...ANALYSIS: THE FUNDAMENTALS Outline * The objectives of industry analysis * From environmental analysis to industry analysis * Porter’s Five Forces Framework * Applying industry analysis * Industry and market boundaries * Identifying Key Success Factors The objectives of Industrial Analysis * To understand how industry structure drives competition, which determines the level of industry profitability * To assess industry attractiveness * To use evidence on changes in industry structure to forecast future profitability * To formulate strategies to change industry structure to improve industry profitability * To identify Key Success Factors From Environmental Analysis to Industrial Analysis The Industry Environment lies at the core of the Macro environment The Macro Environment impacts the firm through its effect on the Industry Environment The Determinants of Industrial Profitability Three key influences: 1. The value of the product to customers 2. The intensity of competition 3. Relative bargaining power at different stages of the value chain The Spectrum of Industry Structures Porter´s Five Forces Competition Framework The Structural Determinant of Competition Threat of Substitutes Extent of competitive pressure from producers of substitutes depends on: * Buyer’s propensity to substitute * The price‐performance characteristics of substitutes Threat of New Entrants Entrants’ threat to industry profitability...
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...competitive behaviour 2. Industry structure is (fairly) stable. [pic] Case: Airline Industry …. Porter’s 5 forces – purpose: Identifying the different stakeholders, or ‘forces’, which affect: • The level of competition in an industry. • The ability of a company to become powerful in that industry. Threat of New Entrants : • Company’s Point of view • Industry Point of view • Huge Capital Required • High Maintenance Cost • Brand Identity. • Govt. Policy Supplier’s Bargaining Power • Aircraft Manufacturers • Fuel Companies Buyer’s Bargaining Power • Travel Agents • Business Travelers Threat Of Substitute • Railway service • Bus service • Water Transport • Video conferences (for business flyers) Competitive Rivalry • Highly Competitive Industry. • Can work as growth driver for Industry. External Analysis: Porter’s Five Forces Threat of New Entrants HIGH Threat of Substitute Products MEDIUM Buyers’ Bargaining Power LOW Suppliers’ Bargaining Power LOW Industry Competitors Rivalry Among Existing Firms HIGH Dynamic Competition Competition changes industry structure: – Schumpeterian Competition: A “perennial gale of creative destruction” –market leaders overthrown by innovation – Hyper...
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...be on the opposite end of the continuum and partially explained their differences; omitted key information. Described with 60 – 79% accuracy and thoroughness. Described sufficiently Nordstrom's level of service on the continuum from full service to self-service; gave a relevant example of a store that would be on the opposite end of the continuum and sufficiently explained their differences. Described with 80 – 89% accuracy and thoroughness. Described fully Nordstrom's level of service on the continuum from full service to self-service; gave a relevant example of a store that would be on the opposite end of the continuum and fully explained their differences. Described with 90 – 100% accuracy and thoroughness. 3. Analyze the six components of Nordstrom's retailing mix to determine which have been the most important to the company's success. Provide a detailed rationale. Did not complete the assignment or did not analyze the six components of Nordstrom's retailing mix to determine which have been the most important to the company's success; did not or did not sufficiently provide a detailed rationale; omitted key information and/or irrelevant information. Analyzed with less than 60% accuracy and thoroughness. Analyzed partially the six components of Nordstrom's retailing mix to determine which have been the most important to the company's success; provided a partial rationale; omitted key information. Analyzed with 60 – 79% accuracy and thoroughness. Analyzed sufficiently the six...
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...too attractive-looking to new entrants for its own good and will therefore always tend to be the opposite of, say, the old business of gathering and rendering dead horses that always tended to contain few and prosperous participants. —Charles T. Munger, Chairman, Wesco Financial Corp. OUTLINE n n n n n INTRODUCTION AND OBJECTIVES FROM ENVIRONMENTAL ANALYSIS TO INDUSTRY ANALYSIS THE DETERMINANTS OF INDUSTRY PROFIT: DEMAND AND COMPETITION ANALYZING INDUSTRY ATTRACTIVENESS Porter’s Five Forces of Competition Framework Competition from Substitutes Threat of Entry Rivalry Between Established Competitors Bargaining Power of Buyers Bargaining Power of Suppliers APPLYING INDUSTRY ANALYSIS Describing Industry Structure Forecasting Industry Profitability Strategies to Alter Industry Structure 66 INTRODUCTION AND OBJECTIVES 67 n n n n DEFINING INDUSTRIES: WHERE TO DRAW THE BOUNDARIES Industries and Markets Defining Markets: Substitution in Demand and Supply FROM INDUSTRY ATTRACTIVENESS TO COMPETITIVE ADVANTAGE: IDENTIFYING KEY SUCCESS FACTORS SUMMARY NOTES INTRODUCTION AND OBJECTIVES In this chapter and the next we explore the external environment of the firm. In Chapter 1 we observed that profound understanding of the competitive environment is a critical ingredient of a successful strategy. We further noted that business strategy is essentially a quest for profit. The primary task for this chapter is to identify the sources of profit in the external environment...
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...too attractive-looking to new entrants for its own good and will therefore always tend to be the opposite of, say, the old business of gathering and rendering dead horses that always tended to contain few and prosperous participants. —Charles T. Munger, Chairman, Wesco Financial Corp. OUTLINE n n n n n INTRODUCTION AND OBJECTIVES FROM ENVIRONMENTAL ANALYSIS TO INDUSTRY ANALYSIS THE DETERMINANTS OF INDUSTRY PROFIT: DEMAND AND COMPETITION ANALYZING INDUSTRY ATTRACTIVENESS Porter’s Five Forces of Competition Framework Competition from Substitutes Threat of Entry Rivalry Between Established Competitors Bargaining Power of Buyers Bargaining Power of Suppliers APPLYING INDUSTRY ANALYSIS Describing Industry Structure Forecasting Industry Profitability Strategies to Alter Industry Structure 66 INTRODUCTION AND OBJECTIVES 67 n n n n DEFINING INDUSTRIES: WHERE TO DRAW THE BOUNDARIES Industries and Markets Defining Markets: Substitution in Demand and Supply FROM INDUSTRY ATTRACTIVENESS TO COMPETITIVE ADVANTAGE: IDENTIFYING KEY SUCCESS FACTORS SUMMARY NOTES INTRODUCTION AND OBJECTIVES In this chapter and the next we explore the external environment of the firm. In Chapter 1 we observed that profound understanding of the competitive environment is a critical ingredient of a successful strategy. We further noted that business strategy is essentially a quest for profit. The primary task for this chapter is to identify the sources of profit in the external environment...
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...environment 9 Threat of substitutes 10 3.0 Identification of key issues/ strategic agenda 11 4.0 Identification of key forces driving the strategic agenda 11 5.0 Identification of 5- 8 over- riding drivers 13 6.0 Root - cause analysis 13 7.0 Identification of 2 key drivers 13 8.0 Plot of two key drivers to determine possible scenario 14 Figure 1 Scenario Analysis 14 9.0 Four scenarios and description of key assumptions 14 Four Scenarios for 2018 14 Co-opetition, 15 Co-existence 15 Competition 15 Conflict 16 10. Testing of scenarios for consistency and reliability 16 Conclusion 17 Recommendation 17 Bibliography 19 Introduction: Tanzania is endowed with some of the world's greatest natural wonders. Following major reforms in its foreign tourism policies, tourism has increased to become the nation's second leading foreign exchange earner. There are many weaknesses at national level including poor infrastructure, lack of trained staff, and legal and regulatory framework. In this paper, a case study of Asilia Lodges and Camps Ltd, I have tried to highlight a number of scenarios analyzed and recommendations have also been drawn to try to improve the current situation in relation to the future. The focus is on hotels and camps operated in national parks and not other hotels such as those operated in township. With increasing number of players in the market, global and regional competition, economic...
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...Better Regulation for Growth Regulatory Quality and Competition Policy Investment Climate Advisory Services of the World Bank Group With funding from FIAS, the multi-donor investment climate advisory service in partnership with BETTER REGULATION FOR GROWTH GOVERNANCE FRAMEWORKS AND TOOLS FOR EFFECTIVE REGULATORY REFORM REGULATORY QUALITY AND COMPETITION POLICY INVESTMENT CLIMATE ADVISORY SERVICES WORLD BANK GROUP ©2010 The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. About the Investment Climate Advisory Services of the World Bank Group The Investment Climate...
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...BUILDING STRATEGIE: TAKING THE COMPETITION TO COMPETITORS WITH “TRANSACTIONAL MODEL” Agenda • Brief Summary about the case • Global PC Industry • Lenovo: From Emerging to Surging • Key Challenges of Lenovo from the case • Recommendations Agenda • Brief Summary about the case • Global PC Industry • Lenovo: From Emerging to Surging • Key Challenges of Lenovo from the case • Recommendations Overview of Global PC Industry Overview of Global PC Industry • Since early 1980s, PC industry has been the most dynamic electronic industry sector • The global PC industry reached mature level by mid-1990s • Dell and Gateway starts their build-to-order strategies, resulted to the total supply chain respond swiftly to change • Emerge of e-commerce (online sales) hastened PC industry’s clock speed Overview of Global PC Industry • PC-makers enjoys high profits 1990, however, they experiences an extreme downfall in early of 2000 • In 2004, in order to maintain PC vendor’s market position, vendor consolidation can develop economies of scale in order to go into a global presence • Global PC industry currently affected by two major trends; commoditization which is about mass-produced and the absence of mid-market, which separate to the customers that demand cheapest products and that of exclusive products Agenda • Brief Summary about the case • Global PC Industry • Lenovo: From Emerging to Surging • Key Challenges of Lenovo from the...
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...Objectives: - 4 components of strategy analysis: firms goals and values, resources and capabilities, structure and management systems and industry environment - Measurement of profitability, Profit most useful measure of firm performance (maximization of profit) - Tools of Financial analysis - Shareholders and stakeholders - Value: - Commerce is creating value - Firm have to know what profit is and how to measure it - Economic profit more reliable measure as accounting profit - Measure of e.p. is EVA, economic value added - Firm must maximize the future net cash flow to maximize its value and mimimize cost of capital - C.f. forecasts are very difficult,estimate future c.f. need make assumption - Important for value maximization is the consistency Real options theory - Two types: growth and flexibility options - Strategic alliances and joint ventures, investment in core products Putting performance analysis into practice - Need to asses current situation - Identify current strategy - Identify sources of unsatisfactory performance - Balanced scorecards -> balancing financial and strategic goals Profits and purpose - Companies that are more focused on making profit are often unsuccessful at achieving their goals - “Profits are important for existence of a company but not the reason for its existence” - Important is to have a dream, to have a joy of creating things - To have a vision for the future and a core ideology (values and principles) are both...
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...WHY IS COMPETITION IMPORTANT FOR GROWTH AND POVERTY REDUCTION? Nick Godfrey Session 1.3.: Competition policy This paper was submitted in response to a call for papers conducted by the organisers of the OECD Global Forum on International Investment. It is distributed as part of the official conference documentation and serves as background material for the relevant session in the programme. The views expressed in this paper do not necessarily represent those of the OECD or its member governments. OECD Global Forum on International Investment OECD Investment Division www.oecd.org/investment/gfi-7 Table of Contents Executive Summary Introduction How is Competition Policy Linked to Growth and Poverty Reduction? A. Competition policy B. Competition policy and growth C. Competition policy and poverty reduction Competition in Developing countries The Competition Assessment Framework Background Content How to select sectors and markets for assessment 3 3 4 4 4 5 5 8 8 9 9 Identify the relevant markets and the competitors Examine the market structure Look for barriers to entry Ascertain if government policies or institutions limit competition Consider vested interests Look for signs of anti-competitive practices actions by firms Draw conclusions Conclusions References 9 9 9 9 10 10 10 11 12 Department for International Development, London OECD Global Forum on Investment, March 2008 2 Why is Competition Important for Growth and Poverty Reduction? ...
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...identify the dominant economic market structure of Hongkong and Shanhai Banking Corporation Sri Lanka referred to as HSBC herein. The contents will highlight the key assumptions made on the market structures by the economists and channel it across the commercial banking industry via the key competing elements of HSBC. 1. Introduction Having celebrated 115 Years of service with pride, HSBC which was formally known as Hongkongbank opened its doors in Sri Lanka during mid-1882. Having been with the nation during the tough and good times, HSBC boasts of stability with a strong capital structure and innovativeness by customizing its products and services to its customers. 2. Brief Introduction to Industry Market Structures The form of market in which a firm operates, is referred to as the market structure. The identification of same is vital as the decision making atmosphere will depend on the type of structure the firm functions in. However it is noted that a firm may not necessarily fall into a particular type of market, but may possess basic characteristics, which can be extracted to determine its market structure. In this context we will be exploring the four main categories of market structures in the economy namely; a) Monopoly b) Perfect Competition c) Oligopoly d) Monopolistic competition a) Monopoly In the event only one firm produces goods and services in a particular market, then it is said to have a monopoly in the market. Similarly if a...
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...and to retain customer loyalty to gain market dominance. In creating an environmental scan for Janntech Enterprises, the company focused on trends in the nutraceutical soft drinks industry as a whole, and the impact of events in the current political and economic climate in the country, particularly the possible outcome of the current elections in the US. Regardless of the political climate in the country and the state of the economy, the threat of competition, especially new entrants into the market, and the introduction of newer products targeting the female segments of the target market, the outcome of which is stiffer competition, price concessions, resulting in revenue loss, is a bigger threat to the company. This is all because, globally, the market for nutraceutical soft drinks has been growing at just below 10% each year and this is expected to continue for the next three years at least. Even though the largest nutraceutical soft drinks market in the world is that of Japan, the second largest is the US – worth US$6.2bn. (Key Trends...
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...strategy. Nike uses this innovation in order to become a more sustainable company, which is the second key aspect of its business strategy. We live in a world where natural and human resources are constrained and Nike realizes that this could greatly affect its business. The cost of competition for resources will increase as these resources become increasingly scarce. Coupled with emerging trends, such as customization, a push to be closer to multiple markets, and shifting labor markets, Nike sees a new opportunity to create business growth for the future. A big aspect of Under Amour’s growth strategy is expanding abroad, which also ties into how they plan to manage competition. Under Armour has established a solid position in the United States and Europe is a big opportunity to continue expanding. By expanding in Europe, Under Armour hopes to try and gain some market share from Nike, who is their largest competitor. Under Armour may need to adjust its messaging for Europeans, who are less impacted by its traditional football and baseball based marketing. Nike has a slight advantage because it is coming at Europe from a running and basketball perspective, which are much more international sports. Both Nike and Under Armour are very focused on innovation. With the industry that they are in they almost are forced to focus on innovation in order to keep up with the competition and customer demands. They also are both focused on growth, but from completely different perspectives...
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...includes all elements outside the boundary of the organization. Key elements include the industry, government, customers, suppliers, and the financial community. All organizations face uncertainty in dealing with events outside their boundary and have to adapt to new competition, economic turmoil, changes in consumer interests or innovative technologies. In case of People Express Airlines (PE), these external environment factors have been responsible for its growth as well as decline, as discussed below. Factors responsible for growth of PE: Government and Regulations PE benefitted from deregulation in the airline industry, and phasing out of restrictions on new entrants, new routes and fares. This regulatory change in the industry was responsible for inception of PE. Customers and Preferences PE found great acceptance among its customers, and their numbers grew quickly which was largely responsible for its explosive growth. PE focused heavily on its customers and devised its business strategy to provide unrestricted, reduced prices, and convenient flight schedules customers. Moreover, its marketing campaign focused on customers and its services for them. As a result, demand for its services was overwhelming. Economy PE found an abundant pool of pilots who could make good flight managers, as there were many pilots who had been laid off by other airlines because of recession and deregulation. Competition PE took advantage of flying on underserved, low density routes...
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...analysing changing and complex environments. These frameworks are organised in a series of ‘layers’. Within the environment there is Macro-environment, this is the highest-level layer that consist of broad environmental factors that impact to a greater or lesser extent on almost all organisations. Industry or Sector forms the next layer within this broad general environment; this is made up of organisations producing the same products and services. Competitors and markets are the most immediate layer surrounding organisations; here the concept of strategic groups can help to identify the different kinds of competitors. This chapter works through this three layers in turn. 1. THE MACRO-ENVIRONMENT The three concepts in this section are PESTEL, key drivers and scenarios these are interrelated tools for analysing the broad macro environment of an organisation 2.1. PESTEL framework The PESTEL framework categorise the environmental influences into six main types, namely: Political, Economic, Social, Technological, Environmental and Legal. Politics highlight the role of government, Economics refers to macro-economic factors such as exchange rates, business cycle and different economic growth rates around the world, social influences include changing cultures and demographics, Technological influences refer to innovation such as the internet etc., Environmental stand specifically for ‘green’ issues and Legal embraces legislative constraints or...
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