BUSS1000 Lecture Notes - Lecture 4: Coopetition, Pest Analysis, Scenario Planning
23 Jun 2018
School
Department
Course
Professor
Industry and competitors
Defining your industry
- Define industry boundaries by identifying the relevant market
- Define the boundary by substitutability on the demand side
- Geographical boundaries may also apply to a market
- Remain wary of external influences
- Be conscious of purpose of classification
- Types of markets eg nike vs louis vuitton
- Geographical boundaries
- Demand for products
- Operating spaces - same demand and geographic space
- Megatrends
- To what ends + what ends
- Demand for the industry
- Organization of the industry
- Regulation of industry
Negatives:
- Can be liability
- Can be dangerous
- Identify incorrectly
- Might not see competitors
- How industries were changing + boundaries were changing
- Hard to detangle eg competitor + works in your industry
Porter’s 5 forces
- Originally developed as a way of assessing the attractiveness (profit potential) of
different industries.
- The five forces constitute an industry’s structure
- Can be employed by any organisations
- Assessing the profit potential of different industries
- Is this a market we want to enter? Industry we want to enter? Is it profitable?
- Luck + timing- bad people can do well in business
- If you have an idea/ business you can see if it is attractive
Assess whether each is ranked: Low, Medium, or High
➢Supplier Power ->
○ Eg airports allowing airlines to land for set prices= lot’s of power
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○ Eg airline food- low
supplier power since
they get to choose
lowest
➢Buyer Power ->
○ Difficult for businesses
to set prices - price
expectations already
set
➢Threat of New Entry ->
○ New businesses
selling
➢Substitution ->
○ Another industry
replacing it entirely (eg
teleportation for
airlines)
➢Competitive Rivalry
○ The higher the
competitive rivalry -
the less likely to
penetrate the market
Assess based on research into
factors such as the ones on the
previous slide.
Criticisms
- Defining the ‘right industry’
- Geographic factors and prices might not influence competitors
- Who am i competing with?
- Converging industries
- Eg Amazon for food + clothes + product reviews
- Complementary products
- Eg shopping mall - many options/ drives traffic
- Based on structure-conduct-performance approach that has been largely replaced by
game theory
- Game theory= view businesses as a game
- Assumptions may not always hold (business relationships are not always at arms length)
- Working together + good relationships with competitors
- Static nature of analysis (competitive interactions are not well managed - e.g.
complementors)
- Fourth dimension of time
- Sometimes blind to complementary & dynamics of markets
- ‘Power’ & ‘threats’ not so useful for entrepreneurial firms
- SMEs/ doing something specific/ innovators/ niche
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The value net
- A tool for industry analysis
- Developed by Nalebuff &
Brandenburger (1996)
- Built upon/inspired by
Porter’s 5 Forces
- Introduces the concept of co-
opetition
- Portmanteau of
cooperation and
competition
- Moves beyond the notion of
kill/be killed mentality
- The assumption with this
perspective is that you
won’t be killed
- Co-opetition is rooted in game
theory (Lendel, 2007)
- Cooperation +
competition
- Suggests organisations:
- Should not act
egocentrically (i.e. how
do I get more of the pie)
- Rather than
taking over -
even if it’s the same ratio, we will have more
- Should act allocentrically (i.e. how can the size of the pie be increased)
- How they are connection and the relationship between them
What is it
- Value Net Analysis involves a careful examination of an organization’s operating
environment.
- Away from kill or be kill notion
- Focus is predominantly on the industry context from the perspective of the organization.
- Works with perception - moves away from game but still works with it
- Fundamentally different from other frameworks as it moves away from classical game
theory i.e. zero-sum games.
- Critically questions what is happening
- Focusses heavily (mostly) on perception.
How to use
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Define industry boundaries by identifying the relevant market. Define the boundary by substitutability on the demand side. Geographical boundaries may also apply to a market. Types of markets eg nike vs louis vuitton. Operating spaces - same demand and geographic space. How industries were changing + boundaries were changing. Hard to detangle eg competitor + works in your industry. Originally developed as a way of assessing the attractiveness (profit potential) of different industries. Assessing the profit potential of different industries. Luck + timing- bad people can do well in business. If you have an idea/ business you can see if it is attractive. Assess whether each is ranked: low, medium, or high. Eg airports allowing airlines to land for set prices= lot"s of power. Eg airline food- low supplier power since they get to choose lowest. Difficult for businesses to set prices - price expectations already set. Another industry replacing it entirely (eg teleportation for airlines)
