PHP Chapter 2
the following articles: •“The five competitive forces that shape strategy” by Michael E. Porter, Harvard Business Review, January 2008, 79-93 •“Looking inside for competitive advantage”, Jay B. Barney, Academy of Management Executive, 1995 Vol9 No 4, 49-61
Additional readings available through library link on blackboard
In class case study activity
Preparation for Seminar 3
Group work on Case Study 1- preparing answers to set questions
Register group for case studies by Friday 8/3/2013(online registration process) Deadline for Team Project Registration 15/3/2013(online registration process)
Presentation material for Case study 1(assessed)
1. Top down analysis 2. Strategy analysis Porter’s 5 forces 3. SWOT analysis Strengths Weaknesses Opportunities Threats
◦ The heart of a good valuation is good forecasting ◦ Forecasts are only as good as the information supporting them ◦ Under-investing in information collection will result in poor investment advice/decisions.
A Top Down Approach
factors o GDP o Interest rates o Inflation o Foreign exchange (FOREX) rates o Oil and commodity prices o Hedging o Business cycle Industry factors o Sensitivity to macroeconomic factors o Industry operation, ratios and statistics o Competition Firm o Strategy o Synergy
economic sector is a group of industries that are similarly affected by macro economic events (eg auto manufacturers and beverage manufacturers are in the consumer goods sector). •An industry is a group of firms that produce similar goods and use the same inputs and production technologies.
Industry choice Competitive positioning Corporate strategy ◦ Creation and exploitation of synergies ◦ Configuration of activities
strategy involves looking for a profitable and sustainable position in an industry where competition occurs. •Factors that contribute to a competitive position within an industry are innovations, cohesiveness of a business culture and good implementation. •Considerations in determining a competitive strategy are: 1. Long-term profitability within the industry 2. The position of a business within that industry, relative to competitors
setting –Performance of an industry and a firm’s competitive position within an industry change over time with individual firms having the ability to influence these factors. •The greatest influence an individual firm can have is on its positioning within an industry.
forces that determine the attractiveness of an industry •Identifies the causes of these forces •Explains how these forces change over time •Identifies how businesses can use strategies to influence these forces. •Analyses competitors in order to predict and explain their behaviour •Groups competitors on the basis of strategy in order to identify a competitive position within the industry •Examines specific structural settings and applies this framework to those settings
advantage grows from a business creating value in excess of the cost of creating value (similar to residual income concept). •Value represents what buyers are willing to pay and stems from – Offering goods/services at lower prices than competitors (COST LEADERSHIP) or – Providing a unique product that buyers are willing to pay more for. (DIFFERENTIATION)
Structural Analysis of Industries Need to understand the rules of competition within an industry in order to assess the attractiveness of that industry ◦ Rules of competition within an industry are embedded in 5 competitive forces 1. Entry of new competition 2. Threat of substitutes 3. Bargaining power of buyers 4. Bargaining power of suppliers 5. Rivalry among existing competitors ◦ ◦ The strength...