Download - 3 Industry Market analysis and Cost Models
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INDUSTRY/MARKET ANALYSIS
FIRMS WILL ONLY SUCCEED IF THEY EFFECTIVELY ANALYSE THEIR
COMPETITORSMUST FOLLOW THIS WITH AGGRESSIVE
STRATEGIES
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SUSTAINABLE COMPETITIVE ADVANTAGE
THE REASON FOR COMPETITOR ANALYSIS
COMPETITIVE ADVANTAGE1. PRICE2. PRODUCT RANGE3. QUALITY4. SERVICE LEVELS………………
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COMPETITIVE ADVANTAGE
MUST BE DEEPLY EMBEDDED IN THE FIRM OVER TIME
RESOURCES SKILLS CULTURE INVESTMENT
IT’S A DYNAMIC PROCESS NOT A STATIC ONE
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SOURCES OF COMPETITIVE ADVANTAGE
LOW UNIT COST DIFFERENTIATIO
N NICHE MARKETS PERFORMANCE QUALITY SERVICE
VERTICAL INTEGRATION
SYNERGY TECHNOLOGY CULTURE &
LEADERSHIP
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PORTER AGAIN
CONCENTRATES ON THREE KEY FACTORS
1. COST LEADERSHIP
UNIT COSTS KEPT AS LOW AS POSSIBLEWITHOUT REDUCING PRODUCT QUALITYACHIEVED BY economies of scale better training more investment in technology
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PORTER
2. DIFFERENTIATION
MAKING PRODUCTS AS UNIQUE AS POSSIBLE (USP’s)
e.g. via product quality, customer service
THIS DIFFERENTIATES THEM IN THE CUSTOMERS MIND FROM THE OTHER FIRMS IN THE MARKET
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PORTER
3. FOCUS STRATEGY
FOCUSSING THE MARKETING MIX ON A SPECIFIC SEGMENT OF THE MARKET - buyer group
NOT GOING FOR THE MARKET IN GENERAL BUT A PARTICULAR PART OF IT
e.g. Primark, Ryanair, Travel Lodge
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ASSESSING THE DEGREE OF COMPETITION
PORTERS FIVE FORCES (previous presentation)
THE DEGREE OF CONCENTRATION OF FIRMS IN THE MARKET
THE RANGE OF AGGRESSIVE STRATEGIES OF COMPETITORS IN THE MARKET
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DEGREE OF CONCENTRATION
LIES BETWEEN TWO EXTREMES i.e. perfect competition and monopoly
ADD TO THIS – CONTESTABLE MARKETS
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CONTESTABLE MARKETS
WHAT IS A CONTESTABLE MARKET? (BAUMOL – 1982)
A MARKET WHERE THERE IS THE THREAT OF COMPETITION
WHERE THE BARRIERS TO ENTRY COULD BE OVERCOME
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FEATURES OF CONTESTABILITY
ENTRY COSTS ARE LOW EXIT COSTS ARE LOW ENTRY & EXIT CAN BE MADE
SPEEDILY SUNK COSTS HIT & RUN TACTICS
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CONTESTABLE MARKETS
WHERE CONTESTABILITY EXISTS THERE WILL BE MORE COMPETITION
AS EXISTING FIRMS WILL FEAR THE THREAT OF NEW FIRMS
THEY WILL BEHAVE MORE COMPETITIVELY
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THE EFFECT LOWER PRICES HIGHER QUALITY MORE EFFICIENCY LOWER PROFITS
CONTESTABILITY IS POSSIBLE IF THE BARRIERS CAN BE
OVERCOME
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THE RELEVANCE OF THE GOVERNMENT
KEY FACTOR INFLUENCINGA FIRMS COMPETITIVENESS
1. TAX POLICY 2. MONETARY POLICY3. SUBSIDIES, GRANTS, SUPPORT & HELP 4. CONTRACTS
5. LEGISLATION6. COMPETITION
POLICY7. INTERVENTION & BUREAUCRACY8. REGIONAL POLICY
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THE INTERNATIONAL ENVIRONMENT
MUST ALSO BE ANALYSED DUE TO MULTINATIONALS & GLOBAL FIRMS GLOBAL ECONOMIC, SOCIAL,
TECHNOLOGICAL & POLITICAL CHANGE
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KEY INTERNATIONAL ISSUES
LOW WAGE ECONOMIES OUTSOURCING TERRORISM/WAR/CRIME RESOURCE ACQUISITION
e.g. raw materials DEVELOPING COUNTRIES ENLARGEMENT OF THE
EU
EUROPEAN UNION STRATEGY e.g. the Euro
TECHNOLOGICAL ADVANCEMENT
TRADE ISSUES GLOBAL
BRANDING
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COST MODELS
DIAGRAMS FOR KEY MARKET FORMS (see accompanying
text under this slide:17)
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PERFECT COMPETITION
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OLIGOPOLY
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MONOPOLY
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PRICING PERFECT – ALL ARE PRICE TAKERS MONOPOLISTIC – SOME PRICE MAKERS
(via product diff) MOST ARE PRICE TAKERS
OLIGOPOLY – PRICE MATCHING & USUALLY A LEADER (price maker) OTHERS ARE PRICE TAKERS
MONOPOLY – PRICE MAKER USES DIFF PRICING DUE TO PED DIFFERENTIALS & ABILITY TO SEPARATE MARKETS