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ENTREPRENEUSHIP

Dr. Naveed Akhtar


(Ph. D Management Sciences)
nab_phd@yahoo.com
Industry
&
Competitors Analysis &
Strategies
Industry Analysis

Business research Focuses on the potential of an industry

Competitors Analysis

Detailed evaluation of a firm’s competitors, and must gain


an understanding of its competitive environment
Firm specific factors: Firms’ Assets, products,
culture, teamwork of employees, reputation etc

Industry-specific Factors: Threat of new entrants,


rivalry among existing firms, the bargaining power of
suppliers, the bargaining power of customers, threat of
substitutes
Industry Analysis – Porter’s Five Forces Model
(Industry Attractiveness)

Threat of
new entrants

Bargaining Rivalry Bargaining


power of among power of
Suppliers Industry Customers

Threat of
substitute
Elements of industry structure
Entry Barriers
Economies of scale Rivalry determinants
Proprietary product differences Industry growth
Brand identity Fixed (or storage costs)/Value added
Switching costs Overcapacity
Capital requirements Product differences
Access to distribution Threat of Brand identity
Cost advantage new entrants Switching costs
Access to necessary inputs Diversity of competitors
Proprietary low-cost design Corporate stakes
Government policy Exit Barrier
Expected retaliation
Bargaining
Bargaining Rivalry among power of
power of Industry Customers
Suppliers
Determinants of Supplier Power Determinants of Buyer Power
Differentiation of inputs Buyer concentration
Switching costs of suppliers and firms in Buyer volume
the industry Threat of Buyer swithching costs
Presence of substitute inputs substitute Buyer information
Supplier concentration Ability to backward integrate
Importance of volume to supplier Substitute products
Determinants of
Cost relative to total purchases in the
Substitution Threat Price Sensitivity
industry
Relative price performance of Price/Total purchases
Impact of inputs on cost or differentiation
substitutes Product differences
Threat of forward integration relative to
Switching costs Brand identity
threat of backward integration by firms in
Buyer propensity to substitute Impact on quality/performance
the industry
Buyer profits
Competitive Industry Threat to Industry Profitability
Low Medium High

Threat of substitute

Threat of new entrants

Rivalry among existing customers

Bargaining power of suppliers

Bargaining power of buyers


Generic Competitive Strategies
(Relative Position within Industry)

•Positioning determines –
Firm’s profitability above or below industry average

•Fundamental basis of above-average performance –


Sustainable Competitive Advantage

•Two Basic Competitive Advantage –


Low cost, Differentiation & Focus
Three Generic Strategies

Strategic Advantage
Uniqueness Low cost
perceived by Position
the customer

Differentiation Overall cost


Strategic Target

Industry wide leadership

Particular Focus
Segment only
Low Cost

•Low cost producer in an industry

•Serves many industry segments with broad scope

•Operate in related industries

•e.g. Economies of scale, Proprietary technology,


Preferential access to raw material
Differentiation

Firm seeks to be unique in industry with dimension valued by customer

Selects only one or two attributes That buyer perceives important

Differentiation can be on Product itself, Delivery systems, Marketing approach


Focus

•Rests on choice of a narrow competitive scope within industry

•Focuser selects a segment or group of segments in the industry –


Tailors strategy for target customers

•Two Variants - Cost Focus & Differentiation Focus


Support activities
Firm Infrastructure
Human Resource Management
Technology Development
Procurement

Inbound Operations Outbound Marketing Services


Logistics Logistics & Sales

Primary Activities

Figure 3.1. Porter’s Generic Value Chain


Inbound Logistics: activities like receiving, storing, and disseminating
inputs to the products, such as material handling, inventory control,
vehicle scheduling, and returns to suppliers

Operations: Activities involved in transforming inputs into final products.


Such as machining, packaging, assembly, equipment maintenance,
testing, printing, and facility operations.

Outbound Logistics: Activities associated with collecting, storing and


physically distributing the product to buyers, such as finished goods
warehousing, material handling, delivery vehicle operations, order
processing, and scheduling.

Marketing and Sales: Activities associated with providing a means by


which buyers can purchase the product. Advertising, promotion, sales
force, quoting, channel selection, channel relation, and pricing

Service: activities associated with providing services to enhance or


maintain the value of product, such as installation, repair, training, parts
supply, and product adjustment
Procurement: Function of purchasing inputs used in the firms value chain not
the purchased inputs. Raw material, office equipment, machinery

Technology Development: Every value activity embodies technology be it


know-how, procedures, or technology embodied in process equipment.
Technology development that is related with the product and its features
supports the entire chain while other technology development is associated
with particular primary or support activities.

Human Resource Management: Activities like recruiting, hiring, training,


development and compensation of all types of personnel.
It supports both primary and support activities (hiring engineers) and the
entire value chain.

Firm infrastructure: Activities including general management, planning,


finance, accounting, legal, government affairs, and quality management.
Infrastructure supports all value chain instead of individual activities.
(Finance at corporate level but quality management is done at the business
unit level)
RESOURCES
AND
CAPABILITIES
ATTRIBUTES OF STRATEGIC
RESOURCES

Resource - is anything that is useful

Firms have different starting points for resources


1. Resource Heterogeneity:
2. Resource Immobility
ATTRIBUTES OF STRATEGIC
RESOURCES
Resource Based Theory:
Firms usually begin their history with a relatively small
amount of strategically relevant resources and skills.

This theory has a simple formula


Buy or acquire resources and skills cheaply
Transform the resource or skill into a product or service
Implement the strategy
Sell dearly (for more than you pay)
ATTRIBUTES OF STRATEGIC
RESOURCES
Resource Based Theory states that sustainable
competitive advantage (SCA) is created when
firms possess and employ following resources:

• Valuable
• Rare
• Hard to copy
• Non sustainable
ATTRIBUTES OF STRATEGIC
RESOURCES
Strategic Resources:
• Strategic resources create competitive advantage.
• Distinction between strategic and non strategic
resources.
• Not all capital resources are strategically important
because they are necessary for carrying out firm's day to
day activities. E.g. desks, chairs, office furniture etc.
• Strategic resources are beneficial strategies that bind the
entrepreneur to alternative possibilities.
ATTRIBUTES OF STRATEGIC RESOURCES
Competitive Advantage V Sustained Competitive
Advantage
• Competitive advantage occurs when entrepreneur is
implementing a value creating strategy not implemented by
and current or potential competitors.
• Value creation refers to normal gain or growth.
• Sustained competitive advantage is a competitive
advantage with a very important addition. Other firms are
not able to duplicate the benefits of the strategy.
ATTRIBUTES OF STRATEGIC
RESOURCES
Three characteristics of resources to create SCA
1. Valuable Resources
2. Rare Resources
3. Hard to copy Resources (Inimitable)
4. Non-substitutable Resources (Substitutability)
ATTRIBUTES OF STRATEGIC
RESOURCES
1. Valuable Resources:
Resources are valuable when they help the organization
implement its strategy effectively and efficiently. e.g. a
valuable resource exploits opportunities or minimizes
threats in the firm’s environment.
e.g. property, equipment, people, skills like marketing,
financing, accounting etc.
ATTRIBUTES OF STRATEGIC
RESOURCES
2. Rare Resources:
• Valuable resources shared by a large number of firms
cannot be a source of competitive advantage or SCA
because of their wide spread availability.
• A resource is considered rare as long as its not widely
available to all competitor.
e.g. good, location, managers who are considered good
leaders, oil resources etc.
ATTRIBUTES OF STRATEGIC
RESOURCES
3. Hard to Copy Resources:

• Where duplication is not possible at a price low enough to


leave profits.
• These often lead to innovation and market leadership
• There are 3 factors that make it difficult for firms to copy
each others skills and resources
ATTRIBUTES OF STRATEGIC
RESOURCES
a. Unique historical conditions:
The initial assets and resources that accompany the
organization’s origin are unique for that place and time.
e.g. starting a company at a great location that was unrecognized
by others at that time.
ATTRIBUTES OF STRATEGIC
RESOURCES
b. Ambiguous causes and effects:
In business this means that there is doubt about what
causes what and why things happened.
e.g. What makes our firms sales force more effective?
What makes its production more effective
Why are its designs more appealing to the customers
ATTRIBUTES OF STRATEGIC
RESOURCES
c. Complex social relationships:
The interpersonal relationships of managers, customers
and suppliers are all complex.
This basically refers to organizational culture. The culture
might be very supportive, highly authoritarian, very
aggressive or combination of these.
ATTRIBUTES OF STRATEGIC
RESOURCES
4. Non-substitutable Resources:
Strategic resources that cannot be replaced by common
resources.
Very different resources can be substitute of each other.
e.g. An expert system computer program may substitute
for a manager.
A programmed learning module may substitute for an
inspirational teacher.
RESOURCE TYPES
1. Tangible (Physical) Resources:
These are tangible property of the firm used in production
and administration. This includes plant equipment, location
etc.
2. Intangible Resources: (Management Expertise, Brand image, copy
rights, reputation, skills)
Reputational Resources - These are perceptions that people in the firm’s
environment have of the company.
Reputation can exist at the product level or at the corporate level as a
global image.
RESOURCE TYPES
These may include:
Quality of management
Use of corporate assets firm’s financial soundness
The quality of products and services
Innovativeness
Ability to attract, develop and retain top people
RESOURCE TYPES
3. Organizational Resources:
They include firm’s structure, routines and systems.
This can be firm’s formal reporting systems, its information
generation and decision-making systems and formal and
informal planning.
The organizational structure is an intangible resource that
can make the difference between the organization and the
competitors.
RESOURCE TYPES

4. Financial Resources:
They represents money assets. Financial resources are
generally the firm’s borrowing capacity, the ability to raise
new equity and the amount of cash generated by
operations.
Start-up entrepreneurs see that access to financial
resources is the key to getting into business and are a
source of sustainable competitive advantage.
RESOURCE TYPES

LIMITATIONS OF Financial Resources

READING ASSIGNMENT
RESOURCE TYPES

5. Intellectual and Human Resources:


They include the knowledge, training and experience of
The entrepreneur + the team of employees and managers.

It includes judgment, creativity, vision and intelligence of


individual members of the organization.

A new study indicates that entrepreneurs who promote


racial and cultural diversity in their firms are more able to
improve performance and productivity.
RESOURCE TYPES
Human capital also includes relationship capital. This
refers not to what the organizational members know but
rather to who the organizational members know and what
information these people possess.
Networking gives the entrepreneur access to the
resources without controlling them.
RESOURCE TYPES
6. Technological Resources:
These are made up of processes, systems or physical
transformations. They may include labs, research and
development facilities and testing and quality control
technologies.
Knowledge generated by R & D is also a resource.
Intellectual capital is embodied in a person and if the person
leaves the firm so does the capital.
Technological resources are physical and are owned by the
organization.
RESOURCE TYPES
Can complex physical technology provide a
basis for SCA?
Technological resources like machines, computer system,
equipment, robots cannot be basis for SCA because they can
duplicated and reproduced.
Industry Types & Opportunities They offer

Emerging Industries:

•New industry where SOPs are yet to be established


•Pioneer organization can achieve First Mover Advantage
•Faces High level uncertainty – their opportunities are short-
lived
•Barrier to emerging industries are low so new ventures enter
•No established pattern of rivalry
Fragmented Industries:

Large number of firms of almost equal size


Primary opportunity is to consolidate the industry and
establish industry leadership

Mature Industry:

Experiencing slow or no increase in demands and has


repeat customers
Limited product innovation
Entrepreneurs introduce innovative products
Declining Industries:

Experiencing decline in demand


Entrepreneurs can follow three generic strategies

Global Industries:

Experiencing Internationally significant sales


Start-ups enter into global industries from day one and
try appeal global market
These firms pursue tow strategies - Multidomestic
strategies & Global strategies
MUltidomestic Industry – compete for market share on
country-on-country basis and vary their product or service
offerings to meet the demands of local market

Global Strategy – Firms pursuing this strategy use the


same basic approach in all foreign markets. Example;
companies that sell athletic shoes,
This strategy is more economical
Competitors Analysis Grid

SONY TOSHIBA ORION PHILIPS


Competitors Factors
Product Features
Brand Name Recognition
Compatibility of Products
Access to Distribution Channels
Quality of Products
Ease of Use
Price
Quality of Customer Service

Assignment: Prepare Competitors Analysis Grid for any organization


Competitors Analysis Grid

Name BAHRIA NUML QAU FAST AIR IIUI NUST

Competitors Factors

Product Features

Brand Name Recognition

Compatibility of Products

Access to Distribution Channels

Quality of Products

Ease of Use

Price

Quality of Customer Service

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