Analyzing an Industry Segmentation (BO path 4)  Customer Characteristics : Age, gender, income, level of use Employee characteristics, (Pop Copy) Competitors: 1. leader 2. Challenger 3. Follower 4. Nichers Pop Copy = Leader, ‘Bad Service’ segment

Strategy A View from the Top Chapter 4: Analyzing an Industry John Shonk Bob Odgers Donald Ewalt

What is Industry? Products > function > technology Customers Geography Stages in production-distribution pipeline Markets served

Porter’s Five Forces Model 1. Threat of new entrants 2. Bargaining power of customers 3. Bargaining power of suppliers 4. Threat of substitute products or services 5. Jockeying among current rivals

Threat of Entry Economies of scale Product differentiation Capital requirements Cost disadvantages that are independent of size Access to distribution channels Government regulations

Bargaining Power of Customers Few customers and/or buy in large volume Product is relatively undifferentiated, making it easy to switch other suppliers Buyers’ purchases represent a sizable portion of the sellers’ total revenues Buyers can integrate backward

Bargaining Power of Suppliers Only a few dominant and are more concentrated than the industry they serve Component supplied is differentiated, making switching among suppliers difficult Few substitutes Suppliers can integrate forward Industry generates a small portion of the suppliers’ revenue base

Threat of Substitute Products or Services Show improvements in price performance relative to the industry average Produced by companies with deep pockets

Jockeying among Current Rivals Competitors are numerous and relatively equal in size and power Industry growth is slow and the competitive battle is more about existing customers than creating new customers Fixed costs are high or the product or service is perishable Capacity increases are secured in large increments Exit barriers are high

*Influence of Complementary Products Alignment with complementors New technologies or approaches can upset the existing order

Analyzing an Industry Segmentation (BO path 4)  Customer Characteristics : Age, gender, income, level of use Employee characteristics, (Pop Copy) Competitors: 1. leader 2. Challenger 3. Follower 4. Nichers Pop Copy = Leader, ‘Bad Service’ segment

Analyzing Products/Market “Research used to assist in predicting the direction of the markets based on technical data” 1. Market size (current and future) 2. Market growth rate 3. Market profitability 4. Industry cost structure 5. Distribution channels 7. Market trends 8. Technology changes

Analyzing Products/Market Example: Venezuela, oil Market. Avoidable?

Four Trajectories of Change Radical- threatened with both obsolescence at the same time…. Ex. Airline industries Progressive- not threatened with either obsolescence… Ex. Long-haul trucking Creative- core assets are threatened, but core activities retain value… Ex. Movie studios Intermediating- core assets retain value, but core activities are threatened… Ex. Museums

Structure, Concentration, and Product Differentiation Structure- Vertical integration, horizontal integration, or both? Concentration- Market share and unit costs are inversely related, and the “Rule of Three and Four.” Differentiation- Mature markets sometimes become less concentrated.

Product Life Cycle IntroductoryGrowthMaturityDecline Competition is unsure of targets Less uncertainNo sales growthUnattractive Potential customers are unfamiliar More intense competition Most competitively stable Good strategies can produce Large amount of experimentation Usually most rivals Product development and give a spark

New Patterns Fighting for the right convergence… HD TV's and Cell Phones Industry evolution… Three phases The lines are getting blurred Changing with experience