prepared by: hotma rina sitorus julio lauritz silvia puspita

• Assestment of industry and firm performance

• Indentification of key factors affecting performance in vertical trading relationships and horizontal competitive relationship

• Determination of how changes in the business environment may effect performance

• Indentifying opportunities and threats in the business landscape.

The Five forces framework has several limitations:It pays little attention to factors that

might affect demandIt focuses on a whole industry rather

than on that industry’s individual firmThe framework doesn’t explicitly account

for the role of the government, except when the government is supplier or buyer

FACTOR AFFECTING RIVALRY AMONG EXISTINGCOMPETITORS:Degree of Seller concentration?Rate of industry growth?Excess capacity?Cost structure of firms:sensitivity of costs to

capacity utilization?Degree of product differentiation among sellers?

Brand loyalty to existing sellers? Cross-priceelasticities of demand competitors in industry?

Buyers’ costs of switching from one competitor to another?

Are prices and terms of sales transactions observable?

Can firms adjust prices quickly?Large and/or infrequent sales orders?Use of “facilitating practices” (price

leadership, advance announcement of price changes?

History of “cooperative” pricing?Strength of exit barriers?High industry price elasticity of

demand?

FACTORS AFFECTING THE THREAT OFENTRY: Significant economies of scale? Importance of reputation or established

brand loyalties in purchase decision?Entrants’ access to distribution channels?Entrants’ acces to raw material?Entrants’ acces to technology/know-how? Entrants’ access to favorable locations?

Experience-based advantages of incumbents?

Network externalities: demand-side advantages to incumbents from large installed base?

Government protection of incumbents?Perceptions of entrants about expected

retaliation of incumbents/reputations of incumbents for “toughness”?

FACTORS AFFECTING OR REFLECTING PRESSURE

FROM SUBSTITUE PRODUCTS AND SUPPORT FROM

COMPLEMENTS: Availability of close substitutes?Price-value characteristics of substitutes?Availability of close complements?Price-value characteristics of complements?

FACTORS AFFECTING OR REFLECTING POWER

OF INPUT SUPPLIERS:Is supplier industry more concentrated

than industry it sells to?Do firms industry purchase relatively small

volumes relative to other customers of supplier? Is typical firm’s purchase volume small relative to sales of typical supplier?

Few substitutes for suppliers’ input?

Do firms in industry make relationship-specific investments to support transactions with specific suppliers?

Do suppliers pose credible threat of forward integration into the product market?

Are suppliers able to price-discriminate among prospective customers according to ability/willingness to pay for input?

FACTORS AFFECTING OR REFLECTINGPOWER OF BUYERS: Is buyers industry more cincentrated than the

industry it purchases from? Do buyers purchase in large volume? Does

buyers’ purchase volume represent a large fraction of the typical seller’s revenue?

Can buyers find substitutes for industry’s product?

Do firms in industry make relationship-specific investments to support transactions with specific buyers?

Is price elasticity of demand of buyers’ product high or low?

Do buyers pose credible threat of backward integration?

Does product represent significant of cost in buyer’s business?

Are prices in the market negotiated between buyers and sellers on each individual transaction, or do sellers post “take-it-or-leave-it” price that applies to all transactions?

2 Types of games:Rule-based gamesFreewheeling games

Egocentrism vs AllocentrismChanging GameFrom Lose-Lose to Win-Win

What is it about? Value: creating it & capturing it

Value Net

Cooperation and Competition

CUSTOMER

SUPPLIER

SUBSTITUTES

COMPANYCOMPLEMEN

TS

Elements of the game:• Players• Added Values• Rules• Tactics• Scope

Dealing with Substitutor Pay Me to Play

oNutraSweet, HSC, Coke & PepsioMcCaw, Lin BroadCasting Corp, BellSouth

Dealing with Complementors Cheap Complements

o3DO , Panasonic, GoldStar, Sanyo & Toshiba

Raise your own added value TWA

Lowering others’ added value Card Games Illustration Nintendo Power

oCustomers : Toys R Us, Wal-MartoSuppliers : Ricoh, Sharp (microchips)

Marvel, Disney (game characters)oComplementors : Acclaim, EA (software)oSubstitutors: Atari, Commodore

(hardware)

Pumping Up ProfitsoSoftsoap (Minnetonka)

3 things to remember No guarantee that any player will get all

its added value Even if you have no added value, doesn’t

prohibit you from making money Rules constrain interactions among

players

One price to allStrategy : Judo Economics

Kiwi is No DodooKiwi Airlines & Delta Airlines

Solid Profits from GasoProducers of CO2 (Airco, Liquid

Carbonic, Air Liquide) & Customers of CO2 (Coke & Pepsi)

oMeet the Competition Clause (MCC)

Reducing misperception ( lift the fog) The New York FogoNew York Post vs Daily News

Maintaining uncertainity (thicken the fog) Disagreeing to AgreeoInvestment Bank, Clients & % fee

Sega’s 16-bit system video gamesNintendo wait to years to respond

You have to accept the game as it isChanging the game must come at

expense of othersHave to find something to do that

others can’tFailing to see the whole gameFailing to think methodically about

changing the game

Case of Five Forces Analysis

21 Theater

21 THEATER

History of 21 Cinema• Founder: Cineplex 21 Group Since 1988 and has 75 % market share of All of Indonesia Lobby and Cafe Concepts (see pictures below)

Five Forces Analysis

• Existing Competitor: Blitz Megaplex

• Comparison between 21 and Blitz Megaplex (see the next page)

21 vs Blitz Megaplex

No. Details 21 Cineplex Blitz Megaplex

1 Existing of Brand Pioneer of Theater Follower

2 Price of ticket

Easy to adjust, consumer has some choices (from cheapest price to most expensive price of ticket) according to the variant of products

Price of ticket more expensive, describing the luxury, prestige, modern and convenience

3 Sound system Dolby Digital, THX Dolby Digital, THX

4

Facility

Lobby with many queue-lines and studios, Café, waiting room/seat, games area, smoking room, rest room

Large lobby with many queue-lines and studios and high tech computer of reservation, Café, waiting room/seat, games area, smoking room, rest room, merchandise shop

5Concepts of Coziness

Complete, Luxury (depends on the offering of variant of products, such as Cinema 21, Cinema XXI, The Premiere), Cozy, Family Concept interior design

Complete, Modern, Cozy, "Teen, Young and Minimalist" Concept interior design", large lobby, 3D movies

21 vs Blitz Megaplex Continue…

No. Details 21 Cineplex Blitz Megaplex

6 Variant of Products

Cinema 21, Cinema XXI, The Premiere (different level of coziness per each)

1 theater with different facilities per each (Ordinary, 3D movie, Velvet Class)

7 Buying ticket

buy directly to cinema, ticket online, membership ticket, buying ticket via sms

buy directly to cinema, ticket online, membership ticket, buying ticket via sms

8Numbers of branches

exist in almost every big cities in Indonesia, except Papua

exist only in Jakarta and Bandung

9 Location Mall, own building Mall only

10 Round-play filmsWestern films and Indonesian films

Western films, asian films (no indonesian films), independent films)

Concepts of Blitz Megaplex

Cafe Velvet Class (Pacific Place)

Ordinary Studio The performance of Film Advertisement

Threat of Entry

• Government Regulation• Location (access and the favorableness)• The rights to buy new films from outside• Economic situation

Substitute Products and Support from Complements

SUBSTITUTE PRODUCTS:• TELEVISION• DVD • INTERNET• MOVEABLE SCREEN (LAYAR TANCAP)• DVD RENTAL

COMPLEMENT• CAFÉ• Credit Card (New Offering and Cooperation), e.g: UOB, CITIBANK,

MANDIRI, HSBC. etc.• FICTION OR REFERENCE BOOKS• MALL/PLAZA• MERCHANDISE/GIFT, e.g: MUG, DOLLS, TSHIRT, PEN, HAT, FREE TICKET,

etc.

POWER OF INPUT SUPPLIERS

SUPPLIER POWER:

• RIGHTS OF PLAYING FILM IN ADVANCE• COOPERATE WITH STAKEHOLDERS (GOVERNMENT,

OTHER INSTITUTION RELATED TO THE FIELD OF THEATER AND FILMS)

• TICKETS OFFERING• PRODUCT VARIANTS (CINEMA 21, CINEMA XXI, THE

PREMIERE) • SOUND SYSTEM (DOLBY DIGITAL AND THX)

POWER OF BUYERS

• FREE TO CHOOSE OTHER THEATER (BLITZ MEGAPLEX) ACCORDING TO:

1. TYPE OF FILM2. TICKET (PRICE, BUYING TRANSACTION, ETC)3. COZINESS (SEAT, CAFÉ, BUYING TICKET SYSTEM, TIME,

ETC)

• FREE TO CHOOSE SUBSTITUTES (TV, DVD, BOOKS, MOVEABLE SCREEN, ETC)

Thank You…

Question and Answer…