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SMMCG10[BS-2] External Analysis (Industry analysis-I (5 forces (buyers…
SMMC
G10
[BS-2] External Analysis
Industry analysis-I
5 forces
buyers
barging power of buyers
suppliers
barging power of suppliers
entrants
threat of new entrants
substitutes
threat of substitutes and services
competitors
rivalry of competitors
Entrants
The more new entrants enter, the lower each profit
4 kinds of enter barriers
naturally
Scale Economics
Scope Economies
Learning Curve Economies
Capital requirements
hard to develop cost-competitive production base(supply side)
loyal
Product Differentiation
Access to Distribution Channels
difficult to reach or win over customers(demand side)
strategic
Aggressive pricing, new products
Reputation for retaliation, slow industry growth and high exit costs
Stronger firms with resources and excess capacity are better able to retaliate
threat of retaliation
hodgepodge
Access of raw materials
Government regulations
Difficult to imitate the technology and process
the advantages are not easy to reproduce
Rivalry among industry firms
The intensity of rivalry is high when
Low industry concentration and product differentiation
Slow demand growth
High fixed or storage costs for the product or service
High overcapacity
High exit barriers
Pure price competition
The dilemma of pure price competition
The profit of industry will fall
Suffer from lower prices and lower profits
The prevent of price competition
High industry concentration
High product differentiation
Low fixed or storage costs
Demand growth is high
Limited over-capacity
Low exit barriers
The threat of substitutes
Silmilar product and services offered by the neighboring industries
The profits will be limited by sustidtue when
Meet the similar needs
Better cost structure
More innovative or value providing
Improving quickly in costs and or performance
Bargaining power of buyers
The concentration of buyer's industry
Low switching costs
The more buyers rely on the industry, the greater their bargaining power
Bargainin power of suppliers
Few substitute products
Few suppliers control most supply
The more the supplier rely on the industry, the lower its bargaining power
the soft drink industry
blind tests
our brain tells us to expect
our sense of taste and smell are not completely objective
unique highly safeguarded secret recipes
marketing and advertising
begin to taste it even before we actually taste it
unique taste
Structure-Conduct- Performance Paradigm
Structure
the nature of buyers and sellers
switching costs
condition for entry or exit
supply & demand concentration
diversity of production
Conduct
research& development spending
advertising
Pricing policies
bargaining
It is a foundation for the most widely used industry analysis framework called five force framework
Performance
profitability
Industry analysis-II
How to use the 5-forces framework?
② Examine structural attributes
③ Develop an assessment(strong, weak...)
① Clearly identify
④ Examine dynamics
"Pivotal Force"
The greatest threat to industry profitability
Direct impact on profitability
Ex: Airline Industry
“Price rivalry”
A Sixth Force?
Complements
"Coopetition"
Common errors in 5-forces analysis
Industry definition
Actors/Structural attributes
Evaluating profitability
5-forces analysis limitation
"Static" to "dynamic"
Based on competition
Lack of insight into the surplus part
Required sophistication
airlines
unprofitable
rivalry
undifferentiated services
high fixed cost
low barriers to entry
easy to lease the planes and crew
easy to get the gates and landing slots
supplier
buyers
substitutes
pharrmaceutical
profitable
hard entry barrier
risky R&D investment
marketing and regulatory capabilities
rivalry
high differentiated products / patent
buyers
low bargain capibility
vital health needs
suppliers
little bargain power
substitutes
generic are less competitive
External environment
where companies operate&get affects&interact with
keeping alignment with the external environment makes good strategy
To analysis external environment traditional tool-SWOT framwork
more delicate tool-PESTEL framework
PESTEL framework
to analysis the micro environment of a firm(micro environment- the environment of any company consists of，the major elements in external environment that might affect the company)
P- political
E-economic
S-socio-cultural
T-technological
E-ecological
L-legal
Group 10 member
東南亞三106108025林芯瑜
東南亞四105108022魏郡奎
東南亞四 105132017古景元
歷史六 103105031李尚學
國企三 106212010 張容禎
東南亞三 106108003 鍾語謙
國比三 106402044 薛羽彤