Download read more - Faculty . > Home

Chapter 4
Santiago Ibarreche
© S. Ibarreche 2015
1
© S. Ibarreche 2015
2
© S. Ibarreche 2015
3
 Anchored
in Basic Economic Theory
 Structure includes the number of firms in the
industry, the homogeneity of its products,
and the cost of entry and exit.
 Conduct examines the strategies that firms in
an industry implement.
 Performance includes two different aspects:


the performance of individual firms within the
industry and
the performance of the industry with regard to
the general economy.
© S. Ibarreche 2015
4
 Perfect
Competition
 Monopolistic
Competition
 Oligopolistic
Competition
 Monopoly
© S. Ibarreche 2015
5
 Level







and strength of competition:
Number of competitors of equal size
Growth of the sector as compared with general
economy
Type of product or service
Capacity or Storage Costs
Changes of Capacity
Diversity of Competitors
Strategic Stakes
© S. Ibarreche 2015
6
 Barriers










to Entry
economies of scale,
product differentiation,
brand or name identification,
switching costs,
access to distribution channels,
capital requirements,
access to latest technologies,
access to inputs,
government or institutional protection, and
experience effect
© S. Ibarreche 2015
7
 Barrier





to Exit:
asset specialization,
one-time cost of exit,
strategic interrelationship,
emotional barriers, and
government or social restrictions
© S. Ibarreche 2015
8
Customers and Suppliers
 Most common issues are:











number of important suppliers or buyers,
availability of substitutes,
differentiation or switching costs,
threat of forward integration or backward
integration,
industry threat of forward or backward integration,
suppliers’ contribution to quality or service of
industry products,
contribution to quality for the buyer’s products or
services,
total industry cost contributed by suppliers,
buyer’s profitability, and
importance of the industry to supplier profits..
© S. Ibarreche 2015
9
 Governments:


Level of Government control of the industry
Possible examples;

Expropriations
 Social



Political parties and their electoral agendas
Groups of social and minority groups
Examples:



Ethnic and gender groups
Sexual orientation groups
Unions:


and political groups:
Effects of “Right to work” movements
Others
© S. Ibarreche 2015
10
 Main
elements of substitutes:

Number and Availability of Close Substitutes

User’s Switching Costs

Substitute’s Producer Profitability and
Aggressiveness

Substitute Price/Value
© S. Ibarreche 2015
11
 “Everything
is a function of everything else”.
 Understanding cross effects
 Looking at the link between competitive,
social, and task environments
© S. Ibarreche 2015
12
Firm Strategy,
Structure and
Rivalry
Factors
Conditions
Demand
Conditions
Related and
Supporting
Industries
© S. Ibarreche 2015
13

Determinants of National Advantage:

Factors Conditions


Demand Conditions


The presence or absence in the industry of supplier
industries and related industries that are internationally
competitive
Firm Strategy, Structure and Rivalry


The nature of home demand for the industry’s product or
services
Related and Supporting Industries


The nation’s position in factors of production necessary
to compete in a given industry
The conditions in the nation governing how companies
are created, organized, and managed, and the nature of
domestic rivalry
Source: Porter, M. E. “The Competitive Advantage of Nations”, The Free Press 1990
© S. Ibarreche 2015
14