...How to Fight a Price War By Akshay R. Rao, Mark E. Bergen and Scott Davis IN THE BATTLE TO CAPTURE THE CUSTOMER companies use a wide range of tactics to ward off competitors. Increasingly, price is the weapon of choice – and frequently the skirmishing degenerates into a price war. Creating low price appeal is often the goal, but the result of one retaliatory price slashing after another is often a precipitous decline in industry profits. Look at the airline price wars of 1992. When American Airlines, Northwest Airlines, and other U.S. carriers went toe-to-toe in matching and exceeding one another’s reduced fares, the result was record volumes of air travel-and record losses. Some estimates suggest that the overall losses suffered by the industry that year exceed the combined profits for the entire industry from its inception. Price wars can create economically devastating and psychologically debilitating situations that take an extraordinary toll on an individual, a company, and industry profitability. No matter who wins, the combatants all seem to end up worse off than before they joined the battle. And yet, price wars are becoming increasingly common and uncommonly fierce. Consider the following two examples: • In July 1999, Sprint announced a nighttime long-distance rate of 5 cents per minute. In August 1999, MCI matched Sprint’s off-peak rate. Later that month, AT & T acknowledged that revenue from its consumer long-distance business was falling,...
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...For the exclusive use of G. Alvarado, 2015. 9-707-493 REV: AUGUST 13, 2007 MICHAEL E. PORTER Understanding Industry Structure The essence of the job of the strategist is to cope with competition. The arena in which competition takes place is the industry in which a company and its rivals vie for business. Each industry has a distinctive structure that shapes the nature of competitive interaction that unfolds there. Understanding the underlying structure of a company’s industry, now and in the future, is a core discipline in strategy formation. On the surface, every industry is different. Consider the global automobile industry, the worldwide market for art masterpieces, the booming private equity industry, and the heavily regulated health-care delivery industry in Europe. At one level, these industries appear to have little in common. Industries also differ in another crucial aspect: they register sharply different levels of average profitability in the long run. For example, Exhibit 1 shows a histogram of long-run return on invested capital in the United States for more than 400 industries. The most profitable industries generate much higher returns than the least profitable. Equally significant differences arise in other countries, both advanced and emerging. To understand industry competition and profitability, however, one must look beyond their differences and view industries at a deeper level. In any industry, there are five basic competitive forces—diagrammed...
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...of Porter’s Five Forces Model 3-9 Summary Key Terms Review Questions and Exercises Practice Quiz Notes Reading 3-1 26061_03_ch03_p037-060.indd 37 1/10/08 7:01:36 PM 38 Chapter 3 T Industry A group of competitors that produce similar products or services. 26061_03_ch03_p037-060.indd 38 his chapter marks the beginning of the strategic management process and is one of two that considers the external environment. At this point it is appropriate to focus on factors external to the organization and to view firm performance from an industrial organization perspective. Internal factors are considered later in the process and in future chapters. Each business operates among a group of companies that produces competing products or services known as an industry. The concept of an industry is a simple one, but it is often confused in everyday conversations. The term industry does not refer to a single company or specific firms in general. For example, in the statement, “A new industry is moving to the community,” the word industry should be replaced by...
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...indd 54 9/20/2010 10:10:11 AM Second Pages CHAPTER 03 Analysing a Company’s External Environment Crafting and Executing Strategy: Creating Sustainable High Performance in South African Businesses Part 1: Scope and Dynamics of Strategy Part 3: Part 2: Concepts and Analytical Tools Crafting a Strategy to Create Sustainable High Performance Part 4: Executing and Aligning the Strategy What Is Strategy? Integration and Strategic Alignment The Managerial Process of Strategy Development and Implementation Concepts and Tools for Evaluating a Company’s External and Internal Environment Tailoring Strategy to Various Company Situations Organizational Performance Management Managerial Keys to Successfully Executing and Aligning the Chosen Strategy Chapter 1 Chapter 2 Chapters 3&4 Chapters 5&6 Chapter 7 Chapters 8, 9, & 10 Single Business Companies Line-of-Sight Multi-Business or Diversified Companies High Performance Organization 55 hou27541_ch03.indd 55 9/20/2010 10:10:12 AM Second Pages 56 Chapter 03 Analysing a Company’s External Environment 3.1 Introduction S outh African managers are not prepared either to steer their companies in a different direction or to alter the company strategy until they have developed a deep understanding of the pertinent factors surrounding the company’s situation. As indicated in the opening paragraph...
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...which provides main activity that is air transportation service. AirAsia is the starter and leading the low cost travelling in Asia where operate scheduled domestic and international flight and is Asia’s largest low fare. Air Asia has been established seen 1993 and it has been executed start from 18 November 1996. When it is being established, AirAisa was originally founded by the government owned conglomerate, DRB Hicom. But unfortunately, the incident of World Trade Center attacked by terrorist on 11 September 2001 which influence the airline market trend and leading the worst loss in financial. On 2 December 2001, it was purchased by former Time Warner executive Tony Fernandez’s company Tune Air Sdn Bhd and who has remarkable turnaround which making a profit in 2002. AirAsia is the first aviation industry in the region to adopt fully ticketless travel and unassigned seats by implement and maximize their IT field such as yield management system (YMS), computer reservation system (CRS) and enterprise resource planning system (ERP). Those systems given a lot of beneficial in their area such as create its own web page which provides the facilities to book the seat via online and lead the low expenses. However, as of 5 February 2009, AirAsia has adopted allocated seatings across all AirAsia flights, including in their sister airlines which are Indonesia AirAsia and Thai AirAsia. By the year of 2005, AirAsia already had 16 modern Boeing 737 jets. Its company’s headquarter is...
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...2 CHAPTER 2.1 2.2 2.3 Decision Making and Business Processes Why Do I Need To Know This LEARNING OUTCOMES Explain the difference between transactional data and analytical information, and between OLTP and OLAP. Define TPS, DSS, and EIS, and explain how organizations use these types of information systems to make decisions. Understand what AI is and the four types of artificial intelligence systems used by organizations today. Describe how AI differs from TPS, DSS, and EIS. Describe the importance of business process improvement, business process reengineering, business process modelling, and business process management to an organization and how information systems can help in these areas. This chapter describes various types of business information systems found across the enterprise used to run basic business processes and used to facilitate sound and proper decision making. Using information systems to improve decision making and re-engineer business processes can significantly help organizations become more efficient and effective. ? 2.4 2.5 As a business student, you can gain valuable insight into an organization by understanding the types of information systems that exist in and across enterprises. When you understand how to use these systems to improve business processes and decision making, you can vastly improve organizational performance. After reading this chapter, you should have gained an appreciation of the various kinds of information systems employed...
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... Contents Preface ix l The Information Economy 2 Pricing Information 19 3 Versioning Information 53 4 Rights Management 83 5 Recognizing Lock-In 103 6 Managing Lock-In 135 7 173 Networks and Positive Feedback 8 Cooperation and Compatibility 9 Waging a Standards War 10 Information Policy 227 261 297 viii I Contents Further Reading 319 Notes 327 Bibliography 329 Index 335 About the Authors 351 Preface Luck led us to write this book. Each of us became economists because we wanted to apply our analytical training to better understand how society functions. By our good fortune, the economics of information, technological change, game theory, and competitive strategy were emerging fields of inquiry when we started our professional careers. We jumped in and offered our own contributions in these areas. Never did we imagine that, twenty years later, we would find ourselves in the...
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... Contents Preface ix l The Information Economy 2 Pricing Information 19 3 Versioning Information 53 4 Rights Management 83 5 Recognizing Lock-In 103 6 Managing Lock-In 135 7 Networks and Positive Feedback 173 8 Cooperation and Compatibility 227 9 Waging a Standards War 261 297 10 Information Policy viii I Contents Further Reading 319 Notes 327 Bibliography 329 Index 335 About the Authors 351 Preface Luck led us to write this book. Each of us became economists because we wanted to apply our analytical training to better understand how society functions. By our good fortune, the economics of information, technological change, game theory, and competitive strategy were emerging fields of inquiry when we started our professional careers. We jumped in and offered our own contributions in these areas. Never did we imagine that, twenty years later, we would find ourselves in the middle of an information revolution. What...
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...Introduction: In 1979, Harvard Business Review published “How Competitive Forces Shape Strategy” by a young economist and associate professor, Michael E. Porter. It was his first HBR article, and it started a revolution in the strategy field. In subsequent decades, Porter has brought his signature economic rigor to the study of competitive strategy for corporations, regions, nations, and, more recently, health care and philanthropy. “Porter’s five forces” have shaped a generation of academic research and business practice. With prodding and assistance from Harvard Business School Professor Jan ‘ Rivkin and longtime colleague Joan Magretta, Porter here reaffirms, up-dates, and extends the classic work. He also ad-dresses common misunderstandings, provides practical guidance for users of the framework, and offers a deeper view of its implications for strategy today. In essence, the job of the strategist is to understand and cope with competition. Often, however, managers define competition too narrowly, as if it occurred only among today’s direct competitors. Yet competition for profits goes beyond established industry rivals to include four other competitive forces as well customers, suppliers, potential entrants, and substitute products. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry. As different from one another as industries might appear on the surface, the underlying...
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...transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. ISBN: 978-1-4221-6059-6 By his example, Arthur Rosin, my uncle, taught me the pleasures of understanding and explaining. This book is dedicated to him, to Betty Rosin, and to my parents, Cyrille and Eugene Gorin. Contents Copyright Acknowledgments Introduction Part One: What Is Competition? 1. Competition: The Right Mind-Set 2. The Five Forces: Competing for Profits 3. Competitive Advantage: The Value Chain and Your P&L Part Two: What Is Strategy? 4. Creating Value: The Core 5. Trade-offs: The Linchpin 6. Fit: The Amplifier 7. Continuity: The Enabler Epilogue: A Short List of Implications FAQs: An Interview with Michael Porter A Porter Glossary: Key Concepts Chapter Notes and Sources About the Author Acknowledgments The Michael Porter I know is first and foremost a gifted teacher. If this book succeeds in helping readers understand Porter’s ideas in their full richness, it is thanks in large measure to his encouragement, his guidance, and his patience in explaining those ideas to me. As this book progressed, he carefully reviewed every chapter, giving generously both his time and his laser-sharp attention. The company examples...
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...STRATEGIC ALLIANCES IN THE GLOBAL AIRLINE INDUSTRY Abhishek Goel1 Abstract Strategic alliances are common to any industry. Their presence is felt quite significantly in the airline industry. Starting in the US in 1978 deregulation of airline industry has since brought about sea changes in functioning of the industry. This paper attempts to understand the developments and strategic alliances that have occurred in the airline industry since deregulation. These strategic alliances exist in various forms and differ widely in scope and no consensus on classification was found. The advantages and disadvantages of strategic alliances with respect to the airline industry have been discussed. It is felt that the industry is getting increasingly concentrated. However, no conclusive remarks can be made about consumer welfare. “Airline Business Alliance Survey of 2000 reports that there are 579 alliance agreements in place, up from 280 agreements (more than double) in 1994 when the survey was first conducted. Five major alliances (Star, Oneworld, Qualiflyer, Sky Team, and Wings) account for some 60 percent of all air travel.” (Mason, 2002) The lines above make the issue important enough to understand the phenomenon that is guiding the industry. Almost a decade back Oum, Taylor and Zhang (1993) argued that the airline industry will be marked by strategic alliances and these alliances will be global in nature. The guiding factors will be several that include formation of blocs, resource...
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...www.it-ebooks.info www.it-ebooks.info E L E V E N T H E D I T I O N MARKETING MISTAKES AND SUCCESSES 3 0 T H A N N I V E R S A RY Robert F. Hartley Cleveland State University JOHN WILEY & SONS, INC. www.it-ebooks.info VICE PRESIDENT & PUBLISHER EXECUTIVE EDITOR ASSISTANT EDITOR PRODUCTION MANAGER PRODUCTION ASSISTANT EXECUTIVE MARKETING MANAGER ASSISTANT MARKETING MANAGER MARKETING ASSISTANT DESIGN DIRECTOR SENIOR DESIGNER SENIOR MEDIA EDITOR George Hoffman Lise Johnson Carissa Doshi Dorothy Sinclair Matt Winslow Amy Scholz Carly DeCandia Alana Filipovich Jeof Vita Arthur Medina Allison Morris This book was set in 10/12 New Caledonia by Aptara®, Inc. and printed and bound by Courier/Westford. The cover was printed by Courier/Westford. This book is printed on acid-free paper. Copyright © 2009, 2006, 2004, 2001, 1998, 1995, 1992, 1989, 1986, 1981, 1976 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc. 222 Rosewood Drive, Danvers, MA 01923, website www.copyright.com. Requests to the Publisher for permission should...
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...TLFeBOOK Blue Ocean Strategy Blue Ocean Strategy How to Create Uncontested Market Space and Make the Competition Irrelevant H A R VA R D B U S I N E S S S C H O O L P R E S S BOSTON, MASSACHUSETTS ( ) ( ) ( ) ( ) ( W. Chan Kim Renée Mauborgne Copyright 2005 Harvard Business School Publishing Corporation All rights reserved Printed in the United States of America 09 08 07 06 05 5 4 3 2 1 No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. Library of Congress Cataloging-in-Publication Data Kim, W. Chan. Blue ocean strategy: how to create uncontested market space and make the competition irrelevant / W. Chan Kim, Renée Mauborgne. p. cm. Includes bibliographical references and index. ISBN 1-59139-619-0 (hardcover: alk. paper) 1. New products. 2. Market segmentation. I. Mauborgne, Renée. II. Title. HF5415.153.K53 2005 658.8 02—dc22 2004020857 The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Publications and Documents in Libraries and Archives Z39.48–1992 To friendship and to our families, who make our worlds...
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...Learning with Cases INTRODUCTION The case study method of teaching used in management education is quite different from most of the methods of teaching used at the school and undergraduate course levels. Unlike traditional lecture-based teaching where student participation in the classroom is minimal, the case method is an active learning method, which requires participation and involvement from the student in the classroom. For students who have been exposed only to the traditional teaching methods, this calls for a major change in their approach to learning. This introduction is intended to provide students with some basic information about the case method, and guidelines about what they must do to gain the maximum benefit from the method. We begin by taking a brief look at what case studies are, and how they are used in the classroom. Then we discuss what the student needs to do to prepare for a class, and what she can expect during the case discussion. We also explain how student performance is evaluated in a case study based course. Finally, we describe the benefits a student of management can expect to gain through the use of the case method. WHAT IS A CASE STUDY? There is no universally accepted definition for a case study, and the case method means different things to different people. Consequently, all case studies are not structured similarly, and variations abound in terms of style, structure and approach. Case material ranges from small caselets (a few paragraphs...
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...An Integrated Approach to Strategy Running Case Featuring Wal-Mart Wal-Mart’s Competitive Advantage (Chapter 1) ● Working Conditions at Wal-Mart (Chapter 2) ● Wal-Mart’s Bargaining Power over Suppliers (Chapter 3) ● Human Resource Strategy and Productivity at Wal-Mart (Chapter 4) ● How Wal-Mart Became a Cost Leader (Chapter 5) ● Wal-Mart’s Global Expansion (Chapter 6) ● WalMart Internally Ventures a New Kind of Retail Store (Chapter 8) ● Sam Walton’s Approach to Implementing Wal-Mart’s Strategy (Chapter 9) Strategy in Action Features A Strategic Shift at Microsoft (Chapter 1) ● The Agency Problem at Tyco (Chapter 2) ● Circumventing Entry Barriers into the Soft Drink Industry (Chapter 3) ● Learning Effects in Cardiac Surgery (Chapter 4) ● How to Make Money in the Vacuum Tube Business (Chapter 5) ● The Evolution of Strategy at Procter & Gamble (Chapter 6) ● Diversification at 3M: Leveraging Technology (Chapter 7) ● News Corp’s Successful Acquisition Strategy (Chapter 8) ● How to Flatten and Decentralize Structure (Chapter 9) Practicing Strategic Management Application-based activities intended to get your students thinking beyond the book. Small-Group Exercises Short experiential exercises that ask students to coordinate and collaborate on group work focused on an aspect of strategic management. Exploring the Web Internet exercises that require students to explore company websites and answer chapter-related questions. Designing a Planning System (Chapter 1) Evaluating...
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