Implication: Under dynamic competition, 5-forces framework is less useful—Competitive behavior and industry structure jointly. determined by underlying conditions of technology, demand &[r]
Trang 1
Further Topics in Industry and Competitive Analysis
Further Topics in Industry and Competitive Analysis
Extending 5-forces analysis
o Does industry matter?
o Complements
o Dynamic competition
Game Theory
Competitor Analysis
Segmentation
Strategic Groups
OUTLINE
Trang 2
Does Industry Matter?
Percentage of variance in firms’ return on assets explained by:
Industry effects
Firm-specific effects
Unexplained variance Schmalensee
(1985)
Rumelt (1991) 4.0% 44.2% 44.8%
McGahan &
Porter 1997)
18.7% 31.7% 48.4%
Hawawini et al
(2003)
Trang 3The Value Net
COMPANY CUSTOMERS
SUPPLIERS
COMPLEMENTORS COMPETITORS
Trang 4
SUPPLIERS
POTENTIAL
ENTRANTS
SUBSTITUTES
BUYERS
INDUSTRY COMPETITORS
Rivalry among existing firms
Bargaining power of suppliers
Bargaining power of buyers
Threat of
new entrants Threat of
substitutes
COMPLEMENTS
The suppliers of complements create value for the industry and can exercise bargaining power Five Forces or Six? Introducing Complements
Trang 5
Dynamic Competition
Porter framework assumes:
(a) industry structure drives competitive behavior
(b) Industry structure is (fairly) stable.
But, competition also changes industry structure:
• Schumpeterian Competition: A “perennial gale of creative
destruction” where firm strategies continually transforms industry
structure innovation overthrows established market leaders
• Hypercompetition: “intense and rapid competitive
moves….creating disequilibrium through continuously creating new competitive advantages and destroying, obsolescing or
neutralizing opponents’ competitive advantages
Implication: Under dynamic competition, 5-forces framework is
less useful—Competitive behavior and industry structure jointly
determined by underlying conditions of technology, demand & costs
Trang 6
The Contribution of Game Theory
to Competitive Analysis
The Contribution of Game Theory
to Competitive Analysis
Main value:
1 Framing strategic decisions as interactions between competitors
2 Predicting outcomes of competitive situations involving a few,
evenly-matched players
Some key concepts:
1 Competition and Cooperation—Game theory can show conditions
where cooperation more advantageous than competition
2 Deterrence—changing the payoffs in the game in order to deter
a competitor from certain actions
3 Commitment—irrevocable deployments of resources that
give creditability to threats
4 Signaling—communication to influence a competitor's decision
Problems of game theory:
Useful in explaining past competitive behavior—weak in predicting
future competitive behavior.
What’s the problem? — Multitude of models, outcomes highly sensitive
to small changes in assumptions
Trang 7
PREDICTIONS
• What strategy changes
will the competitor initiate?
• How will the competitor
respond to our strategic initiatives?
OBJECTIVES
What are competitor’s current goals?
Is performance meeting there goals?
How are its goals likely to change?
STRATEGY
How is the firm competing?
ASSUMPTIONS
What assumptions does the competitor
hold about the industry and itself?
RESOURCES & CAPABILITIES
What are the competitors’ key
strengths and weaknesses?
A Framework for Competitor Analysis
A Framework for Competitor Analysis