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© 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
Industry Analysis Porter’s Five Forces Model Potential competitors vs. Threat of substitutes Suppliers vs. Purchasers in bargaining power Stronger forces inhibits profit growth © 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
Competitors Brand Loyalty/Switching Costs Efficiencies Performance (product, support, etc.) Costs Regulatory Environment Barriers to Entry Direct Indirect © 2013, Jens Mueller m@usainfo.net
Buyers End users Retailers (buying power) Most powerful in fragmented markets Low switching costs decrease loyalty Can buyers produce the product on their own? © 2013, Jens Mueller m@usainfo.net
Suppliers Unique products command premiums Can suppliers directly compete? Are suppliers the driving force of future innovation? © 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net http://www.mba2.com/strategy/porter.shtml
Coca Cola Porters 5 Threats of new entrants Entry barriers are relatively low for beverage industry: there is almost 0 consumer switching cost and very low capital requirement. There are more and more new brands appearing in the market with usually lower price than Coke products However Coca-Cola is seen not only as a beverage but also as a brand. It has a very significant market share for a long time and loyal customers are not very likely to try a new brand beverage. © 2013, Jens Mueller m@usainfo.net
Coca Cola Porters 5 Threats of Substitutes There are many kinds of energy drink and soda products in the market. Coca-cola doesn’t really have a special flavor. In a blind taste test, people couldn’t tell the difference between Coca-Cola coke and Pepsi coke. © 2013, Jens Mueller m@usainfo.net
Coca Cola Porters 5 Bargaining power of buyers The individual buyer has little to no pressure on Coca-Cola Consumer could buy those new and less popular beverages with lower price but the flavor is different and the quality is not guaranteed. Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the bargaining power is lessened because of the end consumer brand loyalty. Increasing number of consumers begin to drink fruit juice, lemonade and tea instead of soda products. © 2013, Jens Mueller m@usainfo.net
Coca Cola Porters 5 Bargaining power of suppliers The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and caffeine. The suppliers are not concentrated or differentiated. Any supplier would not want to lose a huge customer like Coca-Cola. © 2013, Jens Mueller m@usainfo.net
Coca Cola Porters 5 Summary: Rivalry is HIGH Currently, the main competitor is Pepsi which also has a wide range of beverage products under its brand. Both Coca-Cola and Pepsi are the predominant carbonated beverages and commit heavily to sponsoring outdoor festivals and activities. As Coca-Cola has a longer history, it is advertised in a more classical approach while Pepsi tried to attract younger generation by using pop stars as brand ambassadors. There are other soda brands in the market that become popular, like Dr. Pepper, because of their unique flavors. © 2013, Jens Mueller m@usainfo.net
Core Competencies Where does the company add value; and is it more value than a competitor could add? Extension of core competencies to new ventures Internal External © 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
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Markets and Firms Going wide or going deep?
Concentration/ Diversification Create value through focus? Do diverse business units stimulate management? Can a company rely on core competencies alone? © 2013, Jens Mueller m@usainfo.net
Vertical Integration A requirement for growth in a single, dedicated market Control over inputs (upward) Control over outputs (downward) To what extent does integration compete with business partners? Barriers to new competition © 2013, Jens Mueller m@usainfo.net
Against Vertical Integration Is there competence in the new business activities? Cost Technological advancement Increased commitment to/dependency on one market Administrative overhead Is outsourcing an alternative? © 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
Most firms integrate Making tools for the workshop Growing herbs as ingredients Designing forms rather than buying them Only firms with one single production step do not integrate Transaction cost theory price vertical integration through market forces © 2013, Jens Mueller m@usainfo.net
Outsourcing Nike: No longer produces shoes AT&T Wireless delegate customer service duties to a competitor No longer control over competencies - no learning curve Dependencies © 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
Diversification How far removed from the core business is the proposed diversification? Are there some overlaps? It takes money and resources to diversify What does it take to generate profits from diversification? © 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
Diversification Separate business units Acquisition of external units Leave as is Integrate Change, through the transfer of efficiencies Subsidiary formation © 2013, Jens Mueller m@usainfo.net
© 2013, Jens Mueller m@usainfo.net
Diversification Limits How many pots can a cook manage? Communication inefficiencies in large diversified organizations Friction and administrative costs If additional units provide buffer against failure, why not keep just the winners? © 2013, Jens Mueller m@usainfo.net
Brandeis University: Selling Art or the Art of Selling Change Page 69 Brandeis University: Selling Art or the Art of Selling Change Group analysis © 2013, Jens Mueller m@usainfo.net