B A 405 Lecture Notes - Lecture 4: Customer Switching, Bargaining Power, Group Analysis
11 Nov 2020
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Document Summary
Research indicates that industry explains only 10-20% variance in firm profitability; while firm-level effects account for about 30-50% Also in the fight for profits with a broader extended set of competitors. Holistic way of looking at any industry and looking at structural businesses. Helps you hone in what is causing profitability, what are the trends, where are the constraints, etc. What is the configuration of underlying driver that are really going to shape the profit potential of an industry. Industry analysis and looking at the competitive environment is the starting basic discipline of any strategy formulation process. Figuring out what your industry is and drawing the right boundaries. Five forces gives you the tools to understanding the dynamics of the industry. New entrants bring new capacity and put pressure on price, cost, and investment. Threat of new entry is high if entry barriers are low. Powerful suppliers can charge higher prices, limit quality and pass costs on to industry firms.
