Final Exam Notes - Case Study

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PROBLEM IDENTIFICATION
Provide short description of the problem, clear description of the company’s current situation (Don’t have to discuss the situation too much) Identification of main problems in the case
Determine main issue to solve
What went wrong financially and strategically?

EXTERNAL ANALYSIS
Apply five forces model and evaluate the industry, analyze general environment if needed Draw strategic implications of analysis result, so what?... Provide conclusion to the industry analysis to show what it all means Five forces model (section 2)

Who are the buyers? Includes final consumers as well as other distribution channels (retail stores) * DRAW STRATEGIC IMPLICATIONS..SO WHAT?

INTERNAL ANALYSIS
Value chain (section 3)
Do not just summarize what they are doing, but also state their strengths and weaknesses accordingly Talk about whether what they are doing is a strength or weakness * DRAW STRATEGIC IMPLICATIONS..SO WHAT?

*

ALTERNATIVES
You need to develop your alternatives based on your assessment of both the internal and external environment This is a logical bridge between your analyses and final recommendation. Do not jump into the recommendation. Make a tight connection with your analysis results

Answer why these particular alternatives are worth while to consider

RECOMMENDATIONS
How did we get to this recommendation: Discuss your selection criteria and provide your reasoning process. *

Porter’s 5 Forces

Firms will have normal profits (enough profit to cover the cost of capital) if an industry has perfect competition: Numerous sellers and buyers (No monopolies)
Perfect information
Relatively homogeneous products
NO barriers to entry or exit

Threat of new entrants
New entrance threaten market share
They bring additional capacity which decreases customers costs Firms need to maintain HIGH ENTRY BARRIERS to avoid entrants * Sources of the entry barriers:
* economies of scale – enhance flexibility
* product differentiation
* capital requirements
* switching costs – ex: loyalty programs increase switching cost * access to distribution channels
* cost disadvantages independent of scale
* government policy– to protect jobs, maintain service, deregulation * expected retaliation – happens mostly when company has high stake, substantial resources, growth is slow *

* Power of suppliers (Horizontal integration marketing… Vertical integration production) * Suppliers exert power in the industry by threatening to raise prices or to reduce quality * Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases * Supplier power is HIGH WHEN:

* Dominated by a few large companies (concentrated * No available substitute products
* The firm is not one of the supplier’s significant customers * Suppliers goods are important to firm
* Firm has high switching cost of supplier’s product * Firm can’t integrate forward - A credible threat of forward integration (Amga buying a restaurant) *
* Power of buyers
* Buyers compete with supplying industry by bargaining down prices and forcing higher quality * Buyer Power is HIGH when:
* (usually buyers are retailers)
* Buyers purchasing large volume of industry’s total output * Sales of product are significant portion of sellet’s revenues * Can switch to another product at low cost
* Undifferentiated products
* Buyers present a credible threat of backwards integration (vertical integration) Amga buying a supplier of his * Buyers have full info
*
* Threat of Product substitutes
* Products with similar function limit the prices firms can charge * Outside the industry
* For example:
* Movie rental – Cable...
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