2. Macro-Environment Factors
Restaurant industry association report

3. Evaluating the External Situation
Pressure from industry’s competitive forces
Competitors
New Entrants
Substitutes
Buyers
Suppliers

4. Competitors: Pressure High When
Demand slow/declining
Low switching costs
Low product differentiation
Excess capacity/supply
More competing firms
High exit barriers
KTA Super Stores, Hilo?

5. New Entrants: Pressure Reduced When
Incumbents have scale cost advantages
Brand loyalty established
Incumbents own expertise, patents, etc.
High capital requirements
Distribution channel requirements
Sig Zane Designs?

6. Substitutes: Pressure High When
Substitutes are
Available
Value / price is attractive
Low switching costs
Goodyear Tires, Hilo?

7. Supplier’s Leverage: Pressure High When
Industry demand high
Product differentiation is important
Switching suppliers is costly
Few suppliers
Backward integration is not feasible (buyer can’t make the product)
Suppliers have non-industry (diverse) customers
Ace Hardware, Hilo?

8. Buyer’s Leverage: Pressure High When
Industry demand weak
Product differentiation is not important
Customers can switch easily
Few buyers and they buy in quantity
Backward integration is feasible (buyer can make the product)
Product information highly available
Buyers have low income or product is large part of their spending
Basically Books, Hilo?

14. Industry Key Success Factors
What product characteristics are most important in purchase decision making?
What resources / capabilities are required to compete?
What shortcomings will lead to competitive disadvantage?

15. Industry Key Success Factors
Mobile phone
Technology reliability, after sale service, innovative features
Apparel manufacturing
Appealing designs and colors, low-cost production efficiencies
Restaurant
Quality food, effective service, convenient location
Your Simulation footwear company?