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EXTERNAL ANALYSIS, CHAPTER 2

EXTERNAL ANALYSIS, CHAPTER 2. Business 189 DR. MARK FRUIN JAN. 29 & 30, 2013. BEFORE DOING SWOT ANALYSIS. CLARIFY INDUSTRY & SECTOR DIFFERENCES INDUSTRY DEFINITION TEXTBOOK VS. EMPIRICAL DEFINITION REAL WORLD MESSINESS MARKET SEGMENTS DEFINITION TEXTBOOK VS EMPIRICAL DEFINITION

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EXTERNAL ANALYSIS, CHAPTER 2

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  1. EXTERNAL ANALYSIS, CHAPTER 2 Business 189 DR. MARK FRUIN JAN. 29 & 30, 2013

  2. BEFORE DOING SWOT ANALYSIS • CLARIFY INDUSTRY & SECTOR DIFFERENCES • INDUSTRY DEFINITION • TEXTBOOK VS. EMPIRICAL DEFINITION • REAL WORLD MESSINESS • MARKET SEGMENTS DEFINITION • TEXTBOOK VS EMPIRICAL DEFINITION • EXAMPLE: FIGURE ON PAGE 41

  3. CHANGING INDUSTRY BOUNDARIES • WHY DO INDUSTRY BOUNDARIES CHANGE? • TEXTBOOK SAYS • CHANGING CUSTOMER NEEDS • CHANGING/EVOLVING TECHNOLOGY • TYPICALLY, WE THINK TECHNOLOGIES DRIVE INDUSTRIES & CUSTOMERS DRIVE SEGMENTS • REAL LIFE ANSWERS • MARKET POWER • ECONOMIC CONDITIONS INFLATE OR DEFLATE RIVALRY & DEGREE OF COMPETITION • NEW, UNANTICIPATED COMPETITION AS GLOBALIZATION ADVANCES • INDUSTRY & SECTOR FORMATION IN EMERGING ECONOMIES NOT AS DEPENDENT ON “FREE-MARKET” FORCES

  4. SWOT FOR COB, SJSU, 2013 • SWOT FOR SJSU • BY PROGRAM, BY LEVEL, BY LOCATION? • STRATEGIC GROUPS? • WHAT ARE THEY; WHAT DIFFERENCE DO THEY MAKE? • SEPARATE UNDERGRAD & GRADUATE PROGRAMS? • WHAT CAN & SHOULD BE DONE TO MOVE UP IN RANKINGS? • ROLE OF STRATEGIC INTENT • HOW FAR CAN ONE GO WITH SWOT?

  5. PORTERS 5 FORCES MODEL • 5 FORCES MODEL & GENERIC COMPETITIVE STRATEGIES MODEL ARE KEY/PIVOTAL PORTER MODELS • WHAT IS A MODEL AND HOW MUCH SHOULD WE EXPECT FROM ONE? • UNDERSTAND AND BE ABLE TO DIAGRAM BOTH • TEXTBOOK’S 5 FORCES FIGURE IS LESS ROBUST THAN USUAL MODEL THAT PROVIDES A LOT OF DETAILS/ITEMS FOR EACH FORCE/POINT IN DIAMOND

  6. DRIVERS OF 5 FORCES & GENERIC COMPETITIVE STRAT • RISK OF ENTRY BY COMPETITORS • THREAT OF SUBSTITUTES (NEW TECHNOLOGIES) • BARGAINING POWER OF SUPPLIERS • HOW MANY, BIG, RARE, LOCKED IN & INDEPENDENT • BARGAINING POWER OF BUYERS • HOW MANY, BIG, LOCKED IN & INDEPENDENT • RIVALRY (MIDDLE BOX) • 4Ss (ABSOLUTE & RELATIVE COST ADVANTAGES) • BRAND LOYALTY • SWITCHING COSTS • GOVERNMENT REGULATION • BARRIERS TO ENTRY (& TO EXIT)

  7. COMPLEMENTOR OR VALUE NET • PORTER’S MODEL IS INDUSTRY-SPECIFIC/FOCUSED ON ONE INDUSTRY • OFTEN, INDUSTRIES ARE INTERRELATED OR CONNECTED AT THE HIP • IN THIS CASE, THE TWO INDUSTRIES SHOULD BE ANALYZED TOGETHER • THUS, EMPLOY VALUE NET ANALYSIS • EXAMPLES: AUTO INDUSTRY VS COMPUTERS • AUTOS, TIRES, GLASS, PLASTICS • COMPUTERS, CHIPS, PERIPHERALS, SOFTWARE

  8. STRATEGIC GROUPS • GROUPS OF COMPANIES THAT PURSUE SIMILAR STRATEGIES WITHIN THE SAME INDUSTRY AND MARKET SEGMENTS • AS OPPOSED TO FIRMS THAT PURSUE DIFFERENT STRATEGIES/MARKET SEGMENTS IN SAME INDUSTRY • SUB-GROUPS IN SAME INDUSTRY = STRATEGIC GROUPS • MOBILITY BARRIERS = WITHIN-INDUSTRY FACTORS THAT INHIBIT ABILITY OF FIRMS TO MOVE EASILY BETWEEN STRATEGIC GROUPS • EXAMPLES? • HOW EASY FOR GM TO COMPETE WITH BMW? • HOW DIFFICULT FOR AUDI TO COMPETE WITH TOYOTA?

  9. IMPLICATIONS OF STRATEGIC GROUPS • PRODUCTS IN THE SAME STRATEGIC GROUP ARE SEEN AS DIRECT SUBSTITUTES • RIVALRY IS HEIGHTENED • MARGINS MAY BE SQUEEZED • EACH STRATEGIC GROUP MAY FACE DIFFERENT OPPORTUNITIES & THREATS (IN SAME INDUSTRY) • “MOBILITY BARRIERS” INHIBIT MOVEMENT BETWEEN STRATEGIC GROUPS

  10. INDUSTRY ANALYSIS • DISTINGUISH BETWEEN FRAGMENTED AND CONCENTRATED INDUSTRIES • INDUSTRY LIFE CYCLE MODEL IS FOR “CONCENTRATED” INDUSTRIES • WHAT DRIVES INDUSTRIES? • TECHNOLOGIES, MARKETS, GOV POLICIES? • DON’T BE FOOLED BY SMOOTH LINE/ CURVE OF THE STANDARD INDUSRY LIE CYCLE (I.LC.) MODEL

  11. INDUSTRY LIFE CYCLE ANALYSIS • EMBRYONIC • GROWTH • INDUSTRY SHAKEOUT • MATURE • DECLINE

  12. LIMITATIONS OF I.L.C. MODEL • NOTION OF LIFE CYCLE IS A GENERALIZATION • INNOVATIONS ARE OF VARIOUS SORTS • INNOVATIONS MAY TRANSFORM INDUSTRY DYNAMICS • ILC MODEL OVEREMPHASIZES INDUSTRY EFFECTS • ILC MODEL UNDEREMPHASIZES FIRM-LEVEL DIFFERENCES & STRATEGIC GROUP DIFFERENCES • HENCE, REAL I.L.C. IS NOT SUCH A PRETTY THING AS TEXTBOOK I.L.C.

  13. MACRO-ECONOMIC ENVIRONMENT • ILC IS NOT AN ISLAND ONTO ITSELF • ILC EFFECTS & FIRM RIVALRIES OCCUR WITHIN ECONOMIC & INSTITUTIONAL ENVIRONMENTS • KNOWN AS MACRO-ECONOMIC ENVIRONMENT • WHAT ARE MACRO-ECONOMIC EFFECTS ON ILC? • ROLE OF INSTITUTIONAL ENVIRONMENT? • WHAT IS AN INSTITUTION? • WHAT ARE INSTITUTIONAL EFFECTS ON ILC? • OTHERS • DEMOGRAPHIC EFFECTS; GLOBAL COMPETITION • POLITICAL & LEGAL FORCES: CO-EVOLUTIONARY EFFECTS ON COMPETITION

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