business_level_strat_Presentation - Announcements Your U2...

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1 Announcements Your U2 trivis needs help; last year Greg Stein named all 12 albums. We’ll go over this! Congratulations to cola test winners Riva Margolis and Morgan Hirsch PS 3 Review is tonight, 8 pm, Warren 201 Prelim is Oct 16, Review sessions: Tues, Oct. 14, 6-8 pm, 201 Warren Weds, Oct. 15, 8-10 pm, 245 Warren CSG input due Sunday at 4, please note new URL I will drop two quiz grades Coke and Pepsi Review (1/2) Concentrate market is attractive Weak suppliers, weak buyers, weak internal rivals, able to keep substitutes at bay Relatively inelastic demand for concentrate Pepsi bottlers can’t switch to buying Coke concentrate even if Coke undercuts Pepsi More elastic demand for bottlers Some Pepsi drinkers will switch to Coke if price is lower, but not all Bottlers need contractual protection for high sunk cost of bottling plant Coke and Pepsi Review (2/2) Concentrate producers capture the most value in chain 40% ROA versus 10% for bottlers Hassle of contract negotiation, better control Consolidation increases efficiency, but…. Worry about bargaining position if few bottlers Independent bottlers provide benchmark for company-owned ones Where are we now? How do I evaluate decisions? At what price and what quantity do I sell? How do I anticipate the actions of rivals? • How can I gain and sustain competitive advantage?
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2 Agenda Business-level Strategy —pursuit of competitive advantage at the firm level Competitive advantage —earning greater economic profits than rivals Why are some firms more profitable than others? - Creating Value - Adding Value - Capturing Value Perceived quality of product relative to rivals’ products Costs relative to rivals’ costs Value-created relative to rivals (Value Added) Industry structure (competitive forces) Firm Performance A firm has competitive advantage when it captures more value then its rivals, i.e. when it earns a higher rate of profits than the average firm in its industry. Framework for Competitive
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business_level_strat_Presentation - Announcements Your U2...

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