© AIPMM 2014 www.aipmm.com
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© AIPMM 2014 www.aipmm.com
© AIPMM 2014 www.aipmm.com
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Use: #ProdBOK
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Today’s Speaker
Presenter:
Hector Del Castillo, CPM, CPMM
Product Innovation Consultant
linkd.i...
© 2014 H. Del Castillo, All Rights Reserved.
Hector Del Castillo
linkd.in/hdelcastillo
© 2014 H. Del Castillo, All Rights Reserved.
What We Will Discuss
1. Porter’s Five Forces Model
2. How To Use It
3. Key Ta...
© 2014 H. Del Castillo, All Rights Reserved.
What you want out of this webcast
• Learn new approaches for competitive
anal...
© 2014 H. Del Castillo, All Rights Reserved.
Which of these best describes you?
• I often use Porter's competitive forces ...
© 2014 H. Del Castillo, All Rights Reserved.
Gain strong understanding of the
external marketing environment
in which your...
© 2014 H. Del Castillo, All Rights Reserved.
• What’s going on out there in
your industry?
• What matters most to remain
c...
© 2014 H. Del Castillo, All Rights Reserved.
A framework for analyzing an
industry in order to develop a
business strategy
© 2014 H. Del Castillo, All Rights Reserved.
5 Forces That Shape Competition
Source: “Competitive Strategy: Techniques for...
© 2014 H. Del Castillo, All Rights Reserved.
5 Competitive Forces
• The strength of competition in the industry.Competitiv...
© 2014 H. Del Castillo, All Rights Reserved.
Assessing Direction and Strength
Strongly in your favor 5
In your favor 3
Som...
© 2014 H. Del Castillo, All Rights Reserved.
Competitive Rivalry
2014
How many competitors?
What is the cost to exit the m...
© 2014 H. Del Castillo, All Rights Reserved.
Threat of New Entrants
2014
What is the cost to enter the market?
How can cur...
© 2014 H. Del Castillo, All Rights Reserved.
Threat of Substitutes
2014
How many alternatives are available?
How well do a...
© 2014 H. Del Castillo, All Rights Reserved.
Power of Buyers
2014
What is the number of customers?
What is the size of buy...
© 2014 H. Del Castillo, All Rights Reserved.
Power of Suppliers
2014
What is the number of suppliers?
What is the size of ...
© 2014 H. Del Castillo, All Rights Reserved.
How To Perform Analysis
• Gather the information on each of the five
forces1
...
© 2014 H. Del Castillo, All Rights Reserved.
U.S. Automotive Industry
Threat of
New
Entrants
Buyer Power
Threat of
Substit...
© 2014 H. Del Castillo, All Rights Reserved.
U.S. Automotive Industry Overview
• Light vehicle sales increased 7.5 percent...
© 2014 H. Del Castillo, All Rights Reserved.
1. Competitive Rivalry
2014
How many competitors? -5
What is the cost to exit...
© 2014 H. Del Castillo, All Rights Reserved.
2. Threat of New Entrants
2014
What is the cost to enter the market? -5
How c...
© 2014 H. Del Castillo, All Rights Reserved.
3. Threat of Substitutes
2014
How many alternatives are available? -3
How wel...
© 2014 H. Del Castillo, All Rights Reserved.
4. Power of Buyers
2014
What is the number of customers? 5
What is the size o...
© 2014 H. Del Castillo, All Rights Reserved.
5. Power of Suppliers
2014
What is the number of suppliers? 5
What is the siz...
© 2014 H. Del Castillo, All Rights Reserved.
U.S. Automotive Industry
Threat of
New
Entrants
Buyer Power
Threat of
Substit...
© 2014 H. Del Castillo, All Rights Reserved.
What is the 15-year average ROIC for
U.S. automotive industry?
1. More than 1...
© 2014 H. Del Castillo, All Rights Reserved.
U.S. Automotive Industry
ROIC, 2013
Source: Market Watch, 2013.
Company ROIC
...
© 2014 H. Del Castillo, All Rights Reserved.
U.S. Airline Industry
Threat of
New
Entrants
Buyer Power
Threat of
Substitute...
© 2014 H. Del Castillo, All Rights Reserved.
U.S. Market
• 100 passenger airlines operate over 11 million flight
departure...
© 2014 H. Del Castillo, All Rights Reserved.
U.S. Airline Industry
Threat of
New
Entrants
Buyer Power
Threat of
Substitute...
© 2014 H. Del Castillo, All Rights Reserved.
U.S. Airline Industry
Average ROIC, 1992-2006
5.9%
Source: “The Five Competit...
© 2014 H. Del Castillo, All Rights Reserved.
Global Market
• 2000 Airlines operating more than 23,000
aircraft, providing ...
© 2014 H. Del Castillo, All Rights Reserved.
Worldwide Airline Industry
Average ROIC, 2004-2011
4.1%
Source: International...
© 2014 H. Del Castillo, All Rights Reserved.
Pick Your Industry
Threat of
New
Entrants
Buyer Power
Threat of
Substitute
Pr...
© 2014 H. Del Castillo, All Rights Reserved.
How would this tool help you?
1. Identify how to position your product
2. Ide...
© 2014 H. Del Castillo, All Rights Reserved.
Practical Tips
• Use this framework to analyze established
industries
• Use i...
© 2014 H. Del Castillo, All Rights Reserved.
Key Takeaways
• Understand the competitive landscape1
• Allows you to gauge p...
© 2014 H. Del Castillo, All Rights Reserved.
Hector Del Castillo
• Senior consultant with over 15 years of experience tran...
© AIPMM 2014 www.aipmm.com
Q & A
Presenter:
Hector Del Castillo, CPM, CPMM
Product Innovation Consultant
linkd.in/hdelcast...
© AIPMM 2014 www.aipmm.com
Join AIPMM!
For a limited time, get a
one-year AIPMM
membership when you
purchase a copy of the...
© AIPMM 2014 www.aipmm.com
May 12-13 - Bellevue, WA
June 16-17 - McLean, VA
Upcoming Courses
AIPMM is offering several sch...
© AIPMM 2014 www.aipmm.com
Upcoming Courses
Course & Location Dates Days Time
CPM® Certification Prep Course & Exam
McLean...
© AIPMM 2014 www.aipmm.com
Athens, Greece
Belgrade, Serbia
Athens, Greece
Follow the links above for more information, or ...
© AIPMM 2014 www.aipmm.com
Please Join Us Again!
Suggest Topics for Upcoming Webcasts: support@aipmm.com
AIPMM Webinar Ser...
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Five Competitive Forces That Can Kill Your Product

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In any industry your ability to maintain the profitability of your product depends on its position in the market. In this session we will discuss the importance of understanding five powerful competitive forces that can quickly erode your product's revenue and profitability.

You will learn insights on how to use Porter's competitive forces model to help you determine the competitive intensity and attractiveness of a market. This is useful to help you understand both the strength of your product's current competitive position and the strength of a position you're considering moving into.

About the Speaker
Hector Del Castillo has over 15 years of experience transforming ideas to products, and products to wealth for technology-based companies by building and directing high performing product teams, improving core business processes and establishing strategic partnerships. He has launched several profitable technology-based products and solutions. He provides services as a consultant, contractor, coach, or trainer to companies that want to grow by strengthening their product portfolio and creating new revenue streams.

Feel free to reach out to Hector if you have any questions regarding this topic: http://linkd.in/hdelcastillo.

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About AIPMM
The AIPMM is the trusted authority for product management knowledge. It is where product professionals go for answers. With members in over 75 countries, it is the worldwide certifying body of product leaders.

It is the world's largest professional organization of product managers, brand managers, product marketing managers and other product team professionals who are responsible for guiding their organizations, or clients, through a constantly changing business landscape.

AIPMM's certification programs are internationally recognized because they allow product professionals to demonstrate their expertise and provide corporate members an assurance that their product management and marketing teams are operating at a high competency level.

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Five Competitive Forces That Can Kill Your Product

  1. 1. © AIPMM 2014 www.aipmm.com www.aipmm.com
  2. 2. © AIPMM 2014 www.aipmm.com
  3. 3. © AIPMM 2014 www.aipmm.com Follow: @AIPMM @hmdelcastillo Use: #ProdBOK Tweet!
  4. 4. © AIPMM 2014 www.aipmm.com Participate and Win! Must be present to win! One lucky winner will get a free copy of the Guide to the Product Management and Marketing Body of Knowledge (ProdBOK®)
  5. 5. © AIPMM 2014 www.aipmm.com Today’s Speaker Presenter: Hector Del Castillo, CPM, CPMM Product Innovation Consultant linkd.in/hdelcastillo @hmdelcastillo hmdelcastillo@aipmm.com Moderator: Cindy F. Solomon, CPM, CPMM @cindyfsolomon
  6. 6. © 2014 H. Del Castillo, All Rights Reserved. Hector Del Castillo linkd.in/hdelcastillo
  7. 7. © 2014 H. Del Castillo, All Rights Reserved. What We Will Discuss 1. Porter’s Five Forces Model 2. How To Use It 3. Key Takeaways
  8. 8. © 2014 H. Del Castillo, All Rights Reserved. What you want out of this webcast • Learn new approaches for competitive analysis • Understanding common product killers • Learn tips and tools for success Today’s Topic How To Use Porter’s Five Forces Model
  9. 9. © 2014 H. Del Castillo, All Rights Reserved. Which of these best describes you? • I often use Porter's competitive forces model • I seldom use Porter's competitive forces model • I've heard about it, but never used it • What's Porter's competitive forces model?
  10. 10. © 2014 H. Del Castillo, All Rights Reserved. Gain strong understanding of the external marketing environment in which your company operates.
  11. 11. © 2014 H. Del Castillo, All Rights Reserved. • What’s going on out there in your industry? • What matters most to remain competitive? • What deserves your attention?
  12. 12. © 2014 H. Del Castillo, All Rights Reserved. A framework for analyzing an industry in order to develop a business strategy
  13. 13. © 2014 H. Del Castillo, All Rights Reserved. 5 Forces That Shape Competition Source: “Competitive Strategy: Techniques for Analyzing Industries and Competitors,” June 2008, Michael E. Porter.
  14. 14. © 2014 H. Del Castillo, All Rights Reserved. 5 Competitive Forces • The strength of competition in the industry.Competitive Rivalry • The ease with which new competitors can enter the market if they see that you are making good profits.Threat of New Entrants • The extent to which different products and services can be used in place of your own.Threat of Substitutes • The power of your customers to drive down your prices.Power of Buyers • The power of suppliers to drive up the cost of your inputs.Power of Suppliers
  15. 15. © 2014 H. Del Castillo, All Rights Reserved. Assessing Direction and Strength Strongly in your favor 5 In your favor 3 Somewhat in your favor 1 Neither 0 Somewhat against you -1 Against you -3 Strongly against you -5
  16. 16. © 2014 H. Del Castillo, All Rights Reserved. Competitive Rivalry 2014 How many competitors? What is the cost to exit the market? What is current industry growth? How well are products differentiated? What is the size of current competitors? What is current customer loyalty? Total
  17. 17. © 2014 H. Del Castillo, All Rights Reserved. Threat of New Entrants 2014 What is the cost to enter the market? How can current vendors retaliate? How well protected is current technology? How much government regulation is there? What are customer switching costs? How much customer loyalty exists? What’s needed to achieve economies of scale? Total
  18. 18. © 2014 H. Del Castillo, All Rights Reserved. Threat of Substitutes 2014 How many alternatives are available? How well do alternatives perform? What is the quality of alternatives? What is the price for alternatives? What is customer cost of change? Total
  19. 19. © 2014 H. Del Castillo, All Rights Reserved. Power of Buyers 2014 What is the number of customers? What is the size of buyers? What is the size of each order? What is the buyers’ cost of switching vendors? How many substitutes exist? What’s the price sensitivity of buyers? What is the threat of backward integration? Total
  20. 20. © 2014 H. Del Castillo, All Rights Reserved. Power of Suppliers 2014 What is the number of suppliers? What is the size of suppliers? What is the availability of raw materials? Do suppliers hold scarce resources? What is cost of changing raw materials? What is the threat of forward integration? Total
  21. 21. © 2014 H. Del Castillo, All Rights Reserved. How To Perform Analysis • Gather the information on each of the five forces1 • Analyze the results and display them on a diagram2 • Create actionable steps to maintain a competitive advantage based on the conclusions 3
  22. 22. © 2014 H. Del Castillo, All Rights Reserved. U.S. Automotive Industry Threat of New Entrants Buyer Power Threat of Substitute Products Supplier Power Competitive Rivalry Threat of New Entrants: ? Competitive Rivalry: ? Supplier Power: ? Buyer Power: ? Threat of Substitutes: ? ? ? ? ? ?
  23. 23. © 2014 H. Del Castillo, All Rights Reserved. U.S. Automotive Industry Overview • Light vehicle sales increased 7.5 percent over 2012, reaching 15.532M vehicles sold in 2013 (Wards Auto, 1/3/14) • Light trucks sales increased 10.5% in 2013, more than twice the increase of car sales (4.9%) (IHS Automotive, 1/9/14) • Annual sales are expected to grow at around 12% in the next five years due to improved buyer confidence • Average age of a light vehicle is 11.4 years • Vendors continue to introduce fuel-efficient models across categories Source: Auto Alliance Trade Association, Sales Data 2013.
  24. 24. © 2014 H. Del Castillo, All Rights Reserved. 1. Competitive Rivalry 2014 How many competitors? -5 What is the cost to exit the market? -5 What is current industry growth? 3 How well are products differentiated? -5 What is the size of current competitors? -5 What is current customer loyalty? 1 Total -3
  25. 25. © 2014 H. Del Castillo, All Rights Reserved. 2. Threat of New Entrants 2014 What is the cost to enter the market? -5 How can current vendors retaliate? -5 How well protected is current technology? 0 How much government regulation is there? -3 What are customer switching costs? -3 How much customer loyalty exists? 3 What’s needed to achieve economies of scale? -5 Total -3
  26. 26. © 2014 H. Del Castillo, All Rights Reserved. 3. Threat of Substitutes 2014 How many alternatives are available? -3 How well do alternatives perform? 3 What is the quality of alternatives? 0 What is the price for alternatives? 3 What is customer cost of change? 0 Total 1
  27. 27. © 2014 H. Del Castillo, All Rights Reserved. 4. Power of Buyers 2014 What is the number of customers? 5 What is the size of buyers? -3 What is the size of each order? -3 What is the buyers’ cost of switching vendors? -3 How many substitutes exist? -5 What’s the price sensitivity of buyers? -5 What is the threat of backward integration? 0 Total -2
  28. 28. © 2014 H. Del Castillo, All Rights Reserved. 5. Power of Suppliers 2014 What is the number of suppliers? 5 What is the size of suppliers? 5 What is the availability of raw materials? 5 Do suppliers hold scarce resources? 5 What is cost of changing raw materials? -1 What is the threat of forward integration? 5 Total 4
  29. 29. © 2014 H. Del Castillo, All Rights Reserved. U.S. Automotive Industry Threat of New Entrants Buyer Power Threat of Substitute Products Supplier Power Competitive Rivalry Threat of New Entrants: -3 • Additional competitors • Few legal barriers protect vendors • New entrants can easily access suppliers and materials Competitive Rivalry: -3 • Large number of competitors • Strong customer loyalty • Moderate threat of M&A Supplier Power: +4 • Large number of small suppliers • Raw materials are readily available Buyer Power: -2 • Many options to compare within same category Threat of Substitutes: +1 • Substitutes can rarely offer the same convenience • Low cost to switch -3 -3 +1 +4 -2
  30. 30. © 2014 H. Del Castillo, All Rights Reserved. What is the 15-year average ROIC for U.S. automotive industry? 1. More than 15% 2. 10 to less than 15% 3. 5 to less than 10% 4. 0 to less than 5% 5. 1 to 5% loss
  31. 31. © 2014 H. Del Castillo, All Rights Reserved. U.S. Automotive Industry ROIC, 2013 Source: Market Watch, 2013. Company ROIC General Motors 9.6% Ford 7% Toyota 5.33% Fiat Chrysler 2.91% Honda 6.79% Total 6.3%
  32. 32. © 2014 H. Del Castillo, All Rights Reserved. U.S. Airline Industry Threat of New Entrants Buyer Power Threat of Substitute Products Supplier Power Competitive Rivalry Threat of New Entrants: Competitive Rivalry: Supplier Power: Buyer Power: Threat of Substitutes: ? ? ? ? ?
  33. 33. © 2014 H. Del Castillo, All Rights Reserved. U.S. Market • 100 passenger airlines operate over 11 million flight departures per year • Carry over one‐third of the world’s total air traffic • 745 million passengers in 2006 • $160 billion in total revenues • 545,000 employees and over 8,000 aircraft operating 31,000 flights per day • Commercial aviation contributes approximately 8% of the US Gross Domestic Product Source: Airline Industry Overview, Eric Henckels, Columbia University.
  34. 34. © 2014 H. Del Castillo, All Rights Reserved. U.S. Airline Industry Threat of New Entrants Buyer Power Threat of Substitute Products Supplier Power Competitive Rivalry Threat of New Entrants: -5 • Additional competitors from abroad Competitive Rivalry: -5 • Large number of competitors • Little customer loyalty Supplier Power: -5 • Boeing, Airbus and Embraer own majority market share • Rising costs Buyer Power: • Many alternatives to buy based on low price Threat of Substitutes: • Alternative modes of transportation • Low cost to switch -5 -5 -5 -5 -3
  35. 35. © 2014 H. Del Castillo, All Rights Reserved. U.S. Airline Industry Average ROIC, 1992-2006 5.9% Source: “The Five Competitive Forces That Shape Strategy” Michael E. Porter, Harvard Business Review Magazine, Jan 2008.
  36. 36. © 2014 H. Del Castillo, All Rights Reserved. Global Market • 2000 Airlines operating more than 23,000 aircraft, providing service to over 3700 airports. • In 2006, there were 28 million scheduled flight departures and carried over 2 billion passengers • Growth of world air travel has averaged approximately 5% per year over the past 30 years • Annual growth in air travel has been about twice the annual growth in GDP • Expected to double over next 10 – 15 years Source: Airline Industry Overview, Eric Henckels, Columbia University.
  37. 37. © 2014 H. Del Castillo, All Rights Reserved. Worldwide Airline Industry Average ROIC, 2004-2011 4.1% Source: International Air Transport Association (IATA) Airline Profitability Report, Aug 2013.
  38. 38. © 2014 H. Del Castillo, All Rights Reserved. Pick Your Industry Threat of New Entrants Buyer Power Threat of Substitute Products Supplier Power Competitive Rivalry Threat of New Entrants: Competitive Rivalry: Supplier Power: Buyer Power: Threat of Substitutes: ? ? ? ? ?
  39. 39. © 2014 H. Del Castillo, All Rights Reserved. How would this tool help you? 1. Identify how to position your product 2. Identify critical value chain elements 3. Identify sources of disruption 4. Compare your product’s profit with competitors 5. Make smarter decisions about your product portfolio
  40. 40. © 2014 H. Del Castillo, All Rights Reserved. Practical Tips • Use this framework to analyze established industries • Use it to identify macro economic trends • Consider the dynamic/changing characteristics of the industry • Use it to identify the impact that government regulation has or may have on the industry
  41. 41. © 2014 H. Del Castillo, All Rights Reserved. Key Takeaways • Understand the competitive landscape1 • Allows you to gauge profitability and risk2 • Can be applied to any established industry3 • Helps align business and product strategies4 • Allows you to anticipate disruption5
  42. 42. © 2014 H. Del Castillo, All Rights Reserved. Hector Del Castillo • Senior consultant with over 15 years of experience transforming products to wealth for technology-based companies • AIPMM Body of Knowledge (ProdBOK®) Contributor • Certified instructor for AIPMM and the 280 Group • Established companies – Jet Propulsion Laboratory, Lucent Technologies, MEI Technologies • Small companies and startups – Nextone Communications, Smith Micro Software • Launched 27+ Products for global deployment – HW/SW, Telecom, Enterprise Mobility, Information Security Services, Professional Development • Certified PMP®, CPM® and CPMM® • University of California at Santa Barbara, MS EE • University of Texas at El Paso, MS EE, BS EE 42
  43. 43. © AIPMM 2014 www.aipmm.com Q & A Presenter: Hector Del Castillo, CPM, CPMM Product Innovation Consultant linkd.in/hdelcastillo @hmdelcastillo hmdelcastillo@aipmm.com Moderator: Cindy F. Solomon, CPM, CPMM @cindyfsolomon
  44. 44. © AIPMM 2014 www.aipmm.com Join AIPMM! For a limited time, get a one-year AIPMM membership when you purchase a copy of the Guide to the Product Management and Marketing Body of Knowledge (ProdBOK®). Learn more here: http://bit.ly/1iUknEx.
  45. 45. © AIPMM 2014 www.aipmm.com May 12-13 - Bellevue, WA June 16-17 - McLean, VA Upcoming Courses AIPMM is offering several scholarships to these courses to reach those who are serious about learning these skills but have budget constraints. For more information visit: http://bit.ly/CILCourse.
  46. 46. © AIPMM 2014 www.aipmm.com Upcoming Courses Course & Location Dates Days Time CPM® Certification Prep Course & Exam McLean, VA June 9-10, 2014 M, T 8:30 am – 5 pm CPMM® Certification Prep Course & Exam McLean, VA June 11-12, 2014 W, Th 8:30 am – 5 pm ACPM® Certification Prep Course & Exam McLean, VA June 13, 2014 F 8:30 am – 5 pm For more information, visit: Transform Your Career.
  47. 47. © AIPMM 2014 www.aipmm.com Athens, Greece Belgrade, Serbia Athens, Greece Follow the links above for more information, or contact: certification@aipmm.com. Upcoming Courses
  48. 48. © AIPMM 2014 www.aipmm.com Please Join Us Again! Suggest Topics for Upcoming Webcasts: support@aipmm.com AIPMM Webinar Series: http://aipmm.com/aipmm_webinars Global Product Management Talk http://www.blogtalkradio.com/prodmgmttalk Call For Speakers: http://www.boldpm.com/call_for_speakers Announcements: http://www.aipmm.com/subscribe LinkedIn: http://www.linkedin.com/company/aipmm Membership: http://www.aipmm.com/join.php Certification: http://aipmm.com/html/certification/

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