New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Strategic Management Week 2 Notes

by: Dominique LaSalle

Strategic Management Week 2 Notes STRT 4500

Marketplace > University of Colorado Colorado Springs > Business > STRT 4500 > Strategic Management Week 2 Notes
Dominique LaSalle
View Full Document for 0 Karma

View Full Document


Unlock These Notes for FREE

Enter your email below and we will instantly email you these Notes for Strategic Management

(Limited time offer)

Unlock Notes

Already have a StudySoup account? Login here

Unlock FREE Class Notes

Enter your email below to receive Strategic Management notes

Everyone needs better class notes. Enter your email and we will send you notes for this class for free.

Unlock FREE notes

About this Document

Porter's Five Forces and the augmented version
Strategic Management
Eric M. Olson
Class Notes
Marketing, business




Popular in Strategic Management

Popular in Business

This 4 page Class Notes was uploaded by Dominique LaSalle on Wednesday August 31, 2016. The Class Notes belongs to STRT 4500 at University of Colorado Colorado Springs taught by Eric M. Olson in Fall 2016. Since its upload, it has received 40 views. For similar materials see Strategic Management in Business at University of Colorado Colorado Springs.


Reviews for Strategic Management Week 2 Notes


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 08/31/16
Strategic Management Week 2 The Structural Analysis of Industries - The essence of competitive strategy is relating a company to its environment - The key element in defining the environment is identifying the industries in which the company competes - Definition of an industry: o Groups of firms producing products that are close substitutes for each other o Companies may be in many industries at the same time - Five competitive forces o Competition in an industry is based on five basic competitive forces o It is the collective strength of these forces that determines the ultimate profit potential in an industry o Examples  Potential entrants: Hooters Airlines  Existing competition: Frontier, United, Southwest  Bargaining power of suppliers: Pilots, Fuel  Bargaining power of buyers: Passengers  Pressure from Substitute Products: Train - Economic Law o Competition drives the rate of return on invested capital to a floor rate measured against long-term government securities o Poor performers go out of business o Very good performers see competition through the influx of new investment - A fresh look at industry and market analysis o Porter’s five forces model was introduced in 1980 o Since then industry dynamics have change - Underlying premises of Porter’s model o Industry is the appropriate unit of analysis  Porter defines an industry as close substitutes  Very vague  Minivans/SUVs  Fresh/frozen vegetables  Industrial adhesive/nuts and bolts o Industry factors determine the average return on capital o Industry factors influence competition - Market vs Industries o We prefer a customer-oriented demand-side definition of industry o We also prefer the term markets over industries - Identifying markets o Step 1: define a group of buyers who have relatively homogeneous needs  Focus groups, survey research, conjoint analysis o Step 2: determine potential demand in market (must be sufficient to make it economically viable) o Step 3: determine if a market is strategically distinctive (if not, merge it with another market) - Industry factors o Average ROI for firms operating in unattractive markets is 13.4% o Average ROI for firms operating in attractive markets is 31.3% o Industry affects account for between 40 and 75% of the difference in industry returns o Rate of change:  Stable forces (e.g., brands, patents) do not change rapidly – rare exceptions  Transient forces (e.g., demand for full-sized luxury cars) may change rapidly  Market analysis must consider the rate and predictability of change as these impact profitability, strategy formation and content o Collective strength of market forces  Substantial variation of ROI performance occurs within industries - Industry factors influence completion o some competitive actions (i.e., sets of actions including the development and deployment of resources, that position the business to exploit opportunities and avoid threats) are more effective than others in particular environments (e.g. turbulence) - an augmented model for market analysis o the new model reconfigures and expands Porter’s five forces to eight o each of these forces directly impacts:  profitability  risk  strategy o 1-3: composite competitive rivalry  1: direct competii - Barriers to entry o Economies of scale o Product differentiation o Capital requirements o Switching costs o Access to distribution channels o Cost disadvantages independent of scale o Government policies o Expected retaliation - Existing competitors o Numerous small competitors or a few equally balanced larger competitors o Slow industry sales growth o Lack of differentiation or switching costs o Capacity augmented in large increments o High strategic stakes o High exit barriers - Pressure from substitute products o Products that are subject to trends improving their price-performance trade-off with the industry’s products o Product produced by firms generating high profit margins - An augmented model for market analysis o 4. Complementors  The impact of network effects on market evolution  Network effects occur when demand for a product rises with the number of complementary products  An example being Microsoft’s relationship with Intel o 5. Customer power  Greatest when they are large, few in number, and able to switch suppliers easily  Powerful customers frequently mean that firms will either accept profit margins that approach their cost of capital or, will attempt to create customer loyalty (benefits, reduce non-price costs, lower prices) o 6. Supplier power  Greatest when large, few in number and can readily sell to alternate customers  Customer can attempt to bargain either for lower costs or more benefits if sellers see an expanded future relationship o 7. Market change: Growth  Growth comes from an increase in the  Number of buyers  More purchases by existing buyers, or  Creation of a solution to a latent needs  First two cases are not disruptive – anticipated  Third case is disruptive – which can significantly alter market structures o Growth: disruptive  Early adopters embrace change in order to give their firms an advantage over competition  To significantly impact an existing industry firms must move beyond the early adopters to mainstream customers (crossing the chasm)  (e.g., 35mm film – digital photography) o Market change: turbulence  Market turbulence – rate of change in customer’s needs and preferences  Competitive turbulence – rate at which other firms change their competitive methods (including development and introduction of new technologies)  The needs of early adopters are often different than the early or late majority  Not all firms (or markets) are equally susceptible to the disruptions or market or competitive turbulence  Barriers to imitation are strong deterrents - Strategic positioning in competitive markets o Create a market-focused organization o Market oriented firms:  Scan the market broadly  Have a long term focus  Work closely with lead users  Conduct small scale market experiments, learn from results, and modify offerings o Establish relationships with key customers and suppliers  Build a foundation of trust  Demonstrate the value of the relationship – even if products are commodity o Create new market space  Avoid head to head competition by finding untapped market demand  (e.g., Home Depot slipped between traditional hardware stores) o Conceive of strategy as a series of real options  Traditional approaches to financial analysis have placed too great an emphasis on risk management  Strategic options analysis takes a broader view and recognizes that managers are active decision makers


Buy Material

Are you sure you want to buy this material for

0 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Jennifer McGill UCSF Med School

"Selling my MCAT study guides and notes has been a great source of side revenue while I'm in school. Some months I'm making over $500! Plus, it makes me happy knowing that I'm helping future med students with their MCAT."

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.