ADMS 1000 Lecture Notes - Lecture 3: Switching Barriers, Swot Analysis, Premium Pricing
17 Oct 2018
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What is Strategic Management
Strategic Management:
-The analyses, decisions and implementations a firm undertakes to create and sustain its
competitive advantage.
What Is Strategy?
-The plans made or the actions taken to help an organization obtain its intended purposes
Analyzing the External Environment
Industry Structure Analysis
-An Industry is a group of firms with similar resource requirements in raw materials, labour,
technology, customers.
-The Five-Forces model attempts to evaluate the attractiveness of an industry
Forces Driving Industry Competition
1. Threat of New Entrants
Can be new firms or diversifying entrants
Incumbents must create barriers to entry:
- Economies of scale
- Capital requirements
- Switching costs
- Access to distribution channels
- Cost disadvantages unrelated to scale
2. Bargaining Power of Suppliers
How critical are the inputs provided by suppliers?
Are there many suppliers relative to producers?
3. Bargaining Power of Buyers
Are switching costs for buyers high?
Are competitive products undifferentiated?
How important are the products to buyers?
Are there many buyers relative to producers?
4. Threat of Substitutes
Is the industry facing many competitive substitutes?
- Air travel vs. rail travel
- Movie theaters vs. DVD rentals, Rogers on Demand
- CDs vs. MP3 downloads
- Coffee vs. tea
5. Rivalry Among Existing Firms
Undifferentiated products and low switching costs encourage more intense rivalry
Many similar producers tend to compete more fiercely
High exit barriers increase competitive rivalry
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ADMS 1000 Full Course Notes
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Document Summary
The analyses, decisions and implementations a firm undertakes to create and sustain its competitive advantage. The plans made or the actions taken to help an organization obtain its intended purposes. An industry is a group of firms with similar resource requirements in raw materials, labour, technology, customers. The five-forces model attempts to evaluate the attractiveness of an industry. Forces driving industry competition: threat of new entrants. Can be new firms or diversifying entrants. Cost disadvantages unrelated to scale: bargaining power of suppliers. Are there many suppliers relative to producers: bargaining power of buyers. Are there many buyers relative to producers: threat of substitutes. Movie theaters vs. dvd rentals, rogers on demand. Coffee vs. tea: rivalry among existing firms. Undifferentiated products and low switching costs encourage more intense rivalry. Many similar producers tend to compete more fiercely. Does not focus on technological changes and governmental regulations. The model is static and assumes all firms experience the forces in the same way.
