360 behavioral health z&s management

International Strategic Management - SUDZUCKER Company Germany

Resource based view

-> Resources & capabilities of the company

-> porters five forces

-> PESTLE and critical success factors (CSF's) of the industry (food processing)

-> porter's generic strategy

- > competitive advantage

- > Internationalization and organization

-> CAGE framework

-> strategic change of the company

- > industry profitabilty

-> Cultural web of suitability

-> porter's value chain

-> hofstede's national culture and liability of foreignness

Lecture Focus

The objectives of industry analysis

From environmental analysis to industry analysis

Porter’s Five Forces Framework

Applying industry analysis

2

From Macro to Micro (Industry) Analysis

THE INDUSTRY

ENVIRONMENT

Suppliers

Competitors

Customers

Social structure

The national/ international economy

Technology

Government

& politics

The natural environment

Demographic structure

Social structure

The Industry Environment lies at the core of the Macro Environment.

The Macro Environment impacts the firm through its effect on the Industry

Environment.

3

Determinants of Industry Profitability

3 key influences:

The value of the product to customers

The intensity of competition

Relative bargaining power at different levels within the value chain.

4

Industry Analysis

Define your industry.

It’s not easy! Globalising forces, internet connectivity and technological developments blur traditional industry parameters, and enable entrance into hitherto unrelated industries.

Boundaries further change as customer needs evolve

Google returns about 490 million in October 2017 (up from 310m in 2016) ‘hits’ for “e-books”. Has eBooks.com & bookhub.com, for example, merely advanced traditional book distribution. Are e-books and e-readers rivals, substitutes, new entrants, or complementors to traditional print media?

5

Industry Analysis

Industry Definition: A group of companies offering products or services that are close substitutes for each other – that is, products or services that satisfy the same basic customer needs.

In identifying the industry, a good starting point is being clear on the basic customer needs being served. That is, adopted a customer-oriented view of the business.

Industry Sector: Group of closely related industries

E.g. Computer sector

Components industries: disk drive; semiconductor; modem

Hardware: Mainframe; PC; handheld

Software

Market Segment: Groups of customers within a market differentiated from one another based on distinct attributes and specific demands

E.g. PC industry: Desktop PC; Notebook PC; Servers (hosting centralised network of PCs)

Hill & Jones (2009) Theory of Strategic Management:43-44

6

Profitability of Selected US Industries: Median return on equity (%), 1999-2007

HIGH PROFITABILITY LOW PROFITABILITY
Household & Personal Products 26.0 Motor Vehicles & Parts 9.3
Pharmaceuticals 21.0 Insurance Life & Health 9.1
Petroleum 20.1 Forest & Paper Products 7.3
Tobacco 21.6 Food Production 6.5
Food Consumer Products 19.5 Semiconductors & Electronic Components 6.2
Securities and Investment Banking 18.4 Network & Communications Equipment 5.9
Beverages 17.2 Telecommunications 5.8
Medical Products & Equipment 17.2 Entertainment 2.7
Scientific & Photographic Equip. 15.6 Airlines -12.6
Commercial Banks 14.8
Computer Software 14.0
Aerospace & Defense 13.9
7

Industry Structures as Indicator for Profitability

Concentration

Entry and Exit

Barriers

Product

Differentiation

Information

Perfect

Competition

Oligopoly

Duopoly

Monopoly

Many firms

A few firms

Two firms

One firm

No barriers

Significant barriers

High barriers

Homogeneous

Product

Potential for product differentiation

Perfect

Information flow

Imperfect availability of information

8

Introduction to Porter’s Five Forces (1979/80)

Most commonly used tool for analysing the competitive environment.

Describes the environment in terms of five basic competitive forces.

Collectively, the factors determine the profit potential of an industry and relationships with the forces tend to be seen as conflictual and ‘zero-sum’ in nature.

The industry competitive analysis should focus on the overall industry a firm competes in prior to accounting for market segments or sector issues.

9

Porter’s Five Forces

Bargaining Power of Suppliers.

Threat of New Entrants.

Threat of Substitutes.

Bargaining Power of Buyers.

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Intensity of rivalry

Suppliers

Substitutes

Buyers

Potential

Entrants

Determinants of the Strength of the Forces

THREAT OF ENTRY

Capital requirements

Economies of scale

Absolute cost advantage

Product differentiation

Access to distribution

channels

Legal/ regulatory barriers

Retaliation

SUBSTITUTE

COMPETITION

Buyers’ propensity

to substitute

Relative prices &

performance of

substitutes

SUPPLIER POWER

Suppliers’ price sensitivity

Relative bargaining

power

INDUSTRY RIVALRY

Concentration

Diversity of competitors

Product differentiation

Excess capacity &

exit barriers

Cost conditions

BUYER POWER

Buyers’ price sensitivity

Relative bargaining

power

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Threat of New Entrants

Threat of new entrants to industry profitability depends upon the height of barriers to entry.

Higher barriers lead to lower risks of entry and greater profitability.

The principal sources of barriers to entry are:

Capital requirements (e.g. Airbus/Boeing)

Economies of scale

Absolute cost advantage

Product differentiation (brands)

Access to channels of distribution & supply (shelf spaces; vertical integration)

Legal and regulatory barriers

Retaliation (Price wars; marketing blitz)

12

Threat of Substitutes

Substitute products (services): Offerings of companies to customer needs in a similar fashion to the industry under analysis.

Extent of competitive pressure from producers of substitutes depends upon:

Buyers’ propensity to substitute

The closer the similarity, the greater the likelihood of price sensitivity and possible inclination for substitution.

The price-performance characteristics of substitutes. (e.g. Aluminum and Steel)

13

Bargaining Power of Buyers (Suppliers)

Buyer’s price sensitivity

Relative bargaining power

Cost of purchases as %

of buyer’s total costs.

How differentiated is the

purchased item?

How intense is

competition between

buyers?

How important is the

item to quality of the

buyers’ own output?

Size and concentration of

buyers relative to

sellers.

Buyer’s information .

Ability to backward

integrate.

Note: analysis of supplier

power is symmetric

14

Competitive Rivalry

The extent to which industry profitability is depressed by aggressive price competition depends upon:

Concentration (number and size distribution of firms)

Diversity of competitors (differences in goals, cost structure, etc.)

Product differentiation

Excess capacity and exit barriers

Cost conditions

Extent of scale economies

Ratio of fixed to variable costs

15

Five Forces: Implications

Firstly, the 5Fs analysis is a good indicator of the industry structure

Monopoly, oligopoly, hypercompetition, perfect competition

Importantly, the tool should be seen as a means to an end not the end in itself.

Findings should prompt further evaluation:

What industries to enter (or leave)

What influences can be exerted?

How are competitors variously affected by changes to structure and environment?

16

Five Forces: Implications

Most industries are somewhere between the extremes

17

If Threats are High

Expect Normal Profits

If Threats are Low