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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-1

    Strategic ManagementMarket Dynamics

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-2

    ETOPEnvironmental Threat and Opportunity Profile

    Factor Impact Importance Opportunity Threat

    Regulatory 3 8 24

    Competitive -2 7 -14

    External Alliance 7 6 42Internal Alliance -6 5 -30

    Entrepreneurial 4 5 20

    Info Highway 5 4 20

    Financial 7 4 28

    Social 2 3 6

    In this ETOP factors are tailored and ordered as to their importance

    Regulatory - tremendous opportunity to push for deregulation, led by STPI.

    They have had their lesson and learned well

    Competitive - AT&T, Sprint

    External Alliance - solid, mutually reinforcing, long-termInternal Alliance - source of friction and reduction of ability to react

    Entrepreneurial - Stentor now much more entrepreneurial (all three elements)

    Info Highway - mergers and acquisition for cable, cellular, infotainment

    Financial - ability to increase leverage through debt

    Social - universal access concept, downsizing, leanness all socially acceptable

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-3

    ETOP: Pros and Cons

    ProsPros

    Help to determine the keyfactors of threats and

    opportunities

    Good tool to qualify the factors

    related to companys strategy

    Can consider many factors for

    each special case

    ConsCons

    It doesnt show theinteractions between factors

    It cant reflect the dynamic

    environment

    Its a subjective analysis tool

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-4

    Porter Competitive Analysis

    5 Forces Model of Competition

    RIVALRYAMONG

    COMPETINGSELLERS

    RIVALRYAMONGCOMPETING

    SELLERS

    FIRMS IN OTHER

    INDUSTRIES OFFERINGSUBSTITUTE PRODUCTS

    FIRMS IN OTHER

    INDUSTRIES OFFERINGSUBSTITUTE PRODUCTS

    POTENTIALNEW ENTRANTS

    POTENTIALNEW ENTRANTS

    SUPPLIERSSUPPLIERS BUYERSBUYERS

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-5

    Porter Analysis

    MarketMarket

    SubstitutesSubstitutes

    New EntrantsNew Entrants

    SuppliersSuppliers CustomersCustomers

    Horizontal Forces mature markets

    Vertical Forces growth markets

    Vertical and Horizontal competitive and changing markets

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-6

    Porter Competitive Analysis - Wal-Mart

    Discount Retailing

    Discount Retailing

    NewE

    ntrants

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-7

    Porter: NTI

    AT&TNTI

    AT&TNTI

    Sat. Tech.Sat. Tech.

    SiemensNEC

    SiemensNEC

    SuppliersSuppliers Baby BellsBaby Bells

    Telephone or

    Multimedia cost?

    Low cost producer

    Financial strength

    Growth market

    Price focus of customers - close to maturity

    Strategic Factors: Flexibility, enhancement, uniqueness (product/service

    combination), combine with GVA, new Porter needed?

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-8

    Porters Five Forces: Pros and Cons

    ProsPros

    Its a good tool to identify the clear

    competitive environment and the

    relationship for the five market forces It is an useful analysis model for the

    new entrants and the existing

    competitor inside the market

    It helps the company designcompetitive strategies and make right

    decisions

    It surfaces the inverse relationship

    between profit margin or returns andthe intensity of competition

    It provides useful inputs for performing

    other analysis

    ConsCons

    It often produces the same

    recommendations for similar

    organizations It assumes relatively static

    market structures.

    It provides a good framework

    for analysis but does not reallyconsider issues around

    implementing changes to

    reposition for strategic

    advantage.

    It cant show how a company

    performed relative to its

    competitors

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-9

    Porter Competitive Analysis - Wal-Mart

    Potential rate of growth in industry

    Ease of entry of new firms into industry

    Intensity of competition among firms

    Degree of product suitability

    Degree of dependency on compl. Or supporting prod & srvcs

    Degree of bargaining power buyers and customers possessDegree of bargaining power suppliers and vendors possess

    Degree of technological sophistication in industry

    Rate of innovation in industry

    General level of management capability

    0 1 2 3 4 5 6 7 8

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-10

    1. Potential rate of growth of industry (in real terms)0-3% ___ 3-6% ___ 6-9 % ___ 9-12% ___ 12-15% ___ 15-18% ___ 18-21% ___ >21% ___

    2. Ease of entry of new firms into industryNo barriers- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Virtually impossible to enter

    3.Intensity of competition among firmsExtemely competitive- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Almost no competition

    4. Degree of product substitutabilityMany substitutes available- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -No substitutes

    5. Degree of dependency on complementary or supporting products and servicesHighly dependent-___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Virtually independent

    Competitive Environment Analysis

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-11

    6. Degree of bargaining power buyers and customers possessBuyers dictate terms- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Selling firms dictate terms

    7. Degree of bargaining power suppliers and vendors possessSuppliers dictate terms- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Buying firms dictate terms

    8. Degree of technological sophistication in industryHigh-level technology- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Very low-level technology

    9. Rate of innovation in industryRapid innovation- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Almost no innovation

    10. General levels of management capabilityMany very capable managers- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Very few capable

    managers

    Competitive Environment Analysis

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-12

    Competitive Sustainability Analysis

    Class Product

    Class 1 - Slow Cycle Resources Marlboros

    KSF: nurturing of protected market,

    defending and building the brand

    Class 2 - Standard Cycle Resources Lesser BrandsKSF: Economies of Scale

    Market share/control

    Building product loyalty

    introducing new products to attack leaders brand

    Class 3 - Fast Cycle Resources Financial Products

    KSF: market timing and intelligence

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-13

    Strategic Map - Industry

    Competitive Capability

    HighLow

    High

    Low

    Diversification

    Sears

    K-Mart

    Price Club

    Wal-Mart

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-14

    Strategic Map - IndustryAECL - CANDU

    Competitive CapabilityHighLow

    High

    Low

    Dive

    rsification

    General Electric

    ABB$590M

    Westinghouse$288M

    AECL

    $4,303MSiemens$1,792M

    Framatome$984M

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-15

    Porters Diamond

    Determinants of National Advantage

    Factor

    ConditionsDemand

    Conditions

    Firm, Strategy,

    Structure, and

    Rivalry

    Related and

    Supporting

    IndustriesWal-Mart

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-16

    Industry Value Chain

    PC Industry

    Intel PC Makers Microsoft

    Chips Hardware Software

    Value captured by each player

    value captured by neighbours influence competitive

    dynamics of PC makers

    Intel & Microsoft capture high % of value

    PC makers are squeezed and are forced to compete on

    volume because of low margins

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    Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-17

    Economies of S

    Scale (inputs,throughput, outputs)

    Scope (production, technology, marketing, channels, core,

    competencies/capabilities)

    Strength (relative market share, branding power, shelf power)

    Structure (market/product linkages,decision flow, value chain

    management)

    Speed (response time to market, product cycle time rate of

    technology absorption)

    Strategy (optimal/minimal changes, Strate