Industry Structure Flashcards
Strategy def
Plan for achieving org’s goal depending on position, capabilities and cost to change these conditions
ICONS
Industry structure
Comp advantage
Organization
Novel threats and opps
Social resp
Industry structure frameworks
5 forces
Industry typologies
Industry typologies (list)
Monopolized (market power)
Differentiated (monopolistic comp)
Commoditized (perfect comp)
Monopolized market conditions (8)
Avg rev > avg costs
Profit > 0
Low TofE
Poor/few substitutes
Low rivalry
High profits
Differentiated goods
E.g. local gas/electricity
Monopolistic market conditions (8)
AR = AV
Avg profit = 0
High TofE
Partial substitutes
Local rivalry
Temp profits
Differentiated goods
E.g. restaurants
Perfect market conditions
AR = AC
Profit = 0
High TofE
Good/many substitutes
High rivalry
Low profits
Commoditized goods
E.g. Ride sharing market
Key questions for industry analysis
Rivalry?
Substitutes?
Threat of Entry? (Barriers)
Porter’s 5 Forces
Nature of Competition:
- Rivalry
- Threat of new entrants
- Threat of substitutes
Appropriation of Profit
- Supplier power
- Buyer power
Determinants of Rivalry
Num. of competitors
Growth of rivalry
Exit barriers
Determinants of TofE
Unequal access to dist channels
Gov policy
Cap reqs (barriers to entry)
Customer switching costs
Determinants of Threat of subs
Num. of subs
Customer switching costs
Determinants of Supplier power
Num. of suppliers
Differentiation
Vertical integration
Switching costs
Determinants of Buyer power
Num. of buyers
Price sensitivity
Vertical integration
Switching costs
Standardized prods
Bargaining between equal parties
Bargaining region is the entire range between the seller’s indifference price and the buyer’s WTP price
Bargaining between unequal parties (multiple buyers)
Bargaining region is the range between the two buyers’ WTP price. If there are more than 2 buyers, the bargaining region drops out the lowest price (seller’s bargaining power increases with more buyers)
Bargaining between unequal parties (multiple sellers)
Bargaining region is the range between the two sellers’ indifference price. If there are more than 2 sellers, the bargaining region drops out the highest price (buyer’s bargaining power increases with more sellers)
Cases for industry structure
Cola Wars
Trader Joe’s
Shein vs Zara
