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Lecture 5

SGMA 591 Lecture 5: 5. Beyond the Five Forces- Industry & Competitor Analysis
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10 Pages
17 Views
Spring 2016

Department
Strategy and Global Management
Course Code
SGMA 591
Professor
Ayesha Malhotra
Lecture
5

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Beyond the Five Forces: Industry & Competitor
Analysis 5/25/2016 8:14:00 PM
The Context
“We know expectations are rising but, what exactly will customers
expect? We don’t know that yet. And htose expectations aren’t set
by us or by our competitors; they’re set out side our industry by
Apple or Amazon. That’s who we’re competing against really”
o S.C. Campbell, EVP, American National Insurance Company
(IBM Article)
The vast majority of C-suites presumably have no intention of
trying to “uberize” the Ubers themselves”
o IBM C-Suite (2015)
Outline
Extending 5 Forces Analysis
o How much does industry matter?
o Role of complements
o Revisiting industry analysis
Dynamics of competition
o Industry convergence
How Much Does Industry Matter?
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find more resources at oneclass.com
Five Forces or Six? Role of Complements
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find more resources at oneclass.com
Revisiting Industry Analysis
Porter’s framework assumes:
o A) Industry structure drives competitive behaviour
o B) Industry structure is (fairly) stable
However, competition changes industry structure:
o Important structural changes are driven by:
Schumpeterian Competition “Perennial gale of
creative destruction”
Hyper competition “intense and rapid competition
moves…that continuously create new competitive
advantages”
What is Industry Convergence?
Industry convergence is a significant phenomenon
o When boundaries between two industries dissolve
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find more resources at oneclass.com

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Description
find more resources at oneclass.com Beyond the Five Forces: Industry & Competitor Analysis 5/25/2016 8:14:00 PM The Context  “We know expectations are rising but, what exactly will customers expect? We don’t know that yet. And htose expectations aren’t set by us or by our competitors; they’re set out side our industry by Apple or Amazon. That’s who we’re competing against really” o S.C. Campbell, EVP, American National Insurance Company (IBM Article)  The vast majority of C-suites presumably have no intention of trying to “uberize” the Ubers themselves” o IBM C-Suite (2015) Outline  Extending 5 Forces Analysis o How much does industry matter? o Role of complements o Revisiting industry analysis  Dynamics of competition o Industry convergence How Much Does Industry Matter? find more resources at oneclass.com find more resources at oneclass.com Five Forces or Six? Role of Complements find more resources at oneclass.com find more resources at oneclass.com Revisiting Industry Analysis  Porter’s framework assumes: o A) Industry structure drives competitive behaviour o B) Industry structure is (fairly) stable  However, competition changes industry structure: o Important structural changes are driven by:  Schumpeterian Competition – “Perennial gale of creative destruction”  Hyper competition – “intense and rapid competition moves…that continuously create new competitive advantages” What is Industry Convergence?  Industry convergence is a significant phenomenon o When boundaries between two industries dissolve find more resources at oneclass.com find more resources at oneclass.com  Firms become direct competitors (Greenstein & Khanna, 1997)  Examples: o Cell phones and PCs o Cable and telecom o Trucking and railroads o Bank loans and securities  Complex and dynamic context o Substitution and complementary links between markets o Firms may “mass” migrate into a new industry o Characterized by uncertainty and turbulence Definitions  Two processes lead to industry convergence: o Demand side  Substitute linkages  i.e. Phone can do what PC can do and PC can do what phone can do  Complementary linkages between products o Supply-side  Firms operate in both industries  Firms bundle products  Main typology: o Substitutive convergence vs. Complementary convergence (Greenstein and Khanna, 1997; Christensen, 2008)  Substitutive convergence is not pure “creative destruction” Academic Research  Entry decisions and choice of product features in converging (adjacent market) o Role of capabilities  Technology and network resources, including their time varying relevance (Lee, 2007, 2008; Jensen, 2003; Broring et al, 2006; Hacklin, 2013) o Roles of Cognition and Inertia find more resources at oneclass.com find more resources at oneclass.com  Role of industry recipes in product choices (Benner & Tripsas, 2011)  Analyst influences on technology adoption (Benner, 2010)  Gaps: o How does the convergence process itself affect resource utilization? o What determines market penetration and firm success? My research on “market” and “technical” assets  Benner and Tripsas found no evidence that technology determined product features in digital imaging…however, it may influence eventual market share  As the creative destruction process unfolds: o Consumer uncertainty and social myopia are resolved (Rosenberg, 1996) o Management’s strategic attention and direction may help resolve diseconomies of scope (Stieglitz and Heine, 2007) o Inter-temporal economies of scope – some assets are freed up from one market for use in the other market (Helfat and Eisenhardt, 2004)  Hypothesis: Greater substitutive convergence enhances a firm’s economies of scope (market assets) and its market shares i
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