1. 1950’s Structure / Conduct & Performance paradigm (Joe Bain) Market Performance profits, growth Market Conduct pricing, advertising, R&D, etc. Market Structure number of sellers, buyers, and suppliers Basic Conditions Of Cost And Demand

2. Strategic Group Analysis A strategic group is a group of firms in an industry following the same or similar strategy. Identifying strategic groups: Identify principal strategic variables which distinguish firms. Position each firm in relation to these variables. Identify clusters of common competing characteristic “No two species that depend on the same prey will think differently” - Gause “Laws of natural competition”

3. Strategic Groups in the World Automobile Industry Broad ProductRange Narrow NationalGeographical ScopeGlobal NATIONALLY- FOCUSED, SMALL, SPECIALIST PRODUCERS e.g., Bristol (U.K.), Classic Roadsters (U.S.), Morgan (U.K.) NATIONALLY FOCUSED, INTERMEDIATE LINE PRODUCERS e.g. Tofas, Kia, VAZ, Maruti REGIONALLY FOCUSED BROAD-LINE PRODUCERS e.g. Fiat, PSA, Renault, Rover, Chrysler PERFORMANCE CAR PRODUCERS e.g., Porsche, Maserati, Lotus LUXURY CAR MANUFACTURERS e.g., Jaguar, Rolls Royce, Daimler-Benz, BMW GLOBAL SUPPLIERS OF NARROW MODEL RANGE e.g., Volvo, Subaru, Isuzu, Suzuki, Saab, Hyundai GLOBAL, BROAD-LINE PRODUCERS e.g., GM, Ford, Toyota, Nissan, Honda, VW

4. A Framework for Competitor Analysis OBJECTIVES What are competitors current goals? Is performance meeting there goals? How are its goals likely to change? STRATEGY How is the firm competing? ASSUMPTIONS What assumptions does the competitor hold about the industry and itself? RESOURCES & CAPABILITIES What are the competitors’ key strengths and weaknesses? PREDICTIONS What strategy changes will the competitor initiate? How will the competitor respond to our strategic initiatives?

5. Tool: CCSI ( Core Competency Strategic Intent matrix Matrix) The CCSI matrix makes firm dynamics alive. Matrices are made at regular intervals –Yearly or quarterly depending on how fast things are changing The two dimensions of the matrix are: –Core Competency: firms’ relative capacity -- as measured by Tobin’s Q or market/book value or defect rates(Customer switching) or as rated by industry experts. –Strategic Intent: firms’ relative aggressiveness -- as measured by R&D expenditures or capital investments or analysis of press releases.

6. Strategic Intent Passiv e AverageAggressiv e Low Average High Core Capabilities Tool: CCSI Matrix Each competitor is mapped as a circle: the size of which reflects sales or capitalization or assets and the pie slice in which reflects free cash or other available resources

7. Case: CCSI Analysis of the early 90s Automobile Industry Flip & Observe ; –The decline of Honda & Toyota –The ascendancy of Ford –General Motors unsuccessful run at leadership –Chrysler’s repositioning as an up and coming star.

8. Passiv e Aggressiv e Strategic Intent Core Capabilities Automobile Industry 1990 Honda General Motors Ford Toyot a Chrysle r 1.0.5 1.5 (1.0) (1.5) (.50 ) 1.041.081.12.88.92.96 Low High illustrative

9. Strategic Intent Passiv e Aggressiv e Core Capabilities Automobile Industry 1991 1.0.5 1.5 (1.0) (1.5) (.50 ) 1.041.081.12.88.92.96 General Motors Toyot a Chrysle r Honda Ford Low High illustrative

10. Passiv e Aggressiv e Core Capabilities Automobile Industry 1992 1.0.5 1.5 (1.0) (1.5) (.50 ) 1.041.081.12.88.92.96 General Motors Ford Toyot a Chrysle r Honda Strategic Intent Low High illustrative

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