AFM433 Lecture Notes - Lecture 6: Healthy Diet, Bargaining Power, Competitive Advantage

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM433
• Professor: Mark Arnason

Document Summary

Are all industries equally profitable: no, average 14. 9, large discrepancies. Forces are very tense: rivalry is high, buyer force high, fewer players, more pressure from suppliers, can still be profitable, vertical integration. Relationship between strength of the forces and industry profitability. Intense forces drive down profitability: ceiling on prices, more investment. Relevant industry definition: two dimensions, product or service scope, geographic scope, as narrowly as possible, encompass all strategic possibilities. Industry economics: profitability of industry, how big is the profitability pie. Size: competition parity, disadvantage, not giving customer a reason to buy from us, competitive advantage. Sales distribution channels: purchase the products but are not the end consumer, power. Influence end-consumer"s decision: find a way to diminish power, market directly, exclusive arrangement. Vertical integration: backward integration, buyers threatening to produce the product themselves, lose a customer and gain a competitor. Forward integration: supplier threaten to produce the product themselves, lose a supplier and gain a competitor.