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2014 slides6 - MODULE 3 FRAMEWORKS AND MODELS FOR MARKET...

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Industry Analysis MODULE 3 - FRAMEWORKS AND MODELS FOR MARKET PLANNING & ANALYSIS SLIDE SET 6 Summer 2014
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Industry Analysis Porter Five Forces CONTENT 2
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INDUSTRY ANALYSIS
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Objecti ve Need to understand the dynamics of the industry in which the company competes Snapshot of the industry providing key factors of relevance to the industry OBJECTIVE OF INDUSTRY ANALYSIS 4
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5 PORTER FIVE FORCES ANALYSIS: AN INDUSTRY ANALYSIS MODEL
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Objecti ve: Assess the level of competi tion and profi t potential within an industry Based on the idea that the structure of an industry defines the level of competi tion Structure as defined by 5 forces: suppliers, buyers, rival, entrants, substitutes Gain an understanding of the way in which each of the five forces influences profitability & competition Provide tactics for countering the problems/strength of the force PORTER FIVE FORCES ANALYSIS: AN INDUSTRY ANALYSIS MODEL 6
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Premise: Structure of an industry depends upon five competitive forces The potential threat of new firms/entrant to the market. The rivalry between existing firms in the market. The power exerted by the buyers in the market. The power exerted by the suppliers in the market The threat of substitute products currently or becoming available in the market AND Structure defines: profit potential intensity of competition in industry 7
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http://www.blac kwellpublishing.c om/grant/pdfs/C SA5eC03.pdf 8
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Define the level of the force based on the the amount or number of substitutes FORCE 1: THREAT OF SUBSTITUTES 9
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What are the product or service that performs the same function as industry product Ex: Milk and coffee? Turkey and Chicken Beer and wine? Blueberries and Raspberries Cell phone and watch Faxes and what? Assess the substitute force based upon these factors and define strategy for your business. 10
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Consider the following: The relative price performance of substitutes Alternative products that provide overall savings to your customers, without impacting the quality of your products are viewed favorably for adoption. Switching costs Cost/Risk incurred by your customers to switch to an alternative product Buyer propensity to substitute Customers loyalty to your product or service Trial substitutes or loyal to current brand Focus on identifying items that influence propensity to trial substitute products. 11
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Consider these factors when determining force of entrants Economies of Scale Product Differentiation Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy Capital Requirements Patents/Trademarks or Leases Switching Cost FORCE 2: THREAT OF NEW FIRMS OR ENTRANTS 12
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Economies of Scale
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