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Installment 8: INDUSTRY ANALISIS - Coggle Diagram
Installment 8: INDUSTRY ANALISIS
Bain-Type IO
Industrial Organization
Intersection between Microeconomics & Strategic Management
Theory of the firm
Purpose
Vertical & Horizontal Boundaries
Market Power
Maximize Profits
Allow to restrain output
Allow to increase price
Measured by mark-up
(Price-Marginal cost) / Price
Practices to gain or maintain it
Collusion
Vertical integration
Horizontal mergers
Strategic barriers to entry
Above-normal profits are possible in the long run
Allows Heterogeneity
Size of the firm
Market Share
SCP
Assume stable, causal relationship
Structure
Number and size distribution (buyer & sellers)
Entry & Exit conditions
Product differentiation
Vertical integration & diversification
Conduct
Objectives
Policies
R&D
Collusion / Merger
Design, branding & advertising
Performance
Profitability
Growth
Quality
Efficiency
Extend to
Supply conditions
Technology, factor markets, etc.
Demand Conditions
Elasticity, preferences, etc.
Government policy
Regulation, subsidies, wage, etc.
Porter´s Five Forces
Influenced by SCP
Capture structure
Factors influence conduct & performance
Competition
Extent & Intensity
Num of Firms
Industry´s dynamic (market share)
Different costs
Production Capacity
Undifferentiated products
Low price to win market
Unobservable prices
Large & infrequent orders
Incentive to undercut prices
High barriers to exit
Market definition
High Price Elasticity
Reduce margin from cost or revenue
Force to reduce price when quality is =
Force to improve quality when $ is higher
Threat of entrants
Barriers to entry
Structural
Strategic
Threat of substitute
Consider
Availability
Price-value characteristics
Substitutes & complements
Power of Buyers
Reduce margin
Revenue & unchange cost
Higher quality, higher cost & same price
Features
B. Concentration
Volume discount, large orders
B. Costs
Price sensitive
Similar products
Switching costs
B. Income
Threat of integration
Make or Buy :question:
Indifference to quality
Bertrand competition
Power of Suppliers
Margin reduction
Price increase
Quality decrease
Features
Concentration
Role of substitutes
Purchasing power
Is the firm an important customer :question:
Quality importance
Switching costs
Threat of integration
Use or Sell :question:
Limitations
Focus on Industry
No role of Government
No consideration of demand conditions
All firms as threat to profitability
Qualitative
Neo-Classical view
No persistent above-normal profits
Demand-Supply theory
Polar cases
Monopoly
Perfect Competition
Lower cost for E.Scale & Scope
Goal: Maximizing Profit
Production as competitiviness
Value Net Model (Brandberger & Nalebuff)
Co-opetition
Strategy
Collaboration
Increase market size
Competition
Share market
Interactions enhance profits
Key Industry Players
Horizontal relationships
Competitors
Complementors
Makes local firm stronger
Vertical relationships
Suppliers
Customers
Local Firm as the center
Firm X’s profit from the Value Net = Overall value of the net when firm X participates minus overall value of net when it does not participate
Industry Analysis
Facilitates
Assessment of industry & firm performance
Key Factors´s Identification
SWOT