mobile phones, Netflix vs. cable, VOD, Internet video sites) Switching Costs play significant role in substitution when buyers face low switching costs 5 The Intensity of Rivalry among Competitors in an Industry • When rivalry among the current competitors is more intense, profitability will be lower • Companies compete away the value they create, passing it on to buyers in lower prices or dissipating it in higher costs of competing Rivalry takes familiar forms: Price competition Advertising battles Product introductions Increased customer service or warranties Price competition most damaging! Factors of intense rivalry: Competitors are numerous, equal High exit barriers Slow industry growth Product is perishable High fixed or shortage costs Capacity augmented in large increments Lack of differentiation or switching costs Other Important Factors Using Industry Analysis: 5F framework applies in all industries, it encompasses relationships fundamental to all commerce limited # of structural forces in every industry that systematically impact profitability in a predictable direction
CH4 Recognizing a Firm’s intellectual assets: Moving beyond a firms tangible resources THE CENTRAL ROLE OF KNOWLEDGE THE KNOWLEDGE ECONOMY DEFINING FORCES: • Rise in knowledge intensity of economic activities – information technology. Today more than 50% of GDP in developed economies is knowledge based. • In the U.S. intellectual and information processes create most of the value for firms in large service industries which make up 77% of the US GDP. THE CENTRAL ROLE OF KNOWLEDGE IN TODAY’S ECONOMY • Intellectual capital • the difference between a firm’s market value and book value • a measure of the value of a firm’s intangible assets RATIO OF MARKET VALUE TO BOOK VALUE THE CENTRAL ROLE OF KNOWLEDGE Intellectual capital is a measure of the value of a firm’s intangible assets – the difference between a firm’s market value & book value. It includes these assets: Reputation Company values Employee loyalty & commitment Brand names Customer relationships Experience & skills of employees THE CENTRAL ROLE OF KNOWLEDGE Human capital includes the individual capabilities, knowledge, skills, and experience of the company’s employees and managers. Social capital includes the network of relationships that individuals have throughout the organization. THE CENTRAL ROLE OF KNOWLEDGE Knowledge management is critical to organizational success. Knowledge includes: Explicit knowledge – codified, documented, easily reproduced, and widely distributed. Tacit knowledge – in the minds of employees, based on their experiences and backgrounds. HUMAN CAPITAL ATTRACTING HUMAN CAPITAL • Hire for attitude, train for skill • Emphasis on:General knowledge & experience /Social skills/ Values/ Beliefs/ Attitudes ATTRACTING HUMAN CAPITAL • Sound recruiting approaches to attract human capital: • Building a pool of qualified candidates • Networking ATTRACTING MILLENNIALS • BLS by 2020 Millennials will make up 40% of the workforce. Tech savviness Ability to innovate More racially diverse than any prior generation.
- Fall '15
- sustainable competitive advantage