Global Strategy Chapter 2 Managing Industry Competition

Global Strategy 1e Michael Peng Global Strategy Mike W Peng c h a p t e r 2 Copyright © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly acce.

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Industry

Competition

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be scanned, copied or duplicated, or posted to a publicly

accessible website, in whole or in part.

Outline

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What Industry is This?

2–3

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Defining Industry Competition

• Industry:

 A group of firms producing products (goods and/or

services) that are similar to each other

• Theories of industry competition

 Perfect competition (rarely observed)

 Industrial organization (IO) economics model

(SCP model)

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Five Forces Framework

in 1980 by Michael Porter

 The focal firm’s performance critically depends on the degree of competitiveness of the five forces within an industry

 The stronger and more competitive these forces

are, the less likely the focal firm is able to earn above-average return, and vice versa

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publicly accessible website, in whole or in part.

The Five Forces

Framework

Figure 2.1

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not be scanned, copied or

duplicated, or posted to a publicly

accessible website, in whole or in

part.

Threats of the Five Forces

Table 2.1

Threats indicative of strong competitive forces that can

Five forces depress industry profitability

Rivalry among  A large number of competing firms

competitors  R ivals are similar in size, influence, and product offerings

 H igh-price, low-frequency purchases

 Capacity is added in large increments

 Industry slow growth or decline

 High exit costs

Threat of  Little scale-based low-cost advantages

potential entry (economies of scale)

 Little non-scale-based advantages  Inadequate product proliferation

 Insufficient product differentiation

 Little fear of retaliation

 No government policy banning or discouraging entry

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Threats of the Five Forces (cont’d)

Bargaining power • A small number of suppliers

of suppliers • Suppliers provide unique, differentiated products

• Focal firm is not an important customer of suppliers

• Suppliers are willing and able to vertically integrate forward

Bargaining power • A small number of buyers

of buyers • Products provide little cost savings or quality of life

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Threats of the Five Forces (cont’d)

Threat of • Substitutes superior to existing products in quality and

of substitutes quality and function

• Switching costs to use substitutes are low

Table 2.1 cont’d

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Five Forces Framework:

Lessons from the Five Forces

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Table 2.4

Three Generic Competitive Strategies

PRODUCT DIFFERENTIATION MARKET SEGMENTATION KEY FUNCTIONAL AREAS Cost Leadership Low (mainly by price) Low (mass market) Manufacturing, services, and

logistics Differentiation High (mainly by uniqueness) High (many market segments) R&D, marketing, and sales Focus Extremely high Low (one of a few segments) R&D, marketing, and sales

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Three Generic Strategies:

Cost Leadership

• Cost leadership

on low costs and low prices

differentiation

management

that customers desire

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Cost Leadership (cont’d)

 This forces the leader to continuously search for

ways to further reduce costs.

 In the relentless drive to cut costs, a cost leader

may make trade-offs that compromise the value customers perceive in its products or services and hurt sales.

2–13

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Differentiation

and different

are willing to pay premium prices

quality, sophistication, prestige, or luxury

customers in each market segment

(source of innovation), marketing/sales, and after-sale services

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Differentiation (cont’d)

 Difficult to sustain differentiation in the long run

 Relentless efforts of competitors to duplicate differentiation

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Differentiation (cont’d)

basis of its differentiation over the long run

the differentiator’s and cost leader’s products is not worth paying for.

of competitive imitation.

brand loyalty to differentiators may decline

premium in 1984 It became a commodity in 2004, which was hardly profitable – IBM sold its PC division to

Lenovo in 2004

2–16

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Focus Strategy

niche of an industry such as a geographical

market, type of customer, or product line

 A specialized differentiator has a smaller, narrower, and sharper focus than a large differentiator

compared with the traditional cost leader

possesses intimate knowledge about a

particular segment

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Lessons from the Three Generic

Strategies

• The essence of the three strategic choices:

 Whether to perform activities differently or to perform different activities relative to competitors

• There are two fundamental strategic dimensions: cost and differentiation

 The key is to choose one dimension and execute on it consistently

have no strategy or are drifting strategically

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Debates and Extensions

1 Clear versus blurred boundaries of industry

2 Threats versus opportunities

3 Five forces versus a sixth force (complementors)

4 Stuck in the middle versus all rounder

5 Industry rivalry versus strategic groups

6 Integrating versus outsourcing

7 Industry-specific versus firm-specific and

institution-specific determinants of performance

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Three Strategic Groups in the Global Automobile Industry

Figure 2.2

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Strategic Groups and Ownership Types

in the Chinese Electronics Industry

Table 2.6

Source: Adapted from M W Peng, J Tan, & T Tong, 2004, Ownership types and strategic groups

in an emerging economy (p 1110), Journal of Management Studies, 41 (7): 1105–1129.

STRATEGIC GROUP DEFENDER ANALYZER REACTOR

Ownership type State ownership Mixed Unstable

Customer base Stable Mixed Changing

Growth strategy Cautious Mixed Aggressive

Managers Older, more conservative Mixed Younger, more aggressive

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The Savvy Strategist

provides:

and competitor analysis, to which a more

detailed examination, introduced in later

chapters, can be added

questions in strategy discussed in Chapter 1

an important role in determining firm

performance

Tiêu đề	Managing Industry Competition
Tác giả	Mike W. Peng
Trường học	Cengage Learning
Chuyên ngành	Global Strategy
Thể loại	Textbook chapter
Năm xuất bản	2014
Thành phố	Unknown

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Số trang	22
Dung lượng	1,88 MB