Chapter7-PPT7SWOTAnalysisandPortersModel.pptVIP

* * Rivalry Among Competitors The more energy you put into fighting off competition, the less you have for profitability Potential for price wars (everyone loses) – subject of game theory Increased expenditures for marketing, ads, etc. Intensity increases where there are: Mature, slow growth industries ($$$ pie is fixed) Participants enjoy roughly same amount of power Products and services are indistinguishable Fixed costs are high, marginal costs low Rivalry can be good for all: For average consumer, competition tends to lower prices and drive new offerings to market For market participants, competition leads to better products and profitable market segmentation (Blue Ocean Strategy module – Toyota example) * * Rivalry - Examples Airlines: Fare cuts and price wars are common Cell phones: Warring rate plans and feature offerings Boeing/Airbus Intel/AMD Microsoft/Google Fox/MSNBC/CNN Automotive Industry Interesting one: Different types of competition across different market segments Who makes the highest MPG car? Who makes the toughest truck? Who makes the fastest sports car? * * Rivalry - Examples Steve’s friend Sean in grad school: Every 2 months, would get a call from a long distance phone provider “Hi, this is from Sprint and we have a deal for you! Would you be willing to switch your long distance service?” Sean: “Sure. What are you offering?” The next month, he’d get a call from ATT asking why he left Needless to say, Sean was a nightmare customer He wheedled better and better deals out of all of his suitors every other month Also had a way to get “free” electronics from Target Example of rivalry leading to better deal for end user. Of course, in the end, no phone company ever made any money off of Sean. * * Five Forces Summary Is a good generic framework; is as detailed as you make it Curious treatment of the government – should there be a 6th force? Complementary products can make or break an offering – iPod example Cars are pretty useless without roads