Prepared by: Hotma Rina Sitorus Julio Lauritz Silvia Puspita

1. INDUSTRY ANALYSIS PERFORMING FIVE FORCES ANALYSIS Prepared by: Hotma Rina Sitorus Julio Lauritz Silvia Puspita

2. Assestment of industry and firm performance • Indentification of key factors affecting performance in vertical trading relationships and horizontal competitive relationship • Determination of how changes in the business environment may effect performance • Indentifying opportunities and threats in the business landscape.

3. LIMITATIONS The Five forces framework has several limitations: • It pays little attention to factors that might affect demand • It focuses on a whole industry rather than on that industry’s individual firm • The framework doesn’t explicitly account for the role of the government, except when the government is supplier or buyer

4. PERFORMING FIVE FORCES ANALYSIS ENTRY SUPPLIER POWER INTERNAL RIVALRY BUYER POWER SUBSTITUTES AND COMPLEMENTS

5. INTERNAL RIVALRY FACTOR AFFECTING RIVALRY AMONG EXISTING COMPETITORS: • Degree of Seller concentration? • Rate of industry growth? • Excess capacity? • Cost structure of firms:sensitivity of costs to capacity utilization? • Degree of product differentiation among sellers? Brand loyalty to existing sellers? Cross-price elasticities of demand competitors in industry?

6. INTERNAL RIVALRY • Buyers’ costs of switching from one competitor to another? • Are prices and terms of sales transactions observable? • Can firms adjust prices quickly? • Large and/or infrequent sales orders? • Use of “facilitating practices” (price leadership, advance announcement of price changes?

7. INTERNAL RIVALRY • History of “cooperative” pricing? • Strength of exit barriers? • High industry price elasticity of demand?

8. ENTRY FACTORS AFFECTING THE THREAT OF ENTRY: • Significant economies of scale? • Importance of reputation or established brand loyalties in purchase decision? • Entrants’ access to distribution channels? • Entrants’ acces to raw material? • Entrants’ acces to technology/know-how? • Entrants’ access to favorable locations?

9. ENTRY • Experience-based advantages of incumbents? • Network externalities: demand-side advantages to incumbents from large installed base? • Government protection of incumbents? • Perceptions of entrants about expected retaliation of incumbents/reputations of incumbents for “toughness”?

10. SUBSTITUTES FACTORS AFFECTING OR REFLECTING PRESSURE FROM SUBSTITUE PRODUCTS AND SUPPORT FROM COMPLEMENTS: • Availability of close substitutes? • Price-value characteristics of substitutes? • Availability of close complements? • Price-value characteristics of complements?

11. POWER OF INPUT SUPPLIERS FACTORS AFFECTING OR REFLECTING POWER OF INPUT SUPPLIERS: • Is supplier industry more concentrated than industry it sells to? • Do firms industry purchase relatively small volumes relative to other customers of supplier? Is typical firm’s purchase volume small relative to sales of typical supplier? • Few substitutes for suppliers’ input?

12. POWER OF INPUT SUPPLIERS • Do firms in industry make relationship-specific investments to support transactions with specific suppliers? • Do suppliers pose credible threat of forward integration into the product market? • Are suppliers able to price-discriminate among prospective customers according to ability/willingness to pay for input?

13. POWER OF BUYERS FACTORS AFFECTING OR REFLECTING POWER OF BUYERS: • Is buyers industry more cincentrated than the industry it purchases from? • Do buyers purchase in large volume? Does buyers’ purchase volume represent a large fraction of the typical seller’s revenue? • Can buyers find substitutes for industry’s product? • Do firms in industry make relationship-specific investments to support transactions with specific buyers?

14. POWER OF BUYERS • Is price elasticity of demand of buyers’ product high or low? • Do buyers pose credible threat of backward integration? • Does product represent significant of cost in buyer’s business? • Are prices in the market negotiated between buyers and sellers on each individual transaction, or do sellers post “take-it-or-leave-it” price that applies to all transactions?

15. GAME THEORY

16. GAME THEORY 2 Types of games: • Rule-based games • Freewheeling games Egocentrism vs Allocentrism Changing Game From Lose-Lose to Win-Win

17. GAME OF BUSINESS What is it about? Value: creating it & capturing it Value Net Cooperation and Competition CUSTOMER COMPLEMENTS COMPANY SUBSTITUTES SUPPLIER

18. CHANGING THE GAME Elements of the game: • Players • Added Values • Rules • Tactics • Scope

19. CHANGING THE PLAYERS • Dealing with Substitutor • Pay Me to Play • NutraSweet, HSC, Coke & Pepsi • McCaw, Lin BroadCasting Corp, BellSouth • Dealing with Complementors • Cheap Complements • 3DO , Panasonic, GoldStar, Sanyo & Toshiba

20. CHANGING THE ADDED VALUES • Raise your own added value • TWA • Lowering others’ added value • Card Games Illustration • Nintendo Power • Customers : Toys R Us, Wal-Mart • Suppliers : Ricoh, Sharp (microchips) Marvel, Disney (game characters) • Complementors : Acclaim, EA (software) • Substitutors: Atari, Commodore (hardware)

21. CHANGING THE ADDED VALUES • Pumping Up Profits • Softsoap (Minnetonka) • 3 things to remember • No guarantee that any player will get all its added value • Even if you have no added value, doesn’t prohibit you from making money • Rules constrain interactions among players

22. CHANGING THE RULES • One price to all • Strategy : Judo Economics • Kiwi is No Dodo • Kiwi Airlines & Delta Airlines • Solid Profits from Gas • Producers of CO2 (Airco, Liquid Carbonic, Air Liquide) & Customers of CO2 (Coke & Pepsi) • Meet the Competition Clause (MCC)

23. CHANGING PERCEPTIONS • Reducing misperception ( lift the fog) • The New York Fog • New York Post vs Daily News • Maintaining uncertainity (thicken the fog) • Disagreeing to Agree • Investment Bank, Clients & % fee

24. CHANGING THE SCOPE • Sega’s 16-bit system video games • Nintendo wait to years to respond

25. THE TRAPS OF STRATEGY • You have to accept the game as it is • Changing the game must come at expense of others • Have to find something to do that others can’t • Failing to see the whole game • Failing to think methodically about changing the game

26. Case of Five Forces Analysis 21 Theater 21 THEATER

27. History of 21 Cinema • Founder: Cineplex 21 Group Since 1988 and has 75 % market share of All of Indonesia Lobby and Cafe Concepts (see pictures below)

28. Five Forces Analysis • Existing Competitor: Blitz Megaplex • Comparison between 21 and Blitz Megaplex (see the next page)

29. 21 vs Blitz Megaplex

30. 21 vs Blitz Megaplex Continue…

31. Concepts of Blitz Megaplex Cafe Velvet Class (Pacific Place) Ordinary Studio The performance of Film Advertisement

32. Threat of Entry • Government Regulation • Location (access and the favorableness) • The rights to buy new films from outside • Economic situation

33. Substitute Products and Support from Complements SUBSTITUTE PRODUCTS: • TELEVISION • DVD • INTERNET • MOVEABLE SCREEN (LAYAR TANCAP) • DVD RENTAL COMPLEMENT • CAFÉ • Credit Card (New Offering and Cooperation), e.g: UOB, CITIBANK, MANDIRI, HSBC. etc. • FICTION OR REFERENCE BOOKS • MALL/PLAZA • MERCHANDISE/GIFT, e.g: MUG, DOLLS, TSHIRT, PEN, HAT, FREE TICKET, etc.

34. POWER OF INPUT SUPPLIERS SUPPLIER POWER: • RIGHTS OF PLAYING FILM IN ADVANCE • COOPERATE WITH STAKEHOLDERS (GOVERNMENT, OTHER INSTITUTION RELATED TO THE FIELD OF THEATER AND FILMS) • TICKETS OFFERING • PRODUCT VARIANTS (CINEMA 21, CINEMA XXI, THE PREMIERE) • SOUND SYSTEM (DOLBY DIGITAL AND THX)

35. POWER OF BUYERS • FREE TO CHOOSE OTHER THEATER (BLITZ MEGAPLEX) ACCORDING TO: • TYPE OF FILM • TICKET (PRICE, BUYING TRANSACTION, ETC) • COZINESS (SEAT, CAFÉ, BUYING TICKET SYSTEM, TIME, ETC) • FREE TO CHOOSE SUBSTITUTES (TV, DVD, BOOKS, MOVEABLE SCREEN, ETC)

36. Thank You… Question and Answer…