EXTERNAL ANALYSIS, CHAPTER 2 DR. MARK FRUIN SPRING 2007 BUSINESS 189

WHY IS THE PHARMA INDUSTRY SO PROFITABLE? PATENT PROTECTION HIGH R&D COSTS RISK OF FAILURE COMPLEXITY OF GETTING NEW DRUGS TO MARKET POLITICAL PRESSURES ON PRICES MARKET ACCESS & MRKTG COSTS

PHARMA INDUSTRY FACTORS PIVOTAL INDUSTRY FACTORS OR THE EXTERNAL/INDUSTRY ENVIRONMENT LEADING UP TO SWOT ANALYSIS –STRENGTHS –WEAKNESSES –OPPORTUNITIES –THREATS

BEFORE SWOT INDUSTRY DEFINITION –? SECTOR DEFINITION –? MARKET SEGMENTS DEFINITION –? EXAMPLE: FIGURE ON PAGE 46

SWOT FOR COB, 2007 SWOT FOR COB STRATEGIC GROUPS? SEPARATE UNDERGRAD & GRADUATE? WHAT CAN & SHOULD BE DONE TO MOVE UP IN RANKINGS? ROLE OF STRATEGIC INTENT HOW FAR CAN ONE GO WITH SWOT?

INDUSTRY BOUNDARIES CUSTOMER NEEDS EVOLVE NEW TECHNOLOGIES EMERGE TYPICALLY, WE THINK THAT TECHNOLOGIES DRIVE INDUSTRIES WHILE CUSTOMER NEEDS DRIVE MARKET SEGMENTS

PORTERS 5 FORCES MODEL 5 FORCES MODEL & GENERIC COMPETITIVE STRATEGIES MODEL ARE KEY PORTER CONCEPTS –UNDERSTAND AND BE ABLE TO DIAGRAM BOTH –TEXTBOOK’S 5 FORCES FIGURE IS LESS ROBUST THAN USUAL MODEL

DRIVERS OF 5 FORCES & GENERIC COMPETITIVE STRAT RISK OF ENTRY BY COMPETITORS THREAT OF SUBSTITUTES (NEW TECHNOLOGIES) BARGAINING POWER OF SUPPLIERS BARGAINING POWER OF BUYERS RIVALRY (MIDDLE BOX) –4Ss –BRAND LOYALTY –SWITCHING COSTS –GOVERNMENT REGULATION –BARRIERS TO EXIT

COMPLEMENTORS OR VALUE NET PORTER’S MODEL IS INDUSTRY- SPECIFIC/FOCUSED ON ONE INDUSTRY OFTEN, INDUSTRIES ARE INTERRELATED OR CONNECTED AT THE HIP –IN THIS CASE, THE TWO INDUSTRIES SHOULD BE ANALYZED TOGETHER –EXAMPLES: AUTO INDUSTRY VS COMPUTERS

STRATEGIC GROUPS GROUPS OF COMPANIES THAT PURSUE SIMILAR STRATEGIES WITHIN THE SAME INDUSTRY BUT AT ODDS WITH FIRMS THAT PURSUE DIFFERENT BUSINESS MODELS IN THE SAME INDUSTRY EXAMPLES?

IMPLICATIONS OF STRATEGIC GROUPS PRODUCTS IN THE SAME GROUP ARE SEEN AS DIRECT SUBSTITUTES –RIVALRY IS HEIGHTENED –MARGINS MAY BE SQUEEZED EACH STRATEGIC GROUP MAY FACE DIFFERENT OPPORTUNITIES & THREATS (IN THE SAME INDUSTRY) MOBILITY BARRIERS INHIBIT MOVEMENT BETWEEN STRATEGIC GROUPS

INDUSTRY ANALYSIS DISTINGUISH BETWEEN FRAGMENTED AND CONCENTRATED INDUSTRIES INDUSTRY LIFE CYCLE MODEL FOR “CONCENTRATED” INDUSTRIES WHAT DRIVES INDUSTRIES? DON’T BE FOOLED BY SMOOTH LINE/ CURVE OF THE STANDARD I.LC. MODEL

INDUSTRY LIFE CYCLE ANALYSIS EMBRYONIC GROWTH INDUSTRY SHAKEOUT MATURE DECLINE

LIMITATIONS OF I.L.C. MODEL LIFE CYCLE IS GENERALIZATION INNOVATIONS ARE OF VARIOUS SORTS INNOVATIONS CAN TRANSFORM INDUSTRY DYNAMICS OVEREMPHASIZE INDUSTRY EFFECTS UNDEREMPHASIZE FIRM DIFFERENCES & STRATEGIC GROUP DIFFERENCES

MACRO-ECONOMIC ENVIRONMENT ILC EFFECTS AND RIVALRY TAKE PLACE WITHIN ECONOMIC AND INSTITUTIONAL ENVIRONMENTS ROLE OF MACROECONOMIC EFFECTS? ROLE OF INSTITUTIONAL ENVIRONMENT? OTHERS –DEMOGRAPHIC FORCES –GLOBAL COMPETITION –POLITICAL & LEGAL FORCES: CO-EVOLUTIONARY EFFECTS ON COMPETITION

CLOSING CASE: AIRLINE INDUSTRY SINCE , WHAT’S BEEN HAPPENING IN TERMS OF COMPETITION & AIRLINES? IS SLUMP COINCIDENCE OR CORRELATED? SOME AIRLINES ARE DOING REASONABLY WELL - WHICH ONES AND WHY? STRATEGIC GROUP ANALYSIS SWOTS FOR BUDGET VS. MAJOR AIRLINES LOOKING FORWARD - IN WHICH WOULD YOU INVEST FOR AND WHY?