EXTERNAL ANALYSIS, CHAPTER 2BEFORE DOING SWOTCHANGING INDUSTRY BOUNDARIESSWOT FOR SJSU, 2012PORTERS 5 FORCES MODELDRIVERS OF 5 FORCES & GENERIC COMPETITIVE STRATCOMPLEMENTORS OR VALUE NETSTRATEGIC GROUPSIMPLICATIONS OF STRATEGIC GROUPSINDUSTRY ANALYSISINDUSTRY LIFE CYCLE ANALYSISLIMITATIONS OF I.L.C. MODELMACRO-ECONOMIC ENVIRONMENTWHY BEER INDUSTRY SO CON-CENTRATED? CLOSING CASE pp.70-71EXTERNAL ANALYSIS, CHAPTER 2Business 189DR. MARK FRUINFeb. 7, 2012BEFORE DOING SWOT•INDUSTRY & SECTOR•INDUSTRY DEFINITION–TEXTBOOK VS. EMPIRICAL DEFINITION•MARKET SEGMENTS DEFINITION–TEXTBOOK VS EMPIRICAL DEFINITION•EXAMPLE: FIGURE ON PAGE 41CHANGING 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” FORCESSWOT FOR SJSU, 2012•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?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 DIAMONDDRIVERS 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)COMPLEMENTORS 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–EXAMPLES: AUTO INDUSTRY VS COMPUTERS•AUTOS, TIRES, GLASS, PLASTICS•COMPUTERS, CHIPS, PERIPHERALS, SOFTWARESTRATEGIC GROUPS•GROUPS OF COMPANIES THAT PURSUE SIMILAR STRATEGIES WITHIN THE SAME INDUSTRY AND MARKET SEGMENTS•BUT AT ODDS WITH FIRMS THAT PURSUE DIFFERENT BUSINESS MODELS/MARKET SEGMENTS IN THE SAME INDUSTRY•MOBILITY BARRIERS = WITHIN-INDUSTRY FACTORS THAT INHIBIT ABILITY TO MOVE BETWEEN STRATEGIC GROUPS•EXAMPLES?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–SOME EXAMPLES OF MOBILITY BARRIERS IN AUTO & COMPUTER INDUSTRIES?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 I.LC. MODELINDUSTRY LIFE CYCLE ANALYSIS•EMBRYONIC•GROWTH•INDUSTRY SHAKEOUT•MATURE•DECLINELIMITATIONS OF I.L.C. MODEL•LIFE CYCLE IS A GENERALIZATION•INNOVATIONS ARE OF VARIOUS SORTS–INNOVATIONS MAY TRANSFORM INDUSTRY DYNAMICS•MODEL OVEREMPHASIZES INDUSTRY EFFECTS•MODEL UNDEREMPHASIZES FIRM-LEVEL DIFFERENCES & STRATEGIC GROUP DIFFERENCES•HENCE, REAL I.L.C. IS NOT SUCH A PRETTY THING AS TEXTBOOK I.L.C.MACRO-ECONOMIC ENVIRONMENT•ILC EFFECTS & RIVALRIES TAKE PLACE WITHIN ECONOMIC & INSTITUTIONAL ENVIRONMENTS•ROLE OF MACROECONOMIC EFFECTS?•ROLE OF INSTITUTIONAL ENVIRONMENT?–WHAT IS AN INSTITUTION?–WHAT ARE INSTITUTIONAL EFFECTS?•OTHERS–DEMOGRAPHIC FORCES–GLOBAL COMPETITION–POLITICAL & LEGAL FORCES: CO-EVOLUTIONARY EFFECTS ON COMPETITIONWHY BEER INDUSTRY SO CON-CENTRATED? CLOSING CASE pp.70-71•IN NOV ‘08, InBev, A BELGIUM-BRAZILIAN COMPANY, BUYS BUDWEISER (ANHEUSER-BUSCH) W/ 50% U.S. MARKET SHARE–ANHEUSER BUSCH HAS ROIC OF BETWEEN 17-23% BETWEEN 1996 AND 2008; WHAT’S ROIC? HOW CALCULATE? PAGE C9.•BEER INDUSTRY, ALREADY CONCENTRATED, GETS MORE CONCENTRATED. WHY?–WHY DOESN’T DOJ CARE OR DOES IT?•DISTINGUISH BETWEEN MASS MARKET FOR BEER (@90%) & PREMIUM MARKET•WHY SO CONCENTRATED?–BEER CONSUMPTION FALLING; BREWERS COMPETE HARDER FOR SHRINKING MARKET; “FULL LINE” STRATEGY–ADVERTISING $$ UP, MAKING HARDER FOR SMALL BREWERS TO COMPETE–MINIMUM EFFICIENT SCALE GOING UP; FROM 8 MILLION BARRELS IN ‘70 TO 23 MILLION BARRELS IN 2000s•13% MARKET SHARE REQUIRED TO TAKE ADVANTAGE OF