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SMMCG1[BS-2] External Analysis, dam (weakest force) :explode:, (consumers…
SMMC
G1
[BS-2] External Analysis
competitors
decrease price rivalry of the structural attributes
Product differentiation
High industry concentration
grow revenue or market share
barriers to price rivalry
products have low fixed or storage costs
products have low fixed or storage costs
sell these products by dropping price
potential entrants
entry barrier
more difficult to develop a cost-competitive production base.
These cost advantages and capital requirements are only effective as entry barriers if they are large.
very limited or the logistics of distribution are quite complicated and expensive to build
substitutes
limit the profitability of the local industry
constraining the prices that industries can charge
a better cost structure
Airbnb and Hostel industry
closer the substitute is to the product or service
suppliers
can threaten industry profits by essentially bargaining
a strong buyer buy a large % of sales
buyers
suppliers or the focal industry relies on the other
the greater the reliance, the lower the bargaining power.
Industry envioroment
Industry Analysis
Understand
Why an industry is more or less profitable
Decide
which product-markets to invest more resources
Intervene
with strategic actions to chage (increase) the profitability
Examines different factors and structural features in an industry
conclusion
Analyze the opportunities and difficulties that may arise from various potential competitions in the industry
Forces defined relative to focal industry
PESTEL framework
nested layers
📢
E
conomic
employment, inflation and exchange rates, growth,
inequality
📢
P
olitical
political stability, security, corruption,
governments
future of the automobile
gas-powered, petrol-powered
S
ocio-cultural
demographic trends, values and culture, aspirations and expectations
urbanization/ growth of middle class/ environmental conciousness
Western values and lifestyles (demand)
T
echnological
broader trends in innovation, new business models
hybrid cars/ driving assistant/ solar battery infrastructure/ apps
E
cological
pollution, sustainability, conservation, climate change
climate change/ waste and recycle/ air pollution
L
egal
courts, international treaties and laws
multiple international treaties
trade, investment, global warming
introduction
systemetically analyze outermost macro-enviroment
The firm
Industry environment
MACRO ENVIROMENT
🧾comprehensive checklist
drawbacks
NO guidance
implications for a company/ industry
how to respond 💬
A six force
software of hardware products
Compliments
increase industry profits
gasoline of cars
games of consoles
corporate profitability
high-tech industry low
food products relatively high
systematic differences
systematically different:star:
Premier league :red_flag:
revenue shared equally
structure-conduct-performance
five forces framework :star:
identify the roles
insight about the industry
industry analyzing
financial fair play rules
TV rights contracts
The evolution of industry
Insight from PESTEL analysis of macro-environment
drug patent
Known patterns of industry evolution
changes over the product life cycle
10 common errors in 5-forces analysis
Descriptive Analysis Without Deep Analysis
Overemphasis on Hard Structural Attributes
Failure to Track Various Actors
Conceptual Errors
Unclear Industry Definition
Failure to Evaluate Overall Industry Profitability
Misinterpretation of Industry Profitability Evaluation
Overemphasis on Short-term Profit Indicators
Too Broad or Narrow Industry Definition
Ignoring Dynamic Changes in Industry Structure
Industry performance in 5-forces analysis
Consider potential entrants and buyers
explore some dynamics
Evaluate the strength of each force
Confirm industry boundaries
competitors :question:
substitutes :question:
metaphor-lake (
benefit
)
Eg. U.S. Airline industry
rivalry-pivotal force
yield management
:tada: solution: major mergers
dam (
weakest force
) :explode:
dam (strong force)
dam (strong force)
dam (strong force)
dam (strong force)
pivotal force
improve benefits : doing something or closely monitoring
(consumers have loyal to different brands)
(Hirschman Herfindahl Index)
STRUCTURE from innermost to outermost
🚗TOYOTA
behave in specific ways :pencil2:
five forces – each of which can compete
for the industry’s profits :!!: