2. We will combine our talents together to develop our skills which produce great projects.
Each member will work to the best of their abilities, and help one another to succeed in the course
Score at least 90% on all assignments, while maintaining a creative aspect
Complete drafts one week in advance prior to deadline.
Each member complete at least one standing-O.
Get an A on every exam while maintaining a 100% group viewership of rerun episodes of America's Next Top Model

3. Meet every Sunday evening to develop creative ideas to present to Professor Neubaum for team special points.
Meet every Wednesday night at Clodfelter’s to build team unity and morale.

4. “I think there is a world market for maybe five computers”
Thomas Watson, Chairman of IBM, 1943

5. “There is no reason why anyone would want a computer in their home”
Ken Olson, president, chairman, and founder of Digital Equipment Corporation, 1977

6. “This ‘telephone” has too many shortcoming to be seriously considered a means of communication. The device is inherently of no value to us.”
Internal Memo, Western Union, 1876

7. “Everything that can be invented has been invented”
Charles H. Duell, Commissioner of the U.S. Patents Office,
1899

8. “640K of RAM ought to be enough for anybody”
Bill Gates, 1981

9. “I see no scenario whatsoever where Toyota will pass us in share”
Chrysler Chief Dieter Zetsche, January 2002

10. “I see no scenario whatsoever where Toyota will pass us in share”
Chrysler Chief Dieter Zetsche, January 2002
September 2003, “The Big Three” became GM, Ford, and Toyota

11. “Nothing important happened today”
Journal entry made by King George III, July 4, 1776, the day the United States declared independence from England

12. “Competitive strategy must grow out of a sophisticated understanding of the rules of competition that determine an industry’s attractiveness”
“Analysis is the critical starting point of strategic thinking”
“Skate to where the puck is going, not to where it has been”

13. External Analysis
It’s not recognizing that change will occur that is the problem, it’s figuring out:
what will happen?
how it will affect us?
what to do about it?
Therefore, forecasting is necessary to predict direction and the effect of change

14. BROAD/REMOTE/MACROENVIRONMENT
The Economy at Large
Technology
Political and Legal
Suppliers
Substitutes
COMPANY
Rival Firms
Buyers
New
Entrants
Societal Values and Lifestyles
Demographics 
IMMEDIATE INDUSTRY AND COMPETITIVE ENVIRONMENT

15. Broad/Remote/ Macroenvironment Segments
Macroeconomic
Demographic
Political/Legal
Technological
Social
Firms CAN NOT
Directly Control Them ?

16. Each of these forces affect costs/prices, therefore, profitability
Porter’s Five Forces
Competitive Rivalry
Power of Buyers
Power of Suppliers
Potential Entrants
Substitute Products
Each of these forces affect costs/prices,
therefore, profitability

17. Substitute Products Rivalry Suppliers of Among Buyers Key Inputs
(of firms in
other industries)
Suppliers of
Key Inputs
Rivalry
Among
Competing
Sellers
Buyers
Potential
New
Entrants

18. { Price Profits Porter’s 5-forces is all about
margins - What factors increase/decrease margins, i.e., profitability.
Costs

19. When industry structural variables are weak…...
Prices can be kept high {
Profits can soar
Costs can be kept low

20. When industry structural variables are strong…...
Prices will be pushed down {
Profits shrink
Costs will rise

21. If you were unable to find work and had to start making money, what kind of business would you start?

22. Which of these industries would be most difficult to enter
Which of these industries would be most difficult to enter? Which would be relatively more easy?
Airlines, automobile manufacturing, grocery store, pharmaceutical, beer brewing, restaurant, hair salon

23. Potential Entrants
Firms enter when industries are attractive, unless they find themselves at an immediate disadvantage relative to incumbents.
Firms can create “barriers to enter”
Barriers of entry are desirable for entrenched firms

24. Barriers to Entry Economies of scale Access to technology & know-how
Learning, costs, experience curves
Product differentiation & loyalty
Switching costs
Capital & resource requirement
Cost disadvantage independent of size
Distribution
Regulatory policies
Threat of retaliation

25. Threat of Substitutes Product/service which fulfills similar need
Price cap
3 Questions
Are they available?
Price-performance relationship?
Can we switch?

26. Power of Buyers Who are the Buyers? - who provides our revenues?
Can they force:
lower prices, higher quality and service – affect the terms and conditions of the exchange?
Based on two issues
Price sensitivity
significant “out of pocket” costs
no differentiation
exist in a competitive, low profit industry – every penny counts

27. Power of Buyers (cont.) Whether buyers can bargain down prices
few buyers
buyers are knowledgeable
low switching costs
backward integration is a valid threat

28. Competitive Force of Suppliers
Who are the suppliers?
Suppliers are a strong competitive force when:
Only a few suppliers exist
Few substitutes
Buyers not important customers
Suppliers provide a product crucial to production process, and/or significantly affects product quality
It is costly to switch suppliers
Forward integration a credible threat
They can supply a component at a lower cost

29. Rivalry and Profitability
Industry profitability is a collective good.
Collective good is served by coordination
Are there industries were pricing is coordinated?
Incentive to violate

30. Usually the most powerful of the five forces
How actively and aggressively are rivals employing competitive weapons in jockeying for a stronger market position and increasing sales?
Is price competition vigorous?
Active efforts to improve quality?
Are rivals racing to offer better performance features? better customer service?
Lots of advertising/sales promotions?
Active efforts to build a stronger dealer network?
Active product innovation?
Active use of other weapons of rivalry?

31. Rivalry – What drives it?
Numerous, equally balanced competitors
Perceptions of high payoff from competitive actions
Slow growth, excess capacity
High fixed, storage, obsolescence costs
High exit barriers
Diversity of competitors
Low switching costs
Lack of differentiation

32. Porter’s..in conclusion
Determines the attractiveness of industry
Can we influence any of these structural attributes?
Static model & Hypercompetition
If the pace of transformation is rapid, if entry rapidly undermines the market power of dominant firms, if innovation speedily transforms industry structure by changing process technology, creating new substitutes, and by shifting the basis on which firms compete, then there is little merit in using industry structure as a basis for analyzing competition and profit.

33. Porter’s Five Forces - Two Examples
Campus Bookstore
Rivals? -
Entry Barriers? -
Substitutes -
Supplier Power -
Buyer Power -
Profitable?
PCs
Rivals -
Entry Barriers -
Substitutes -
Supplier Power -
Buyer Power -
Profitable ?

34. Industries and Segments
What is a segment?
Different segments…..
posses different combinations of 5-forces
therefore:
reward different strategies
possess different levels of profitability
Therefore, not all firms can effectively compete across multiple segments

35. What Forces Are at Work to Change Industry Conditions?
Industries change because forces are driving industry participants to alter their actions
Driving forces are the major underlying causes of changing industry and competitive conditions

36. Common Types of Driving Forces
Changes in long-term industry growth rate
Changes in who buys the product and how they use it
Product innovation
Technological change/process innovation
Marketing innovation
Entry or exit of major firms
Diffusion of technical knowledge

37. Common Types of Driving Forces
Increasing globalization of industry
Changes in cost and efficiency
Market shift from standardized to differentiated products (or vice versa)
New regulatory policies and/or government legislation
Changing societal concerns, attitudes, and lifestyles
Changes in degree of uncertainty and risk

38. National Jewelry Retailers Price Cartier Tiffany Nordstroms Sachs
Burdines
Dillards
Jerrods
Marks & Morgan
Sears
JCP
Zales
Kay
Target
Pawn Shop
Chain-by-the-Foot Carts
WalMart
Kmart
Breadth of Product Line

39. National Jewelry Retailers Price Cartier Tiffany Nordstroms Sachs
Strategic Groups identify
Burdines
Dillards
Closest Rivals
Jerrods
Marks & Morgan
Sears
JCP
Zales
Kay
Target
Pawn Shop
Chain-by-the-Foot Carts
WalMart
Kmart
Breadth of Product Line

40. National Jewelry Retailers Price Cartier Tiffany Nordstroms Sachs
Strategic Groups identify
Burdines
Dillards
Mobility Barriers
Jerrods
Marks & Morgan
Sears
JCP
Zales
Kay
Target
Pawn Shop
Chain-by-the-Foot Carts
WalMart
Kmart
Breadth of Product Line

41. National Jewelry Retailers Price Cartier Tiffany Nordstroms Sachs
Strategic Groups identify
Burdines
Dillards
Jerrods
Marks & Morgan
Sears
JCP
Zales
Kay
Untapped Niches
Pawn Shop
Chain-by-the-Foot Carts
WalMart
Kmart
Breadth of Product Line

42. National Jewelry Retailers Price Cartier Tiffany Nordstroms Sachs
Strategic Groups identify
Burdines
Dillards
Jerrods
Marks & Morgan
Sears
JCP
Zales
Kay
Untapped Niches
Target
Pawn Shop
Chain-by-the-Foot Carts
WalMart
Kmart
Breadth of Product Line

43. What strategic moves are rivals likely to make? - Competitive Analysis
Important in concentrated industries
Benefits
forecast future actions, predict reactions
can we influence rivals’ behavior?

44. Four Steps of CA Identify their strategy Identify the objectives
Identify their assumptions
Identity their capabilities
Strategy
Objectives
Assumptions
Capabilities
Strategic
Action

45. What are the Key Success Factors?
KSFs are product attributes, competencies, competitive capabilities, and market achievements with the greatest direct bearing on profitability
opportunities for competitive advantage

46. Example: KSFs for Beer Industry
Utilization of brewing capacity -- to keep manufacturing costs low
Strong network of wholesale distributors -- to gain access to retail outlets
Clever advertising -- to induce beer drinkers to buy a particular brand

47. Identifying Key Success Factors (KSFs) - vary by segment
Automotive Industry