation®:

Analysis and Assessment

slide2

Comparison of SIC and NAICS

SIC code sequence for chewing gum, bubble gum manufacturers

NAICS code sequence for chewing gum, bubble gum manufacturers

slide3

Porter’s Model of Industry Competition

Potential Entrants

Economies of scale

Cost advantage

Brand identity

Access to distribution

Government policy

  • Potential Entrants
  • Economies of scale
  • Cost advantage
  • Brand identity
  • Access to distribution
  • Government policy

Threat of new entrants

Bargaining

power

of

suppliers

Suppliers

Supplier concentration

Number of buyers

Switching costs

Availability of substitute raw materials

Threat of forward integration

  • Suppliers
  • Supplier concentration
  • Number of buyers
  • Switching costs
  • Availability of substitute raw materials
  • Threat of forward integration
  • Degree of Rivalry
  • Number of competitors
  • Industry growth
  • Asset intensity
  • Product differentiation
  • Exit barriers

Bargaining power

of buyers

  • Buyers
  • Buyer concentration
  • Number of suppliers
  • Switching costs
  • Substitute products
  • Threat of backward integration

Threat of substitute products/services.

  • Substitutes
  • Functional similarity
  • Price performance trend
  • Brand recognition
slide4

Industry Analysis of the North American Railroad Industry

  • Potential Entrants
  • High barriers to entry
  • Economies of scale
  • No brand identity
  • Low switching costs
  • Deregulated

Threat of new entrants – minimal

Bargaining power of suppliers – moderate

Bargaining power of buyers – significant

  • Buyers
  • Low switching costs
  • Many types of buyers
  • Buyers are dispersed geographically
  • Degree of Rivalry-
  • Significant
  • 7 competitors
  • Modest industry growth
  • Little product differentiation
  • High exit barriers
  • Rigid assets
  • Suppliers
  • Suppliers are concentrated
  • Unionized
  • Few buyers

Threat of substitute products/services – significant

  • Substitutes
  • Close substitutes
  • Firms compete primarily on price
slide5

Stages of Industry Evolution

Introduction Stage

Growth Stage

Maturity Stage

Decline Stage

slide7

Industry Growth and Firm Profitability

Industry Growth Rate

Firm

Profitability

New product

development

slide8

An Industry Analysis as Firms

Move Through the Industry Life Cycle

slide9

An Industry Analysis as Firms

Move Through the Industry Life Cycle

slide10

An Industry Analysis as Firms

Move Through the Industry Life Cycle

slide11

An Industry Analysis as Firms

Move Through the Industry Life Cycle

slide12

An Industry Analysis as Firms

Move Through the Industry Life Cycle

using internal analysis to build competitive advantage
Using Internal Analysis to

Build Competitive Advantage

slide14

From Resources to Capabilities to Core Capabilities

  • Core Capabilities
  • Integration of resources and capabilities that serve as a competitive advantage over rivals
  • Intel’s chip manufacturing technology
  • Exploitation of Coke’s brand name
  • Resources
  • Stock of assets that are controlled by the firm:
  • Equipment
  • Plant
  • Trucks
  • Managers
  • Culture
  • Capabilities
  • The productive services by which firms deploy resources over time.
  • Transformation of technology into new products
  • Processes which generate economies of scale and/or scope
slide23

Business Level Strategy

Definition: Actions necessary to gain and maintain competitive advantage over time within a given product market.

Gaining Advantage: Meeting key success factors superior to competition

Maintaining Advantage: Responding to changing consumer needs more successfully than competition

slide24

Key Success Factors

Definition: That set of criteria, defined by the customer base, which dictate buying decisions.

Key success factors change over time

Air Freight Industry

slide25

Porter’s Generic Business Strategies

Competitive Advantage

Cost

Uniqueness

Cost Leadership

Differentiation

Broad Target

CompetitiveScope

Focused

Low Cost

Focused Differentiation

Narrow Target

slide26

Cost Leadership

Actions necessary to gain and maintain position:

1. Economies of scale through the utilization of excess capacity.

2. Automation and utilization of robotics in manufacturing processes.

3. Development of efficient distribution networks.

4. Implementation of TQM (Total Quality Management) initiatives.

Example: Dell

slide27

Differentiation

Actions necessary to gain and maintain position:

1. Developing innovative products/services to broad range of customers.

2. Significant investments in R&D.

3. Capability to generate a series of successful new products over time.

4. Development of flexible manufacturing systems.

Example: Toyota

slide28

Focused Low Cost

Actions necessary to gain and maintain position:

1. Specific, very well defined target market, that is oriented toward products/services where price is an important key success factor.

2. A market that larger scale firms may ignore because these firms may generate greater efficiencies in other markets.

3. Customer may be willing to absorb certain costs (e.g. transportation) in return for lower prices.

Example: Ikea Furniture

slide29

Focused Differentiation

  • Actions necessary to gain and maintain position:
  • 1. Customers are willing to pay more for real or perceived superior quality.
  • 2. Brand name is important to customers.
  • 3. Profit margins are such that firms do not need to generate significant economies of scale.
  • Promotion directed toward identification of real or perceived superior quality features.
  • 5. Customers are brand loyal.
    • Example: Rolls Royce
slide30

Decision Making Utilizing SWOT Analysis

Firm A Firm B

: Utilize strengths of one firm (A) to capitalize upon weakness of competitor (Firm B).

(Example: Dell’s direct selling model)

: Transform opportunities to strengths.

(Example: Pharmaceutical firms R&D capability develops new drugs: Pfizer-Lipitor)

slide31

Competitive Dynamics

Competitive advantage may result from responding successfully to competitor’s mistakes

+

Firm 1

Firm 2

Firm 2

Firm 1

Firm 2

ROI

Firm 1

-

: Firm 2 initially responds to firm 1’s successful launch

: Firm 1’s second venture is not profitable

: Firm 2 learns from firm’s 1’s error and launches its own successful product

: Firm 1’s responses to firm 2’s new actions