Competitive Strategy

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  • Competitive Strategy

    1. 1. Competitive Strategy By Michael Porter Instructor: Wesley Shu
    2. 2. Competitive Strategy <ul><li>A framework for understanding the underlying forces of competition in industries </li></ul>
    3. 3. Basic Competitive Forces
    4. 4. The Five Forces <ul><li>Threat of entry </li></ul><ul><li>Intensity of rivalry among existing competitors </li></ul><ul><li>Pressure from substitute products </li></ul><ul><li>Bargaining power of buyers </li></ul><ul><li>Bargaining power of suppliers </li></ul><ul><li>They Are Structural Determinants of the Intensity of Competition </li></ul>
    5. 5. Threat of Entry <ul><li>Barriers to entry </li></ul><ul><ul><li>Economies of Scale </li></ul></ul><ul><ul><li>Product differentiation </li></ul></ul><ul><ul><li>Capital requirements </li></ul></ul><ul><ul><li>Switching costs </li></ul></ul><ul><ul><li>next </li></ul></ul>
    6. 6. Economies of Scale <ul><li>can be also achieved by “joint costs” including brand name or know-how </li></ul><ul><li>Not only manufacturing, but also Marketing, service network (Amazon) R&D, branding, marketing etc. </li></ul><ul><li>Ex. McDonald share promotion among franchised stores </li></ul><ul><li>return </li></ul>
    7. 7. Product Differentiation <ul><li>Differentiated products enjoy customer loyalty and brand identification </li></ul><ul><li>return </li></ul>
    8. 8. Capital Requirement <ul><li>既存廠商可以創新價格模式﹐使得資本比重相對提高﹑回收期加長﹐例如租賃影印機 </li></ul>
    9. 9. Switching Cost <ul><li>指買方不容易另求賣方﹐尤其是下游廠商對上游的依賴度。例如﹐公司一旦採用了某種 ERP 產品﹐要更換就不容易了﹐因為 ERP 除了價格不菲之外﹐一旦更換﹐訓練成本得重新付出﹐過去的維護成本完全付之流水。如此﹐新的 ERP 就不容易打入市場。 </li></ul>
    10. 10. Other Barrier to Entry <ul><ul><li>Access to distribution channels </li></ul></ul><ul><ul><li>Cost disadvantages independent of scale, e.g., proprietary product, favorable access to raw materials, favorable locations, government subsidies, learning or experience curve, government policy, etc. </li></ul></ul>
    11. 11. Threat of Entry <ul><li>Expected retaliation </li></ul><ul><li>The entry deterring price </li></ul><ul><li>Properties of entry barriers, e.g., vertical integration to lower cost </li></ul><ul><li>Network externalities </li></ul>
    12. 12. Expected retaliation <ul><li>History of vigorous retaliation </li></ul><ul><li>Established firms with substantial resources to fight back </li></ul><ul><li>Slow industry growth </li></ul><ul><li>return </li></ul>
    13. 13. The entry deterring price <ul><li>競爭者想要進入某個產業﹐一定是覺得有利可圖。有利與否決定於競爭者對加入市場後的產品價格﹑自己的生產成本﹑以及為了進入該產業所需付出的努力。產業的既存者如果不想讓競爭者進入﹐可以將產品價格降低﹐低到競爭者覺得無利可圖。此時如果既存者為了爭取利潤而不降價﹐使得市場價格高於競爭者心目中的 Entry deterring price﹐ 就徒然讓他們蠢蠢欲動﹐和自己過不去了。 </li></ul>
    14. 14. The entry deterring price <ul><li>在不成熟的第三世界國家﹐金融產業是被高度控制的。控制方法之一就是特許制度。任何特許﹑伴隨著法律上對政府的約束微弱﹐都無法避免貪污賄賂。而政府對不中意的行賄者﹐可以索取一定的回扣﹐使得該行賄者覺得無利可圖﹐就是操作 Entry deterring price 的一種方式。 </li></ul><ul><li>return </li></ul>
    15. 15. Network externalities <ul><li>Network Externalities: 指的是﹐一件商品對消費者的價值決定於消費者的總數﹐而消費者購買的決定也取決於其總數。例如電話機﹑電腦操作系統﹑ eBay 都是。 </li></ul>
    16. 16. Intensity of rivalry among existing competitors <ul><li>Numerous or equally balanced competitors </li></ul><ul><li>Slow industry growth </li></ul><ul><li>High fixed or storage costs </li></ul><ul><ul><li>High fixed cost: 為了沖銷大量的固定成本﹐廠商可能會傾向多生產﹐如此導致價格降低﹑廠商之間的競爭加劇。 </li></ul></ul><ul><ul><li>High storage cost: 為了出清存貨﹐降低儲存成本﹐廠商可能降價求售﹐如此增加了產業內的競爭。 </li></ul></ul>
    17. 17. Intensity of rivalry among existing competitors <ul><li>Lack of differentiation or switching costs </li></ul><ul><li>Products are like commodity. </li></ul><ul><li>Capacity augmented in large increments </li></ul><ul><li>一旦如此﹐廠商會形成周期性的產量驟增。如果產品需求穩定﹐當產量驟增﹐供需就失衡﹐如此增加了產業內的競爭。 </li></ul><ul><li>High exit barriers: specialized assets, strategic interrelationship, emotional barriers, etc. </li></ul>
    18. 18. Intensity of rivalry among existing competitors <ul><li>Diverse competitors </li></ul><ul><li>如此﹐各個廠商就無法正確了解對手的行為﹐形成混亂的戰局。此外﹐廠商也比較難提出普效的策略﹐因為對某一對手有效﹐對其他對手就未必。 </li></ul><ul><li>High strategic stakes </li></ul><ul><li>當廠商進入某一產業具有策略考量﹐ 通常表示他不太會放棄該產業﹑有意在該產業擴張﹑願意犧牲利潤以成就策略。這些再再增加了產業內的競爭。 </li></ul>
    19. 19. Pressure from substitute products <ul><li>Price elasticity </li></ul><ul><ul><li>指價格的變動率對需求變動率的影響。價格的彈性愈高的話﹐價格上漲﹐需求就愈減少。亦即﹐消費者就愈傾向買替代品。讓價格彈性降低的方法很多﹐如運用 CRM 的技巧﹐增加消費者對品牌的認知和忠誠度﹑產品差異化。 </li></ul></ul><ul><ul><li>If the price elasticity is high, rising industry prices tend to drive consumers to purchase substitutes. </li></ul></ul>
    20. 20. Bargaining power of buyers <ul><li>The buyer purchases large volumes. </li></ul><ul><li>The products are standard or undifferentiated. </li></ul><ul><li>It faces few switching costs </li></ul><ul><li>Buyers pose a credible threat of backward integration . E.g., GM or Ford’s self-manufacture as bargaining level for part suppliers </li></ul>
    21. 21. Bargaining power of buyers <ul><li>The industry’s product is unimportant to the quality of the buyers’ products or services </li></ul><ul><li>The buyers have full information </li></ul>
    22. 22. Bargaining power of suppliers <ul><li>Fewer and concentrated suppliers. </li></ul><ul><li>Suppliers are not obliged to contend with other substitute products </li></ul><ul><li>如果沒有競爭者生產替代品﹐該供應商自然就有較高的 bargaining power. </li></ul><ul><li>The industry is not an important customer of the suppliers </li></ul><ul><li>The suppliers’ product is an important input to the buyer’s business. </li></ul>
    23. 23. Bargaining power of suppliers <ul><li>The supplier group’s products are differentiated or it has built up switching costs </li></ul><ul><li>The supplier group poses a credible threat of forward integration </li></ul>
    24. 24. Competitive Strategy
    25. 25. Competitive Strategy <ul><li>Identify the five forces and their causes </li></ul><ul><li>Identify a firm’s strengths and weaknesses relative to the industry </li></ul><ul><li>Create a defendable position against the five competitive forces </li></ul>
    26. 26. Competitive Strategy Approaches <ul><li>Positioning </li></ul><ul><ul><li>Position the firm in the industry where the forces are weakest, or provide the best defense against the competitive forces. </li></ul></ul><ul><li>Influencing the balance </li></ul><ul><ul><li>Change the firm itself to eliminate the causes of the forces. </li></ul></ul><ul><li>Exploiting change </li></ul><ul><ul><li>by choosing a strategy appropriate to the new competitive balance before rivals recognize it </li></ul></ul>
    27. 27. Generic Competitive Strategies <ul><li>Cost leadership </li></ul><ul><li>Differentiation </li></ul><ul><li>Focus </li></ul>
    28. 28. Generic Strategies Focus Particular segment only Overall cost leadership Differentiation Industrywide Low cost position Uniqueness perceived by the customer
    29. 29. Overall Cost Leadership <ul><li>Commonly required skills and resources </li></ul><ul><li>Substantial capital investment and access to capital </li></ul><ul><li>Process engineering skills </li></ul><ul><li>Intense supervision of labor </li></ul><ul><li>Products designed for ease in manufacture </li></ul><ul><li>Low-cost distribution system </li></ul>
    30. 30. Overall Cost Leadership <ul><li>Commonly organizational requirements </li></ul><ul><li>Tight cost control </li></ul><ul><li>Frequent, detailed control reports </li></ul><ul><li>Structured organization and responsibilities </li></ul><ul><li>Incentives based on meeting strict quantitative targets </li></ul>
    31. 31. Differentiation <ul><li>Commonly required skills and resources </li></ul><ul><li>Strong marketing abilities </li></ul><ul><li>Product engineering </li></ul><ul><li>Creative flair </li></ul><ul><li>Strong capbility in basic research </li></ul><ul><li>Corporate reputation for quality or technological leadership </li></ul><ul><li>Long tradition in the industry or unique combination of skills drawn from other business </li></ul><ul><li>Strong cooperation from channels </li></ul>
    32. 32. Differentiation <ul><li>Common organizational requirements </li></ul><ul><li>Strong coordination among functions in R&D, product development, and marketing </li></ul><ul><li>Subjective measurement and incentives instead of quantitative measures </li></ul><ul><li>Amenities to attract highly skilled labor, scientists, or creative people </li></ul>
    33. 33. Focus <ul><li>Commonly required skills and resources </li></ul><ul><li>Combination of the above policies directed at the particular strategic target </li></ul>
    34. 34. Focus <ul><li>Common organizational requirements </li></ul><ul><li>Combination of the above policies directed at the particular strategic target </li></ul>
    35. 35. Competitor Analysis - Objective <ul><li>Develop a profile of the nature and success of the likely strategy changes each competitor might make </li></ul>
    36. 36. Competitor Analysis <ul><li>Identify current and potential competitors : </li></ul><ul><li>Firms not in the industry but who could overcome entry barriers particularly cheaply </li></ul><ul><li>Firms for whom there is obvious synergy from being in the industry </li></ul><ul><li>Firms for whom competing in the industry is an obvious extension of the corporate strategy </li></ul><ul><li>Customers or suppliers who may integrate backward or forward </li></ul>
    37. 37. Competitor Analysis <ul><li>Future Goals of the competitors </li></ul><ul><li>Current Strategy of the competitors </li></ul><ul><li>Assumptions of the competitors </li></ul><ul><li>Capabilities of the competitors </li></ul><ul><li>-> </li></ul><ul><li>Competitor’s response profile </li></ul>
    38. 38. Future Goals <ul><li>What drives the competitor? </li></ul><ul><li>Knowledge of goals allows predictions about whether the competitor is satisfied with its present position. </li></ul><ul><li>Allows to predict its reaction to our strategic changes </li></ul><ul><li>Helps interpret the seriousness of initiatives the competitor takes </li></ul>
    39. 39. Assumptions <ul><li>Identify each competitor’s assumptions about itself and about the industry and the other companies in it </li></ul>

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