External environment Flashcards
general environment - analyze with ______
PESTEL
industry environment - analyze with ______
Porter’s 5 forces
barriers to entry: economies of scale
lower cost per unit
can be developed in virtually any activity
varies by industry
barriers to entry: product differentiation
aka brand image - harder to make headway - many have to lower prices to compete unwillingness to buy - limits the price newcomer can command
barriers to entry: customer switching costs
fixed costs incurred by buyer when suppliers are changed
larger switching costs => harder for new entrants
barriers to entry: unequal access to distribution channels example
chobani: now large % is greek yogurt (~36%)
muscled out plain yogurt cousins, pudding, margarine
- something must be removed to make room
- shelf space is so valuable that containers (ie margarine) shapes are changed to utilize space (round => square)
barriers to entry: government policy example
pharmaceutical patents end => generics come in
- after patent expired, oxycotin “unable to abuse” version
exert power with high $ and limited quality
suppliers
exert power with low $ and high demand for quality
buyers
2 industries in Cola wars:
- Coke and Pepsi (concentrate producers)
2. bottlers
airlines
least profitable industry and forces explain why (strong 5 forces)
“sexy” does not drive profit. underlying strategy drives profit.
Walmart & Porter’s 5 forces
business level strategy = low prices (“always” emphasis on price)
worlds largest retailer
11,000 retail units under 55 different banners in 27 countries (4600 units in US)
2014 revenue = 476.3 billion
2.2 million associates worldwide (1.3M US)
discount retailing in mid 1950s
Sam Walton opened in 1962
4 advantages of Walmart
- suppliers willing to make damaging concessions because of ready-made markets (immediate access)
- must increase efficiency to meet low price standards (ex. Levi)
- jump in sales
- honest company (pays bills on time)
3 disadvantages of Walmart
- make a lot of concessions - barely make margins
- if dont meet demands => give up things (outsourcing, sell parts)
- big brands diluted (vlasik, levi)
Walmart retailing format
discount store - average size 91,000 sq ft supercenter neighborhood markets SAMs club walmart.com
Walmart: 4 competitive advantages - all aligned with low $ strategy
- procurement
- distribution
- merchandising
- pricing
Walmart: procurement
buy into system - useful for suppliers (relationships with >100K suppliers)
emphasis: frugality
retail - 8% out of stock + 1/3 sale
- retail link system => trends, inventory, stocking
Walmart: distribution
- strategic locations - 158 distribution centers - each within a day’s drive
- hubs in a hub and spoke network
- 1M sq. ft. avg. investment $70M
- cross docking $RFID on product cases
- distribution costs 2-3% rev vs. 4-5% for others (saves billions)
Walmart: merchandising
- emphasis on hard goods rather than soft goods (hard Gs PM > soft (seasonal => sale))
- national and private label brands
- more variety & tight invt. control
Walmart: pricing
- EDLP set nationally w/ flexibility for store managers
- daily price check on competitors
- 2-4% differential up to 10% vs. supermarkets
- Target differentiates via up-scale w/ designers & partnerships
Walmart: people
- mixed record
labor: profit sharing managers
anti union (need to keep wages low to keep $ low) ex. meat cutters - Litigation
off the clock work
gender discriminatory class action lawsuit
“tap on shoulder” promotion system (~^M females)
Walmart: future trends
- smaller
- harder to penetrate cities
- take over transportation of suppliers
- recapture Mr. Sam’s formula “its back”
- LT - new markets:
- online
- alcohol
- gas
- finc. services (W2W, bluebird)
Suiting up against the big boys (plank and under armor)
“performance apparel” didnt exist before UA
1 man show until kipp joined
turning point w/ “any given sunday” movie and espn ad.
tom brady as spokesman
Amazon
- initially didnt collect sales tax bc no physical operation in state.
- adv. eroded over time
- major concern for 1. brick&mortar 2. states
- set up in WA bc low pop.
- now: big battleground = shipping (1day), launching 1 hr. shipping in NYC
Selling items on smartphone
$22 B revenue on apps for only apple and google
- must be able to predict/project trends
McDonald’s sales
- declining to healthier/gourmet chain alts. => losing biggest group (20-30yr olds)
- hard to change bc of large and complex supply chain
