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INDUSTRY ANALYSIS (6-FORCES MODEL), 4 critiques, Porter, 1980; Grant, 2010…
INDUSTRY ANALYSIS (6-FORCES MODEL)
Rivalry among existing firms
High fixed costs
High exit barriers
Industry growth rate
Commodity or differentiation
Distribution of market shares
High strategic stake in industry
Level of competition
Bargaining power of suppliers
Information asymmetries
Competition threat
Switching costs
Level of differentiation
Level of concentration
Proportion of cost of product of industry competitors
Bargaining power of buyers
Information asymmetries
Buyer poses a competition threat
Switching costs
Level of differentiation
Buyer's concentration
Proportion of cost of product of industry competitors
Threat of new entrants
ROCE > cost of entry capital = ATTRACTIVE INDUSTRY
Entry Barriers
EX-POST
Threats created by incumbents
Aggressive tactics
Predatory pricing
Tightening control on supply/distribution
Initiating litigation
EX-ANTE
Exogenous
Barriers - governments
Legal barriers
Investments in fixed assets
Endogenous
R & D investment
Marketing investment
Incumbents' experience
Control of supply/distribution channels
Investments to increase scale
Investments to increase experience
Type of industry according to entry barriers
Fat cat
Development/growth
Lean and hungry
Mature/decline
Top dog
Mature/decline
Puppy dog
Development/growth
From new entrant POV
Giarratana (2013)
capital & other resources
experience
innovativeness
probability of survival
Threat of substitutes
Buyers' propensity to substitute
Price/performance relationship of substitutes
Bargaining power of complements
Commoditisation of the industry product
Monopoly on complement side
Steps for analysis
Attractiveness to incumbent
Attractiveness to new entrant
Interdependencies between forces
Identify & evaluate forces (profitability?)
Define industry
Evaluation potential changes to 6 forces
4 critiques
resource based
practice-based
dynamic critiques
sector-based
Porter, 1980; Grant, 2010
