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Chapter 4 You might want to make improvements to these notes because they were from last year (winter), I attended this class however did not take part. What I did was I take addition notes on top of these notes, with more updated examples and etc. PS: my

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York University
Administrative Studies
ADMS 1000
Eytan Lasry

Lecture 4 Slide 4: - About competitive advantage - Decisions implemented by firms - Temporary; stainable: protection for competitive competition - 5 forces model o External: inside firms o Internal Slide 3: - Model o Michael porter o 5 forces influence the firms to a degree to make money o Branch of economic o Social welfare is maximized - Minimized monopolistic prices o No cooperation - Flip on its help (Michael Porter) o Gain monopolistic characteristic o Distort completion = more profit and money - Industry o Many firms with similar machines, resources, etc Example: beer brewing, Air Company, book store (online) Slide 5: - Danger; new companies entry - Low or high barriers o Influence of profitability - Economies of scale o Reduce cost with higher production o Fixed cost to the production of products o Higher: that means older costumers; new companies would have to work o Low barriers; services would have to work harder o Varies depended on consumed Example: account o When first started: fixed cost (computer, table, desk, etc. o Latter become better make more money due to more clients Example: switching from company to company o Contracts (3 years) o Cost - Channels Either high to low barriers o Pharmaceutical to tell doctors to (amount the examples) use specific drugs 1. Economies of scale Example: Doctors and Pharmaceutical 2. Switching cost for buyers 3. Access to disruption o Selling drugs to doctors channel - Cost disadvantages unreeled to scale 4. Cost disadvantage - Protected by law, trade secret Example: trade paten o Cannot copy this object or idea for 20 years, etc. Slide 6: - Buy things from suppliers - Inputs are critical - Many or few suppliers Example: computers o Many computers companies o Needs to buy chips from Intel o Buying operating chips from Microsoft - Microsoft, Intel, etc. Can charge anything for their chips; these computer companies need these chip therefore they would buy at any cost - More companies to choose from = less bargaining power - Power - Only would pay so much - How does it get split? o High switching cost - Switching cost o Get points; gas is gas nothing different - Competitive products o No switching power o Need gas to drive a car o Product is essential; people will pay - Buyers to producers o Highly concentrated o High barriers to gas company o Few types of gas companies o Million of buyers Example: gas: competition is high o People are willing to go far for the cheapest price o No switching cost o One lows = another lower o Low bargaining power for the buyers Slide 8: - Potential substitutes - More competition Example: Gas: hard to substitute Air vs. Rail travel: small substitute Slide 9: - Lots of rivals - Same size - Usually 2 big markets than little one’s here and there - Exit barriers o Hard to leave o Fix or sunk o Cost Example: Factories o Spend million in building factories o Cannot give it up because loss of money o No executive want to leave / mangers - Pressure = plays a role of the 5 factors model Slid
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