Chapter 2 Flashcards
Remember, industries are made up of segments. Segments are groups of companies with similar characteristics.
Industries are split into:
Primary
Secondary
Tertiary
What are Porters Generic Strategies?
There are three strategies for competing in an industry
Cost leadership - having the lowest cost
Differentiation - stands out to competitor products by being unique
Focus on narrow niche
If a supplier positions themselves in the middle, they are said to soon fail as they will not hold a competitive advantage on any of the three strategies
What is direct marketing?
Product sold directly to customers vs through retailer
How many groups do manufacturers fall into?
2
1- few large organisations whose bargaining power is high
2- fragmented, small so each have little bargaining power
Remember, an important role of alternative product is to limit price of all products
Where can you collate information to estimate costs of good and service in an industry?
Value Chain
Market data
Technical data
RFIs
Plant visits
Discount lists
Company annual report - reports are ppublished from companies on annual basis and can be used to estimate costs. This can be done by subtracting profit from sales to give costs, average retail price can be found by company webistes or retailers which divided by sales can approximate volume. With this, plot data on graph for each company. Eaxis are cost and output. Data will be a little sporadic as each company will vary slightly, however, shouldbe close. Add a line of best fit - line of best should have as many data point above the line as below- this can be done manually by eye, or for a more accurate result, uyse statistical analysis. Line fo best fit give us the trend.
Where can you collate information to estimate costs of good and service in an industry as well as negotiation?
Value Chain
Market data
Technical data
RFIs
Plant visits
Discount lists
Company annual report - reports are published from companies on annual basis and can be used to estimate costs. This can be done by subtracting profit from sales to give costs, average retail price can be found by company websites or retailers which divided by sales can approximate volume. With this, plot data on graph for each company. Axis are cost and output. Data will be a little sporadic as each company will vary slightly, however, should be close. Add a line of best fit - line of best should have as many data point above the line as below- this can be done manually by eye, or for a more accurate result, use statistical analysis. Line of best fit give us the trend. Where the line starts from will show us fixed costs in the industry. The sloping line represents rate of variable costs as output increases.
This info can then be used to estimate the industry’s breakeven point - once profits cover fixed costs. At this point, supplier may be willing to offer discounts as they only need to cover variable costs.
What is Evidence Based Negotiating?
Negotiations reliant on fact and figure only, for example challenging price, because you have a deep understanding of the cost base of a product and supplier, thus know their break even point etc
Where can you collate information to estimate costs of good and service in an industry as well as negotiation? (2)
There is a 5 step process to follow: OWNIT
Outline
Wide search
Narrow search
Increase your stockpile of information
Transform your stockpile into new knowledge
Outline - 4 steps here: be specific. define wat is already known, create the outline and define the gaps
Transform your stockpile into new knowledge - organise the information into a meaningful way by theming it
Remember, via product life cycle model there are
Innovators - people who like to be the first to try new products
Early adopters - group of consumers to adopt a new product after the innovators
Middle majority - group of consumers who adopt a new product only after they see its successfully used by innovators and early adopters.
Laggards - group of consumers who are last to adopt the product
