Lecture4_Industry Analysis

Lecture4_Industry Analysis - BUAD497 Strategic Management...

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BUAD497 Strategic Management Session 4: Industry Analysis Lori Yue, Ph.D. Assistant Professor Marshall School of Business University of Southern California
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The External Environment v An integrated understanding of the external and internal environments is essential for firms to understand the present and predict the future v Today, we will focus on the external environment (Industry Analysis) v The external environment affects firm growth and profitability v As shown in the next slide, a firm’s external environment is divided into 2 major areas § General Environment Industry Environment § Competitor Environment
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The External Environment
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If concentration were the only factor, then what would we expect to see? Industry Concentration Industry Profitability
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Industry Concentration vs. Industry Profitability 24 U.S. Manufacturing Industries in 1992 0% 1% 2% 3% 4% 5% 6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 8-Firm Concentration Ratio Industry Median ROS
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What do we learn from not seeing the scatter plot that we expected? v Market concentration may NOT be the only factor driving intensity of price competition. v Intensity of price competition may NOT be the only driver of industry profitability. v Other than market concentration, what else drives intensity of price competition? v Other than intensity of price competition, what else drives industry profitability? Industry Analysis!
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Porter’s Five Competitive Forces that Shape Strategy …an invitation to broaden our definition of “competition.” Profitability of a market/industry depends on strength of five threats to profitability
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Threat of new entrants is highest when. .. n
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Lecture4_Industry Analysis - BUAD497 Strategic Management...

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