9/15 Class Flashcards
rivalry
known as competition how to measure? number of firms concentration relative size industry growth (demand) lack of product differentiation EOS exit barriers: specialized investment, high cost of exit, emotional attachment
three external analysis
industry structure
general environment
five force model *most important
hoovers
industry growth (demand)
unit sales can help us determine this
threat of new entrants
attractiveness of industry
high(projected) growth, high profits, emerging industry
barriers to entry
economies of scale
product differentiation
cost advantages independent of scale: proprietary technology, access to raw materials, learning curve effects, favorable locations, etc
substitutes
when other people produce something that could replace your good
power of buyers
small number of buyers
product represents a significant fraction of buyers cost of purchases
products are standard or low switching costs exist
buyers do not earn significant economic profits
power of suppliers
few suppliers few substitutes available differentiated product threat of forward vertical integration importance of customer to supplier
porters five force model
entry
rivalry
substitutes
suppliers
buyers
all threats are high the profit is average
all threats are low the profit is above average
complementors
increase the value of the focal firm’s product
limitations of five force model
dynamics of competing what can managers do? reactive vs proactive static view innovation as a driver of competitive structure industry evolution not considered focus on industry, not on firm alternative: resource based view - firm capabilities drive profitability
industry structure
fragmented industry - landscapers, tatoo industry
emerging industry - new industry, customers come from non-consumption not from competitors
mature industry
declining industry
VRIO
Value
rarity
imitability
organization
Harlequeen
publication company
