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Unformatted text preview: BMGT364 EXAM 2 OUTLINE 1. Strategic Management Highest paid consultants are STRATEGY CONSULTANTS Differences in Industry Profitability: o The average return on invested capital varies markedly from industry to industry 1992-2006, average return on invested capital in US industries ranged as low as 0, or even negative, to more than 50% At the high end: soft drink industry and prepackaged software (over 6 times more profitable than the airline industry) BOTTOM 10: bakery products, engines/turbines, book publishing, laboratory equipment, oil and gas machinery, soft drink bottling, knitting mills, hotels, catalog/ mail-order houses, airlines TOP 10: security brokers and dealers, soft drinks, prepackaged software, pharmaceuticals, perfume/cosmetics, advertising agencies, distilled spirits, semiconductors, medical instruments, mens/boys clothing Pharmaceuticals are down because of government regulation o Return on Invested Capital: the appropriate measure of profitability for strategy formulation Return on sales or the growth rate of profits fail to account for the capital required to compete in the industry Porters Analysis: o Macroenvironment: Laws an policies Economy Technology Demographics Social Values o Competitive environment: Buyers New entrants Suppliers Rivals Substitutes and Complements o **MUST ADAPT TO THESE FORCES AND MAKE A DECISION ABOUT AN INDUSTRY Attractive or unattractive? EX: STOP THE PRESSES! Newspaper industry in crisis: Rocky Mountain News, Tribune Company, New York Times, Washington Post, Seattle Post-Intelligencer The rise of the Internet was the final nail in the coffin for newspapers. News, on whatever topic, interested readers from politics, to celebrities and sports results, and often sourced from the newspapers themselves, was made available instantaneously and without charge over the web Structurally unattractive industry: o HIGH competition from non-traditional sources o HIGH entry threat due to low barriers o MANY substitutes due to the Internet Freeconomics- Dan Arielli o A generation of consumers have grown up expecting to get their music, newspapers, mobile phone handsets, and broadband access without paying. Over the past decade a tide of free goods and services have been introduced to the consumer markets as a result of the internet o The free economy is overturning the business models of many sectors and causing the reinvention of some of the 20 th centurys most successful industries o New economic model, not just a marketing strategy o It is possible for a few to subsidize many o We make irrational decisions to get free stuff You Tube and Google Ads Strategy: o Creation of a very unique and valuable addition and position o System of activities that is difficult for others to duplicate o Choosing what to do and what not to do o About being different o Activities are the basic units of competitive advantage...
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- Fall '08