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Class 5 Spring 2011 - Lynn Gazzola BU481 Agenda Lynn...

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5/16/2011 Lynn Gazzola 1 BU481 January 18, 2010 5/16/2011 Lynn Gazzola 2 Agenda 1. Environmental Analysis 2. Strategy—Environmental Analysis 3. Preparation for next class
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5/16/2011 Lynn Gazzola 3 2. Environment Analysis 3 2 1 4 5/16/2011 Lynn Gazzola 4 Porter’s Value Chain—Company Inbound Logistics Manufac- turing Marketing & Sales Outbound Logistics Service Procurement Human Resource Management Firm Infrastructure Technology Development Mar gin Margin 3 2 1 4
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5/16/2011 Lynn Gazzola 5 Industry Value Chain boxshadowdwn Where does the economic profit lie in the value chain? boxshadowdwn Core activities often impact the value chain boxshadowdwn Focus on parts of the value chain that return the most profit! boxshadowdwn Is the firm doing things on the value chain that return no value? Bus A IND1 Bus A IND 2 Bus A IND 3 3 2 1 4 5/16/2011 Lynn Gazzola 6 Co-operation and Competition: Game Theory box3 Small number of firms enables monitoring box3 Product homogeneity focuses attention on price, which is more easily monitored box3 Cost homogeneity enables a common price structure and level of output box3 Price leaders can provide order and discipline in the market box3 Industry social structure or recipe that defines the standards of operating in the industry box3 High order frequency and small order size minimizes the cost of losing an order and incentive to compete box3 Large inventories and order backlogs create buffers and reduce pressure to compete box3 Entry barriers as noted by Porter in his Five Forces Model 3 2 1 4
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5/16/2011 Lynn Gazzola 7 Prisoner’s Dilemma box3 The point: there is an incentive to turn the partner in, however, if both prisoners act in this way, they will both suffer, hence the dilemma box3 Barney argues that players are more likely to cooperate if: square6 They can directly communicate with one another square6 Cheating does not lead to large payoffs square6 Cheating leads to costly sanctions square6 Players are more interested in maximizing their payoffs than in beating the payoffs of other players Stephen J. Hummel, P. Eng.
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