Mgmt_451_Fall_2011_Student_Class 4

Mgmt_451_Fall_2011_Student_Class 4 - MGMT45101...

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MGMT 451 -01 Strategic Management Wednesday     August 31, 2011 Class 4  –  Chapter 2 contd. – Industry and Competitor  Analysis Instructor  Mona Bahl
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Outline for Today 2 l Thought for the day l Administrative Announcements l How bad can competition be? l Industry Environment Analysis o Industry o Industry Analysis l Set up for September 7 class
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3 “It is questioned whether the airline industry has basic structural problems or if it is just a collection of poorly managed companies…” Robert L. Crandall – CEO American Airlines, in a Report to the President and Congress - August 1993 Thought for the Day
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Administrative Announcements 4 Use of Share Point Reminder for group formation for case studies ü To be finalized by Friday (September 2, 2011)
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5 General environment Focused on the broader society (broad context) Industry environment Focused on factors and conditions directly influencing a firm’s profitability within an industry Competitor environment Focused on predicting the dynamics of competitors’ actions, responses and intentions Analysis of the External Environments
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How bad can competition be?
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Research Perspective – I/O Model 7 According to the model, the industry in which a company chooses to compete has a stronger influence on performance than do the choices managers make inside their organizations.
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8 Monopoly (e.g. Electric utilities; Shuttle service to O’Hare) Single firm with pricing often above marginal cost Oligopolistic Competition (e.g. Cars) Few firms, limited entry Perfect Competition (e.g. Taxi service in Lithuania in 1990s) Many firms (easy entry), Price-taking behavior Common themes include: economies of scale barriers to market entry product differentiation (or lack of it) degree of concentration of firms in the industry Economic   Models   of   Industry   Analysis
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Why Is Industry Analysis Useful? 9 Industry structure partly determines economic profitability Opportunities for profit are not a matter of chance Better structures have consistently higher rates of profitability than others “Should I invest in this industry?” and “Should I stay in this industry?” Industry analysis is useful because . ..
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Mgmt_451_Fall_2011_Student_Class 4 - MGMT45101...

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