Assestment of industry and firm performanceIndentification of key factors affecting performance in vertical trading relationships and horizontal competitive relationshipDetermination of how changes in the business environment may effect performanceIndentifying opportunities and threats in the business landscape.
The Five forces framework has several limitations:It pays little attention to factors that might affect demandIt focuses on a whole industry rather than on that industrys individual firmThe framework doesnt explicitly account for the role of the government, except when the government is supplier or buyer
FACTOR AFFECTING RIVALRY AMONG EXISTINGCOMPETITORS:Degree of Seller concentration?Rate of industry growth?Excess capacity?Cost structure of firms:sensitivity of costs to capacity utilization?Degree of product differentiation among sellers?Brand loyalty to existing sellers? Cross-priceelasticities of demand competitors in industry?
Buyers costs of switching from one competitor to another?Are prices and terms of sales transactions observable?Can firms adjust prices quickly?Large and/or infrequent sales orders?Use of facilitating practices (price leadership, advance announcement of price changes?
History of cooperative pricing?Strength of exit barriers?High industry price elasticity of demand?
FACTORS AFFECTING THE THREAT OFENTRY: Significant economies of scale?Importance of reputation or established brand loyalties in purchase decision?Entrants access to distribution channels?Entrants acces to raw material?Entrants acces to technology/know-how? Entrants access to favorable locations?
Experience-based advantages of incumbents?Network externalities: demand-side advantages to incumbents from large installed base?Government protection of incumbents?Perceptions of entrants about expected retaliation of incumbents/reputations of incumbents for toughness?
FACTORS AFFECTING OR REFLECTING PRESSUREFROM SUBSTITUE PRODUCTS AND SUPPORT FROMCOMPLEMENTS: Availability of close substitutes?Price-value characteristics of substitutes?Availability of close complements?Price-value characteristics of complements?
FACTORS AFFECTING OR REFLECTING POWEROF INPUT SUPPLIERS:Is supplier industry more concentrated than industry it sells to?Do firms industry purchase relatively small volumes relative to other customers of supplier? Is typical firms purchase volume small relative to sales of typical supplier?Few substitutes for suppliers input?
Do firms in industry make relationship-specific investments to support transactions with specific suppliers?Do suppliers pose credible threat of forward integration into the product market?Are suppliers able to price-discriminate among prospective customers according to ability/willingness to pay for input?
FACTORS AFFECTING OR REFLECTINGPOWER OF BUYERS:Is buyers industry more cincentrated than the industry it purchases from?Do buyers purchase in large volume? Does buyers purchase volume represent a large fraction of the typical sellers revenue?Can buyers find substitutes for industrys product?Do firms in industry make relationship-specific investments to support transactions with specific buyers?
Is price elasticity of demand of buyers product high or low?Do buyers pose credible threat of backward integration?Does product represent significant of cost in buyers business?Are prices in the market negotiated between buyers and sellers on each individual transaction, or do sellers post take-it-or-leave-it price that applies to all transactions?
2 Types of games:Rule-based gamesFreewheeling games
Egocentrism vs AllocentrismChanging GameFrom Lose-Lose to Win-Win
What is it about? Value: creating it & capturing itValue Net
Cooperation and CompetitionCUSTOMERSUPPLIERSUBSTITUTESCOMPANYCOMPLEMENTS
Elements of the game:PlayersAdded ValuesRulesTacticsScope
Dealing with SubstitutorPay Me to PlayNutraSweet, HSC, Coke & PepsiMcCaw, Lin BroadCasting Corp, BellSouth
Dealing with ComplementorsCheap Complements3DO , Panasonic, GoldStar, Sanyo & Toshiba
Raise your own added valueTWALowering others added valueCard Games IllustrationNintendo PowerCustomers : Toys R Us, Wal-MartSuppliers : Ricoh, Sharp (microchips) Marvel, Disney (game characters)Complementors : Acclaim, EA (software)Substitutors: Atari, Commodore (hardware)
Pumping Up ProfitsSoftsoap (Minnetonka)3 things to rememberNo guarantee that any player will get all its added valueEven if you have no added value, doesnt prohibit you from making moneyRules constrain interactions among players
One price to allStrategy : Judo EconomicsKiwi is No DodoKiwi Airlines & Delta AirlinesSolid Profits from GasProducers of CO2 (Airco, Liquid Carbonic, Air Liquide) & Customers of CO2 (Coke & Pepsi)Meet the Competition Clause (MCC)
Reducing misperception ( lift the fog)The New York FogNew York Post vs Daily NewsMaintaining uncertainity (thicken the fog)Disagreeing to AgreeInvestment Bank, Clients & % fee
Segas 16-bit system video gamesNintendo wait to years to respond
You have to accept the game as it isChanging the game must come at expense of othersHave to find something to do that others cantFailing to see the whole gameFailing to think methodically about changing the game
Case of Five Forces Analysis21 Theater21 THEATER
History of 21 Cinema Founder: Cineplex 21 Group Since 1988 and has 75 % market share of All of Indonesia Lobby and Cafe Concepts (see pictures below)
Five Forces AnalysisExisting Competitor: Blitz Megaplex
Comparison between 21 and Blitz Megaplex (see the next page)
21 vs Blitz Megaplex
No.Details21 CineplexBlitz Megaplex1Existing of BrandPioneer of TheaterFollower2Price of ticketEasy to adjust, consumer has some choices (from cheapest price to most expensive price of ticket) according to the variant of productsPrice of ticket more expensive, describing the luxury, prestige, modern and convenience3Sound systemDolby Digital, THXDolby Digital, THX4FacilityLobby with many queue-lines and studios, Caf, waiting room/seat, games area, smoking room, rest roomLarge lobby with many queue-lines and studios and high tech computer of reservation, Caf, waiting room/seat, games area, smoking room, rest room, merchandise shop5Concepts of CozinessComplete, Luxury (depends on the offering of variant of products, such as Cinema 21, Cinema XXI, The Premiere), Cozy, Family Concept interior designComplete, Modern, Cozy, "Teen, Young and Minimalist" Concept interior design", large lobby, 3D movies
21 vs Blitz Megaplex Continue
No.Details21 CineplexBlitz Megaplex6Variant of ProductsCinema 21, Cinema XXI, The Premiere (different level of coziness per each)1 theater with different facilities per each (Ordinary, 3D movie, Velvet Class)7Buying ticketbuy directly to cinema, ticket online, membership ticket, buying ticket via smsbuy directly to cinema, ticket online, membership ticket, buying ticket via sms8Numbers of branchesexist in almost every big cities in Indonesia, except Papuaexist only in Jakarta and Bandung9LocationMall, own buildingMall only10Round-play filmsWestern films and Indonesian filmsWestern films, asian films (no indonesian films), independent films)
Concepts of Blitz MegaplexCafeVelvet Class (Pacific Place)Ordinary StudioThe performance of Film Advertisement
Threat of EntryGovernment RegulationLocation (access and the favorableness)The rights to buy new films from outsideEconomic situation
Substitute Products and Support from ComplementsSUBSTITUTE PRODUCTS:TELEVISIONDVD INTERNETMOVEABLE SCREEN (LAYAR TANCAP)DVD RENTAL
COMPLEMENTCAFCredit Card (New Offering and Cooperation), e.g: UOB, CITIBANK, MANDIRI, HSBC. etc.FICTION OR REFERENCE BOOKSMALL/PLAZAMERCHANDISE/GIFT, e.g: MUG, DOLLS, TSHIRT, PEN, HAT, FREE TICKET, etc.
POWER OF INPUT SUPPLIERSSUPPLIER POWER:
RIGHTS OF PLAYING FILM IN ADVANCECOOPERATE WITH STAKEHOLDERS (GOVERNMENT, OTHER INSTITUTION RELATED TO THE FIELD OF THEATER AND FILMS)TICKETS OFFERINGPRODUCT VARIANTS (CINEMA 21, CINEMA XXI, THE PREMIERE) SOUND SYSTEM (DOLBY DIGITAL AND THX)
POWER OF BUYERSFREE TO CHOOSE OTHER THEATER (BLITZ MEGAPLEX) ACCORDING TO:TYPE OF FILMTICKET (PRICE, BUYING TRANSACTION, ETC)COZINESS (SEAT, CAF, BUYING TICKET SYSTEM, TIME, ETC)
FREE TO CHOOSE SUBSTITUTES (TV, DVD, BOOKS, MOVEABLE SCREEN, ETC)
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