a paper 450 words

8954r8m5m

MGMT490competitiveopportunitymodelintheindustrialmarket.ppt

Home >Business & Finance homework help >Management homework help >a paper 450 words

Module 6
Competitive opportunity model in the industrial market

Agenda

Opening case
Market opportunity analysis
correlation with potential entrants and substitutes (alternative technological value creation opportunity),
correlation with vendors and customers (organizational value capture opportunity), and
correlation with competitors and complementors (value eco-system governance opportunity).
Market opportunity model
Localized strategic group opportunities
Globalized strategic geography opportunities
Case:
State of the entertainment industry
Video: The event that transformed the music industry

Opening case

Why is console gaming dying?

The survival of traditional console makers will depend on how they adapt to evolving business models and changing consumer tastes

1. Alternative technological value creation opportunity

Correlation with New Firms

The concept of entry barriers implies that substantial costs, time and investment are required to enter an industry. The higher the entry barriers, the less likely are the new firms to enter the industry. Entry barriers depend on the sub-factors:

Alternative technological value creation opportunity

Correlation with Substitute Providers

Substitutes limit the potential profits of an industry by placing a ceiling on the prices firms in the industry can charge

The firms should be particularly attentive to those substitute products that:

show a trend of improving their price-performance ratio

generate high profits, that may become the basis for the substitute providers to drive cost and price reduction or performance improvement and differentiation

The position of the firms relative to the substitute providers is generally a matter of collective action by the industry participants. Product quality improvement, product availability, and product differentiation and advertising by a single firm may not be sufficient to improve the industry’s position against a substitute. However, heavy and sustained efforts by all participating firms can improve the industry’s collection position

2. Organizational value capture opportunity

Correlation with vendors

An industry may deal with several supplier groups, whose forcefulness to bargain on factors mirrors those of buyer groups:

Concept of suppliers includes not only the other firms providing intermediate inputs, equipment, and services, but also the labor

Organizational value capture opportunity

Correlation with customers

Buyers’ forcefulness to bargain depends on:

3. Value eco-system governance opportunity

Correlation with Competitors

Rivalry among competitors means jockeying for position, using tactics that include price - and non-price competition. Intensity of rivalry among firms depends on:

The firms may improve their position in competitive rivalry by focusing their efforts on the fastest growing segments of the industry, or on market areas where they have an asymmetric advantage in terms of resources and capabilities and being able to differentiate; they may also try to avoid confronting competitors with high exit barriers, so that they mitigate the threats of price warfare

A Sixth Force – Correlation with “Complementors”

Complementors
Industry Participants whose businesses enhance the value of yours
The Opposite of Substitutes
The Emergence of “Networks” of Organizations
Examples
Computer Manufacturers & Software Makers
Consumer Electronics & Entertainment Companies
The Central Issue
How to work with “complementors” to make strategic investments which mutually benefit both companies

Value eco-system governance opportunity

A Sixth Force –Correlation with “Complementors”

The complementors add a cooperative dimension to “competitive forces”.

“Thinking [about] complements is a different way of thinking about business. It’s about finding ways to make the pie bigger rather than fighting with competitors over a fixed pie. To benefit from this insight, think about how to expand the pie by developing new complements or making existing complements more affordable”
Brandenburger and Nalebuff Co-opetition

Localized Correlation Across Six Forces using Strategic Groups Analysis

Step 1: Map Strategic Groups and Changes

Strategic groups is a cluster of companies in an industry
Groups of companies clustered around a similar competitive approach or strategic position
Companies in a group are similar to each other but different from companies in other groups

Procedure: Constructing a Strategic Group Map

STEP 1.1: Identify value differentiation, cost leadership, or blue ocean factors that differentiate firms in an industry from one another

STEP 1.2: Plot firms on a two-variable map using pairs of these differentiating characteristics

STEP 1.3: Assign firms that fall in about the same strategy space to same strategic group

STEP 1.4: Draw circles around each group, making circles proportional to size of group’s respective share of total industry sales

Example: Strategic Group Map of Retail Jewelry Industry

Value Premium Factor

High

Low

Medium

Cost Leadership Factor

Specialty Jewelers

Full-line Jewelers

Limited-category Retailers

Broad-category Retailers

Outlet Mall Retailers

National, Regional, & Local Guild - “Fine Jewelry” Stores

National Jewelry Chains

Local Jewelers

Credit Jewelers

Catalog Showrooms

Off-Price Retailers

Small Independent Guild Jewelers

Prestige Departmentalized Retailers

Upscale Department Stores

Chains

Discounters

Step 2:Identify next step

Create a new group
Move to a better group
Strengthen the existing group
Strengthen company’s position within existing group
Move to a new group and make it better

Strategic Maps of the United States Airline Industry

Braniff

Eastern

Western

Republic

Ozark

USAir

Piedmont

Frontier

AirCal

PSA

South-

west

Texas Int’l

South-

west

America

West

International

National

Regional

No Frills

Full Service

Value Premium Factor (servicing value)

Blue Ocean Factor (geographical scope)

The Late 1970s

The Early 1990s

Reno
Air

Continental

Pan

North

west

Laker

World

Kiwi

Others

TWA

United

American

Delta

United

American

TWA

Delta

USAir

Northwest

Conti-

nental

Strategic Geography Analysis: Porter’s Diamond

Related and Supporting Industries (vendors):

The presence or absence in a nation of supplier industries or related industries that are nationally competitive.

Factor Endowments (technology inputs):

A nation’s position in factors of production, such as skilled labor or infrastructure necessary to compete in a given industry.

Firm Strategy, structure and rivalry

(value ecosystem):

The conditions in the nation governing how companies are created, organized, and managed and the nature of domestic rivalry.

Demand Conditions (customers):

the nature of home demand for the industry’s product or service.

S I

How to improve

your global success in a target geography?

Consider these four factors

Factor Endowments – Technological Inputs

They provide a cost advantage

Natural resources
Climate

Location
Demographics

Basic factors:

These factors are naturally endowed.

Factor Endowments

Technology base

These factors offer differentiation advantage and are based on developmental growth

Advanced factors:

Infrastructure

Skilled labor

Supports the basic factors, to bring continued success.
.

Demand Conditions - Customers

Home demand can prove the impetus for upgrading competitive advantage:

Firms are typically more sensitive to the needs of their closest customers.
Therefore, sophisticated and demanding customers in the home market pressure firms to improve:

Related and Supporting Industries - Vendors

Successful firms within a country tend to be grouped into clusters of complementary vendor groups (related industries).

Investments in advanced factors of production by related and supporting industries can spill over into an industry, making it more competitive internationally.

Switzerland: Dye-industry ® Pharmaceuticals

Sweden: Specialty-steel ® Fabricated-steel-products

U.S.: Semiconductor-industry ® Personal-Computers

Firm Strategy, Structure and Rivalry: Value Ecosystem

Nations are characterized by different “management ideologies” which can help or not help build a competitive advantage.

Makeup of Top Management	Results in:
Improved manufacturing processes. Improved designs.
Short-term strategies. Lost competitiveness in engineering-based industries.

Case: State of the entertainment industry

The comprehensive picture of modern entertainment industry highlights a few key points:

The amount of money and content in the entertainment industry has always trended upwards. The opportunity levels are tremendous. The real

challenge is for creators and companies to figure out how best to capture that opportunity - especially in the face of growing competition

Case: State of the entertainment industry

Changes in the music industry:

Case: State of the entertainment industry

The advantage that the music industry has over other creative industries is that music is a particularly pervasive product that can be associated with everything from soft drinks to cars to enterprise software/hardware. Therefore, the music industry has multiple opportunities to diversify its revenue streams:

Case: State of the entertainment industry

Video case: The event that transformed the music industry

Napster is a simple downloadable computer program that enables users to share the music for free

Napster dramatically changed peoples’ expectations of music to: ”cheap and easy”

Music artists got divided in two groups: Pro-Napster (Prince etc.) and Against-Napster (Metallica)

Napster shifted the bargaining power of suppliers and customers in the industry, and enabled new substitutes and new entrants