Week 2 Lecture Slides.pptx - Competitive Strategy\u2014Week 2 Industry Analysis Chad Syverson Distribution of Average Industry Profits Source Ghemawat and

Week 2 Lecture Slides.pptx - Competitive Strategyu2014Week...

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Competitive Strategy—Week 2 Industry Analysis Chad Syverson
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Distribution of Average Industry Profits Source: Ghemawat and Rivkin
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Average Annual ROC by Major Sector, 1998- 2018 Sector ROC (%) Sector ROC (%) Construction 19.1 Information 3.1 Wholesale trade 16.5 Arts, entertainment, and recreation 2.6 Finance and insurance 12.5 Other services, except government 2.0 Professional, scientific, and technical services 9.3 Transportation and warehousing 2.0 Administrative and waste management services 8.6 Mining 1.5 Retail trade 8.5 Utilities 1.2 Manufacturing 5.9 Educational services 1.1 Health care and social assistance 4.9 Agriculture, forestry, fishing, and hunting 0.9 Accommodation and food services 3.5
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Top and Bottom Average Annual ROC by Industry, 1998-2016 Top Industries ROC (%) Bottom Industries ROC (%) Legal services 32.9 Accommodation services 0.8 Construction 18.1 Farms 0.6 Wholesale trade 16.5 Pipeline transportation 0.4 Petroleum and coal products mfg. 15.5 Air transportation 0.4 Social assistance services 14.1 Motor vehicles and parts mfg. -0.7 Ambulatory health care services 12.6 Information and data processing -1.9 Insurance carriers and related 12.2 Securities and investments -2.9
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I. Introduction to Industry Analysis Accounting profits reflect rents to scarce, valuable assets not reflected in balance sheet Industry analysis is about: What factors affect the scarcity of assets owned by industry players What factors affect the value of those assets If we know this, we can: Predict accounting profits Understand key dimensions of industry competition
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A Framework for Competitive Strategy Analysis (I.E., CompStrat in a Nutshell) Economic Profitability Competitive Advantage or Disadvantage Market Attractiveness Market Economics and Opportunities Firm’s Assets The market The firm and its position in the market Explanations for profitability Measurable indicators or causes Entry threats Competition from rivals and substitutes Buyer and supplier power Complements Regulatory pressures Benefit Position in Served Market Cost Position in Served Market Firm’s strategy for creating value Root conditions Firm’s strategic interactions in market
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A Framework for Competitive Strategy Analysis (I.E., CompStrat in a Nutshell) Demand for the Industry’s Good (Benefit) Opportunity Cost of Industry’s Resources Quantity Produced by the Industry $ PIE
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I. Introduction to Industry Analysis Our analytical framework: the Five Forces
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I. Introduction to Industry Analysis Today we go through the broad outline and hit key points We will revisit these forces jointly and individually in more detail later in quarter
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Force 1: Entry and Threatened Entry Classic case 1: Special assets
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