Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,“Getthetools,breaktherules,makeadifference,”,”:Aconceptualmapofthecourse,DefinitionandDynamicsofStrategy,Whatisstrategy?,Howcanyoubesureyouareaskingthe,“,“right”strategyquestions?,Howstrategydevelops:Context,Role-playing,Mentalmodels,andMetaphors,StrategyContent,CompetitiveForcesinanIndustry,IndustryEvolution,ValuingFirmResources,Capabilitiesforpositioning,StrategyinAction,ImplementingStrategy,Institutionalstrategy:Canstrategymakeadifference?,StrategicManagement,Session4,IndustryAnalysis,IndustryAnalysis,Lasttimewesaidthattodevelopourstrategyfurtherweneedtoknowourcompetitiveenvironment.Knowingthiswecanestablish:,Whatdoweneedtodotoshapethefutureactionofcompetitorsandotherindustryplayers?,Howshouldwerespondtotheactionsofcompetitorsandotherindustryplayers?,Thesourceofprofitabilityisevolvingandsoistheroleofthemanager,Whatfactorsexplainthesechanges?,Sustainingcompetitiveadvantageappearstobedifficult,TopTenU.STradedCompaniesbyMarketValue,1.GE$494b,2.Cisco$447b,3.Intel$426b,4.Microsoft$362b,5.Walmart$307b,6.Nokia$271b,7.Exxon-Mobil$270b,8.Lucent$228b,9.IBM$196b,10.Citigroup$187b,1.IBM$37.6b,2.AT&T$36.6b,3.Exxon$24.2b,4.General Motors$14.5b,5.Schlumberger$11.9b,6.Amoco$11.8b,7.Mobil$11.7b,8.GE$11.5b,9.Sohio$10.8b,10.Chevron$9.6b,1980,1.Exxon$62.5b,2.GE$58.4b,3.IBM$54.1b,4.AT&T$48.9b,5.Philip Morris$38.7b,6.Merck$30.6b,7.Bristol-Myers Squibb$29.4b,8.Dupont$28.1b,9.Amoco$27.9b,10.Bell South$27.9b,1990,2000,Source:JeffreyWilliams,Thenwhyaresomeindustriesabletosustainhigherprices?,Whatdrivesprofitability?,A:Intensityofcompetitioninanindustrywhich,inturn,isdeterminedbythestructureoftheindustry,Average,Pharma.,Whyaresomeindustriesconsistentlymoreprofitablethanothers?,Becausefirmsintheseindustriesconsistentlyfacelessintensecompetition,Whatexplainsprofitabilityvariation?,4,19,43,100,2,32,Business unit effects,Corporate parent effects,Industry effects,Year effects,Not explained by model,TOTAL,Estimates by McGahan&Porter,15,45,n/a,100,2,Estimates by Rumelt,38,FromEnvironmentalAnalysistoIndustryAnalysis,THEINDUSTRY,ENVIRONMENT,Suppliers,Competitors,Customers,Socialstructure,TheIndustryEnvironmentliesatthecoreoftheMacroEnvironment.,Thenational/internationaleconomy,Technology,Government,Thenaturalenvironment,Demographicstructure,Socialstructure,TheSpectrumofIndustryStructures,Concentration,EntryandExit,Barriers,Product,Differentiation,Information,Perfect,Competition,Oligopoly,Duopoly,Monopoly,Manyfirms,Afewfirms,Twofirms,Onefirm,Nobarriers,Significantbarriers,Highbarriers,Homogeneous,Product,Potentialforproductdifferentiation,Perfect,Informationflow,Imperfectavailabilityofinformation,A structural(5forces)industry analysis reveals:,Whether the industryis attractive,The dimensionsalongwhich firms compete,Whatstructuralvariablesaffect competition,Whether individual or collective strategies can reducetheintensityof competition,Whatkindsof exogenous forcescanaffect the structure ofthe industry,Drawbacksof 5forces analysis:,It only offersa static picture.Does not explainwhy the industry evolvedthe way itdidand how itwillevolve inthefuture.,It does not highlight theroleof:,technology,(e.g.theeffect offabric technologieson Italianfashion),and,regulation,(e.g.theeffect ofcountry policies about globalwarming onrenewableenergy).,5 forces can explainwhyindustrieschange,Industriesin transition,US Bankingin the 90s,Citicorp&Travelers,BankAmerica&NationsBank,FirstUnion&CoreStates,BancOne&First ChicagoNBD,Automobile,Fiats attemptsat merger,Volkswagen,Telecommunications,Vodaphone&DoCoMo vs.WorldCom,Publishing,Bertelsmann&Napster,BarnesandN&Bertelsmann,Because.,Relevant industry isfinancialservices,Banksvs.mutual funds share of household financial assets:,90%vs.10%in1980,55%vs.44%in1997,Economiesof scale in NewProduct Development,Innovations incellular moditization in long-distance,Needto increase market powerre:distributors,Market power re:publishers,U.S.SoftDrinkIndustryHighlights,mid-1980s,Rising internationalsales,Highly andincreasingly concentrated,Top 2firms gainingmarket share attheexpense ofremainingfirms,Morenew product introductionsandadvertising,Increasingprice competition,Turnover in ownership ofall largercompaniesexcept Coca-Cola and Pepsi,Bottlersroleimportantfor concentrateproducer,The U.S.Soft DrinkIndustryin the mid-80s,Suppliers:,Sweeteners,Containers,Rivals,:,Concentrate Producers,Potential Entrants,:,Takeovers,Potential substitutes,:,other beverages,Buyers:,Bottlers,Stores,Other,Industry,Strategicchallenges,Identify and segmentcompetitive groups,Analyze rivalrywithin and across such groups,Identify the focus(e.g.,price,quality,service,innovation,features),nature,and intensity of rivalry,Competitor,Competitor,Competitor,Competitor,Competitor,Competitor,Rivalry among existing competitors,Whatis the nature,intensity,andfocusof rivalry within an industry?,Competitors canfocus onmultiple factors,Price,quality,servi