...customer or buyer hence that informs the producer where he should channel the available limited resources; because his or her inability to know the buyers interest directly or indirectly affects his profit margin therefore the need to study the power of the customer with regards to purchasing power and the need to fish out their interest at any given time in the production process. A thorough search has come up with the following factors as those that have the ability to influence a business windfall or profit margin in firms .Substainability of industry profit is a yardstick through which an organization can fulfil it aspirations. It can be daunting for business owners even to consider sustainability when they have other things to think about the day to day operations of the business. To be effective , sustainability needs to be worked into a business core strategy. This means starting with the executive discussions at the top level and ensuring that priorities trickle down to the lower level. Profit is the life blood of every sustainable organization to operate in the competitive environment. The following outline the signal for profit in an organization. Power of input suppliers Supplierspower refers to the ability of providers of inputs to determine the price and the items of supply. Suppliers can exert power over firms industry by raising price or reducing the quantities of purchased goods and services thereby reducing profitability. Industry profits tend to be lower when...
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...Determine the profitability of an industry • Assess how attractive and potentially profitable is an industry Introduction (2) • This is a framework for understanding an industry or an organisation’s position with respect to the forces operating in the microenvironment • It can be used to explain the performance of competitors in a market • From the analysis a number of generic competitive strategies can be derived • Cost leadership • Differentiation • Focus The five forces • The ability of firms to earn an good return depends on five forces: namely the… • Threat of new entrants‐ the ability of new competitors to enter the industry • Bargaining power of suppliers • Bargaining power of customers • Threat of substitute products • Degree of competitive rivalry The five forces framework Threat of Substitute Products Bargaining Power of Suppliers Intensity of rivalry within the industry Bargaining Power of Buyers (Customers) Threat of New Entrants The threat of new entrants Threat of new entrants • If new entrants move into an industry they will gain market share, rivalry will accelerate and profits will decline • If it is difficult to enter an industry the position of existing firms will be strengthened • Impediments to the entry of new firms are known as barriers to entry • If barriers to entry are low then the threat of new entrants will be high, and vice versa Barriers to entry • Capital cost of entry • High cost will deter entry • ...
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...1) What are the three parts of sustainability? Social Environment Economic 2) What did Michael Porter come up with? A)Reinnovation B) The Five Forces concept C) sustainability 1) Which country was used as a subject to test the potential benefits from entrepreneurship and innovation in developing countries? (a) Haiti (b) Uganda (c) Ghana (d) Latvia 2) According to the article pertaining to innovation in developing nations, there is a positive relationship between ___________ and __________. (a) education, rate of income (b) cultural barriers, economic development (c) firm size, innovation 3) T/F As a benefit of service innovation, it is believed that users have valid, innovative, useful, and creative ideas. True A unique approach to innovations produces _______ innovation verse a typical strategy that produces ________ innovation. a) radical/incremental b) greater/less c)less/greater d) incremental/radical What is not one of Porters 5 forces for competitive strategy? a) Rivalry b) Substitutes c) Consumer power d) Barriers and entry 1. The adoption of a radical process innovation is significantly promoted THE MOST by: A. Large company size B. The presence of a champion C. Technology policies D. Sustainability Answer: B 2. Which of the following factors DOES NOT impact how well a company innovates? A. Company size B. Level of education C. Race D. Amount of resources Answer: C What factor could influence...
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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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...Competing in the market An organization or (firm) needs to know how to be able to think like its competitors to sustain its competitive advantages in its market place. The first step in being able to think like your competitors is to understand a competitor analysis. Market commonality and Resource similarity are the concepts to the building blocks for a competitor analysis. Motivation, awareness, and ability, are more specific factors that affect the likelihood a competitor will take competitive action. First things first, who is a competitor and what is a competitive rivalry? Competitors are firms who compete in the same market, with similar products, and targeting the same customer demographics as your firm (Hitt, 2008). As the firms compete in the same market an ongoing set of competitive actions and competitive responses occur between competitors as they compete against each other for a market position, this is known as competitive rivalry (Hitt, 2008). Knowing your competitors by studying competitive rivalry in order to predict the competitive actions and responses that each of their competitors likely will take. The firm’s first step is a competitor’s analysis (Hitt, 2008). Competitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors (Hitt, 2008). This analysis provides both an offensive and defensive strategic context to identify opportunities and threats. Thus, understanding...
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...1.0 Introduction 2.0 Introduction of Porter's Five Forces According to theManager, The model of the Five Competitive Forces was developed by Michael E. Porter in his book "Competitive Strategy: Techniques for Analyzing Industries and Competitors“ in 1980 and ever since that time it has become an important tool for analyzing an organizations industry structure in strategic processes. Investopedia explains that Porters 5 forces are frequently used to identify an industry's structure in order to determine corporate strategy, Porter's model can be applied to any segment of the economy to search for profitability and attractiveness. In learnmarketing, Porter's fives forces model is an excellent model to analyse a particular industry. This 5 forces are: 1) Competitive rivalry 2) Power of suppliers 3) Power of buyers 4) Threats of substitutes 5) Threat of new entrants. As the above factors influence industry performance, it is useful to find out about these factors before you enter an industry or if you are wondering why your business industry is not doing well. 2.1 Threat of New Entrant Accordin to theManager, the competition in an industry will be the higher, the easier it is for other companies to enter this industry. In such a situation, new entrants could change major determinants of the market environment (e.g. market shares, prices, customer loyalty) at any time. Jim Wilkinson states that, a profitable industry will attract more competitors looking to achieve profits. If it...
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...KNOWLEDGE OBJECTIVES 1. Define competitors, competitive rivalry, competitive behavior, and competitive dynamics. 2. Describe market commonality and resource similarity as the building blocks of a competitor analysis. 3. Explain awareness, motivation, and ability as drivers of competitive behavior. 4. Discuss factors affecting the likelihood a competitor will take competitive actions. 5. Discuss factors affecting the likelihood a competitor will respond to actions taken against it. 6. Explain competitive dynamics in slow-cycle, fast-cycle and standard-cycle markets. CHAPTER OUTLINE Opening Case Competition Between Hewlett-Packard and Dell: The Battle Rages On A MODEL OF COMPETITIVE RIVALRY COMPETITOR ANALYSIS Market Commonality Resource Similarity DRIVERS OF COMPETITIVE ACTIONS AND RESPONSES Strategic Focus Who Will Win the Competitive Battles Between Netflix and Blockbuster? COMPETITIVE RIVALRY Strategic and Tactical Actions Strategic Focus Using Aggressive Pricing as a Tactical Action at Wal-Mart LIKELIHOOD OF ATTACK First-Mover Incentives Organizational Size Quality LIKELIHOOD OF RESPONSE Type of Competitive Action Actor’s Reputation Dependence on the Market Popped the Top? COMPETITIVE DYNAMICS Slow-Cycle Markets Fast-Cycle Markets Standard-Cycle Markets SUMMARY REVIEW QUESTIONS EXPERIENTIAL EXERCISES NOTES LECTURE NOTES Chapter Introduction: The competitive landscape of the twenty-first century will be...
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...analyzing the competitive forces. His five forces consist of: the risk of entry by potential competitors, the intensity of rivalry among established companies within an industry, the bargaining power of buyers, the bargaining power of suppliers, and the closeness of substitutes to an industry’s products. The Carbonated Soft Drink (CSD) Industry will be thoroughly analyzed using Porter’s Five Forces. Risk of Entry by Potential Competitors With high barriers to entry, the risk of potential competitors entering into the CSD industry is low. The high cost of developing a manufacturing plant in order to meet demand is a barrier that makes the risk of entry low. Coke and Pepsi have spent numerous amounts of money to gain the brand loyalty of their customers. Because brand loyalty is already established in the CSD industry, the risk of competitors entering is lowered. Due to brand loyalty, both Coke and Pepsi have a high demand for their products. Both companies are able to produce in mass quantities and lower the variable cost for each product. With the variable cost being lowered, they are able to lower their selling price. Another barrier that lowers the risk of entry is franchise agreements that Coke and Pepsi have made with their bottlers. The agreements state that the bottlers are prohibited from developing any new contracts with present or potential competitors. Rivalry among Established Companies The CSD industry is consolidated in regards to its competitive structure...
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...Features The movie rental industry’s market size is relatively large with $24.9 billion in 2007, which is up from $22 million in 2004. The growth rate will continue to rise with the demand for movie entertainment. There are a few numbers of rivals, but the industry is consolidating to an even smaller number of competitors. Today the scope of competitive rivalry is a globalized industry but in the beginning of this industry it would have been local, regional and national. The numbers of buyers have been increasing since 2000 with the introduction of new technologies has rapidly increased consumer opportunities to view movies. Consumers could obtain movies through various channels. They could purchase them through retailers such as Wal-Mart, Best Buy, and Amazon or they could subscribe to Netflix or Blockbuster and have movies directly mailed to their own homes. They could also subscribe to any cable movie channel to order movies instantly streamed to their TV’s on a pay-per-view basis. The degree of production differentiation is low since movies are a commodity. Customer can either get their product through digital streaming online, by mail, vending machine, Video on Demand (VOD) or in stores and all be the same product and quality. Concerns with production innovation, the movie rental industry should continually pay attention to research and development to gain competitive advantage over rivals by being first to market with a new product. A new product for this industry...
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...Number words in essay:1755 'LAGENFURT PUB' Five forces and the Value chain analysis. Abstract The purpose of this essay is to present business decisions and strategies through analysing external environment and internal competencies based on Michael Porter's Five force and Value chain models. The Fife force model include: threat of entry, threat of substitutes, power of buyers, power of suppliers, competitive rivalry. Future content includes determining Potter's Value of chain, which are primary activities: inbound logistic,operations, outbound logistic, marketing and sales, service and support activities: firm infrastructure, human resource management, technology development, procurement. Those two models are present to rebuild and develop falling family business, called the 'Lagenfurt Pub' located in old town in Gdansk, belong to my old friend. Introduction This essay will indicate the exemplification Porter's Five forces and Value chain models in business, as well in which way implementation of those two models can successfully develop organisation strategy. A fictitious business, named the 'Lagenfurt Pub' is the example of business in which Porter's two models will be implemented. The 'Lagenfurt Pub' is family business running over 35 years, old business habits, did not spot the modern market tendency and clients expectations leaded this pub to almost closing down. The 'Lagenfurt Pub' offers products as a beers, spirits, meals. The...
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...House of Kebab Contents 1 Introduction 2 1.1 Company Summary 2 1.2 Company Ownership 3 2 Five Forces Model and Analysis 4 2.1 Barriers To Entry 5 2.2 Supplier Power 8 2.3 Buyer Power 10 2.4 Threat of Substitutes 11 2.4.1 The Threat of Substitutes are High 11 2.5 Rivalry among Existing Firms 12 3 Conclusion 17 INTRODUCTION House of Kebab is a locally owned fast food outlet that will be positioned as an international franchise through our creative approach to the company's image and detail presentation. House of Kebab will provide a combination of excellent food at value pricing, with fun packaging and atmosphere. House of Kebab is the answer to an increasing demand for kebab and shawarma fast food. In today's highly competitive environment, it is becoming increasingly difficult to differentiate one fast food outlet from another. Our main priority is to establish one outlet in Kuala Lumpur, preferably in one of prominent housing estate. Later, our effort will be a further development of more retail outlets in the surrounding area. House of Kebab will entice youngsters to bring their friends and family with our innovative environment and our main focus will be serving high-quality food at a great value. COMPANY SUMMARY House of kebab sells specially made shawarma sandwich-like wrap usually composed of shaved lamb, goat, chicken, turkey, beef, or a mixture of meats and kebab which consist of thin slices cut from a cylindrical block of minced...
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...Strategic Management and Business Policy, 14e (Wheelen) Chapter 4 Environmental Scanning and Industry Analysis 1) Environmental scanning is the monitoring, evaluating, and disseminating of information from the external environment to key people within the corporation. Answer: TRUE Difficulty: Easy Chapter Objective: Recognize aspects of an organization’s environment that can influence its long-term decisions 2) A corporation uses environmental scanning to avoid strategic surprise. Answer: TRUE Difficulty: Moderate Chapter Objective: Recognize aspects of an organization’s environment that can influence its long-term decisions AACSB: Analytical Thinking 3) Political-legal forces regulate the values, mores, and customs of society. Answer: FALSE Difficulty: Easy Chapter Objective: Recognize aspects of an organization’s environment that can influence its long-term decisions 4) The societal environment includes the economic, technological, political-legal, and sociocultural forces. Answer: TRUE Difficulty: Moderate Chapter Objective: Recognize aspects of an organization’s environment that can influence its long-term decisions 5) Industry analysis was popularized by Michael Porter. Answer: TRUE Difficulty: Moderate Chapter Objective: Recognize aspects of an organization’s environment that can influence its long-term decisions 6) In dynamic environments, the CEO's focus is on forces in the societal environment. Answer: FALSE Difficulty:...
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...INDUSTRY AND COMPETITIVE ANALYSIS Crafting strategy is an analysis-driven exercise. Managers need to carry out an assessment of the environment in which the organisation operates. Managers cannot get by with opinions, good instincts and creative thinking. Three situational considerations are: 1. Macro-environmental analysis; 2. Industry and competitive conditions; 3. A company¹s own internal situation and competitive position. MACRO-ENVIRONMENTAL ANALYSIS This includes the political, economic, social, technological, legal and ecological factors (PESTLE Analysis). 1. Political Factors • How stable is the political environment? • What influences has politics on the recruitment of top officials in the organization eg there was a lot of politics that went on in the recruitment of officials in parastals which caused the parastatals to be inefficient. • Forecast of investment in a country including FDI has to be considered in terms of the political unrest eg in Zimbabwe right now, foreign companies are not investing in the country due to the unfavourable political situation. There are takeovers of companies by the government for the purposes on indigenization. Examples of such companies are Lobels, mining companies where it is required that 51% of the shareholding be indigenous people. Foreign companies no longer have faith in business operations in Zimbabwe. This has affected companies that would have ventured into joint ventures...
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...Industry Structure & Competitive Strategy: Keys to Profitability Michael E. Porter The first step in structural analysis is an assessment of the competitive environment in which the company operates—the basic competitive forces and the strength of each in shaping industry structure. The second is an assessment of the company's own strategy—of how well it has positioned itself to prosper in this environment. Taken together, these steps are the key to forecasting a company's earning power. THE SUCCESS OF A COMPANY‘S competitive strategy depends on how it relates to its environment. Although the relevant environment is very broad, encompassing social as well as economic forces, the key aspect of the company's environment is the industry or industries in which it operates. Industry structure has a strong influence in defining the rules of the competitive game as well as the strategies potentially available to the company. The intensity of competition in an industry is not a matter of luck. Rather, competition is rooted in underlying industry economics and goes well beyond the established competitors. Not all industries have equal potential. They differ fundamentally in their ultimate profit potential as the collective strength of the forces of competition differs; the forces range from intense in industries like tires, paper and steel, where no firm earns spectacular returns, to relatively mild in industries such as oil field equipment and services, cosmetics and toiletries, where...
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...chapter 3 LO2 LO3 LO4 38 Part 1 Section B: Core Concepts and Analytical Tools In Chapter 2, we learned that the strategy formulation, strategy execution process begins with an appraisal of the company’s present situation. The company’s situation includes two facets: (1) the competitive conditions in the industry in which the company operates—its external environment; and (2) its resources and organizational capabilities—its internal environment. Charting a company’s long-term direction, conceiving its customer value proposition, setting objectives, or crafting a strategy without first gaining an understanding of the company’s external and internal environments hamstrings attempts to build competitive advantage and boost company performance. Indeed, the first test of a winning strategy inquires, “How well does the strategy fit the company’s situation?” This chapter presents the concepts and analytical tools for zeroing in on a single-business company’s external environment. Attention centers on the competitive arena in which the company operates, the drivers of market change, the market positions of rival companies, and the factors that determine competitive success. Chapter 4 explores the methods of evaluating a company’s internal circumstances and competitiveness. Evaluating the Strategically Relevant Components of a Company’s...
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