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porter by jizhen1947

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									Porter on Global
       Business
      Second Lecture
International Competition
   Porter’s “Changing Currents”
       Growing similarity of countries
         The CNN effect
       Fluid global capital markets
         The euro and the dollar, in particular
         Swiss Franc, not inconsequentially
       Falling tariff barriers
         Relatively speaking, since WWII
         NAFTA and ASEAN, vs. MITI and Beijing
       Technological Restructuring
         Microelectronics, IS, and materials science
International Competition
   Porter’s “Changing Currents”
       Integrating the role of technology
         The ease of communication and data transfer allow
           operational linkages
       New global competitors
         East Asian competition is no world class
             Using leading edge POM technology
             FMS, lean/agile, etc.
International Competition
   Porter’s “Cross-Currents”
       Slowing rates of economic growth
           At least as you look at the end of the 20th century, in a macro view
           Fewer domestic opportunities means looking to other markets for
            growth
       Eroding sources of traditional advantage
           Labor, natural resources, technology access are now givens, not
            differentiators
           Technology is not the least of these in effecting this cross current –
            efficiency factor and automation vis a vis labor costs
       The New Protectionism
           Tariff reduction and reduced growth has threatened some
            nations…ask the EU about bananas
International Competition
   Porter’s “Cross-Currents”
       Growing rivalry among governments to attract business
       Proliferating coalitions among firms from different countries
         NAFTA, ASEAN, EU

       Increased ability to tailor business to local conditions
         Think global, act local
         Mass customization due to new technology. essentially
Porter’s Themes

   There is no one pattern of competition or success
    characteristics in global competition
   Globalization is the rule; no longer the exception
   Change is another rule.
   Coordination of complex networks is a new source of
    advantage
   Governments are getting involved
   Coalition partners are necessary for coordination
   Organizational change must precede effective global
    competition
Competitive Strategy
       The Porter Model
The Five Forces
of Competitive Intensity

 Entry

 Threat of Substitution
 Bargaining Power of Buyers

 Bargaining Power of Suppliers

 Rivalry among current Competitors
Threat of Entry
 Brings new capacity
 Market share division

 Bring additional resources to
  compete with
 Price wars

 Cost inflation
Threat of Entry -- Barriers
  Economies of Scale

  Product Differentiation

  Capital Requirements

  Switching Costs

  Access to Distribution

  Cost Disadvantages
   independent of scale
  Government Policy
Intensity of Rivalry
 Most industries mutually dependent
 Price competition, advertising battles,
  product improvements, increase
  service…leave all competitors worse off
 Some forms (price) highly unstable.
Intensity of Rivalry
  Numerous or equally balanced
   competitors
  Slow industry growth

  High fixed or storage costs

  Lack of differentiation

  Capacity augmented in large
   increments (scale)
  Diverse competitors (rules of road)
Intensity of Rivalry
 High strategic stakes
 High exit barriers

 Shifting rivalry (maturity, acquisitions)
Pressure of substitutes
 Allfirms compete with substitutes
 Limit profitability

 Reduce growth in good times

 Have to look to function
Substitutes
 Be   particularly wary of:
  substitutes that are improving in
   price/performance tradeoff relative to
   the industry
  substitutes produced by high profit
   industries
Power of Buyers
 Buyers  force down prices
 Buyers force up quality and
  service
 Buyers play competitors against
  each other
 At the expense of industry
  profitability
Buyers
 Do they buy large volumes, or are they
  concentrated?
 Do their purchases represent one of
  their high cost items?
 Do they purchase undifferentiated
  products?
 Are switching costs low?
Buyers
 Are  their profits low?
 How important is your product to
  their quality?
 Can they backward integrate?

 Do they have full information?
Power of Suppliers
 Control our profitability
 They control the source and price
  of raw materials
 Can impact profits through
  materials costs
Suppliers have power when:
 Industryis dominated by a few
  companies
 They are not obliged to contend
  with substitutes
 The industry they serve is not an
  important customer
Suppliers have power when:
 Theirproduct is important to the
  customers business
 They provide differentiated
  products
 They can forward integrate
Competitive Strategy
 Position firm so that its capabilities
  provide a defense against competition
 Influence the balance of forces through
  strategic moves, to improve position
 Anticipate shifts in the factors
  underlying the 5 forces and exploit
  change by recognizing the new balance
  before it transpires
Three Generic Strategies
 Cost Leadership
 Differentiation (industry-wide)

 Focus (niche)
  The Value Chain

                        Firm Infrastructure (Finance, Planning)


“Support”                  Human Resource Management
 activities
                             Technology Development

                                       Procurement

              Inbound    Operations     Outbound     Marketing Service,
                                                       and     after sale
              Logistics (production)     Logistics
                                                       Sales




                                   Primary Activities
Sources of Competitive
Advantage
   How firms organize                 Value chain as a cost
       1) the support                  advantage tool
        resources, in support              Do not view cost strictly
        of                                  from a production
       2) the primary activities           standpoint
                                           Wal-Mart is instructive
   Linkages in the value
    chain are key                      Economy of scope,
    advantages                          rather than scale may
                                        be advantageous
   Managing a system,
    rather than a collection
    of separate parts
Opportunities for Gaining
Advantage
   New technologies                Changes in
       Change how you market,       Government regulation
        produce or deliver
                                        EU competitive review
   New or shifting buyer                and GE/Honeywell
    needs                               GATT, WTO
   Emergence of new                    PRC and Taiwan
    segments                            ISO 9000
       E-commerce, for
        example
Bloopers and Blunders
   It won’t leak in your pocket and embarrass you
       It won’t leak in your pocket and get you pregnant (Parker
        Pen in Mexico)
   Coca Cola = ke-kou-ke-la from phonetic parsing of
    Han characters
       Bite the wax tadpole
       Female horse stuffed with wax
       Ke-kou-ko-le = happiness in the mouth…works much
        better
   Won’t Go
       GM’s claim to South American fame

								
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