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Interna(onal Business Environment and Strategy
Compe((on Analysis – the real forces of compe((on
Porter 5-‐forces plus
© Robert Jones 2013 [email protected] hLp://cambridgemba.wordpress.com/strategy
(c) Robert Jones 2013
Learning outcomes:
Revisit the classic Porter 5-‐forces of compe((on model
Understand its purpose and apply to an example
Ques(on its validity and update to include more forces
(c) Robert Jones 2013
Compe((on and Collabora(on
Exhibit 5.5 Johnson, Scholes & Whi`ngton (2005) Exploring Corporate Strategy, 7th Edi(on, Pearson Educa(on
(c) Robert Jones 2013
Compe((on or collabora(on ?
Peugeot 107
Citroen C1
Toyota Aygo
Built in the same factory in the Czech Republic
Common pladorm
See: Brandenburger, A. and Nalebuff, B. (1998) Co-‐ope33on, Currency Doubleday (c) Robert Jones 2013
Examples of new entrants:
Walmart into Germany (1998 -‐ 2006) – outcome? hLp://www.dw.de/worlds-‐biggest-‐retailer-‐wal-‐mart-‐closes-‐up-‐shop-‐in-‐germany/a-‐2112746-‐1 hLp://journalofinterna(onalmanagement.wordpress.com/2011/05/16/walmarts-‐downfall-‐in-‐germany-‐a-‐case-‐study/
Walmart into UK (1999 – to date) -‐ outcome ? hLp://www.bbc.co.uk/news/business-‐23713101
Tesco into USA (2007 – 2013) – outcome? hLp://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10300018/Tesco-‐sale-‐of-‐Fresh-‐and-‐Easy-‐wins-‐City-‐backing.html
What happened in each case? Why?
(c) Robert Jones 2013
Compe((ve Strategies in Hypercompe((ve Condi(ons
• Compe((ve advantage is temporary – Rapid imita(on – Not sustainable
• Compe((ve advantage relates to – Organisa(on’s ability to change – Speed – Flexibility – Innova(on – Disrup(on of market
Johnson, Scholes & Whi`ngton (2005) Exploring Corporate Strategy, 7th Edi(on, Pearson Educa(on based on: D’Aveni, R. (1995) Hypercompe((ve Rivalries: Compe(ng in highly dynamic environments, Free Press.
(c) Robert Jones 2013
Game Theory -‐ Prisoner’s Dilemma
Exhibit 5.6 Johnson, Scholes & Whi`ngton (2005) Exploring Corporate Strategy, 7th Edi(on, Pearson Educa(on
Compete aggressively? Or tolerate compe(tors and avoid harming each other?
(c) Robert Jones 2013
Red Oceans – industry sectors that exist today, These are already contested and compe((ve
Blue Oceans – industry sectors that do not yet exist Unknown market space, opportuni(es ?
Examples?
Chan Kim, W., and Mauborgne, R. (2005). Blue Ocean Strategy: How to Create Uncontested Market Space and Make Compe33on Irrelevant, Harvard Business Press
(c) Robert Jones 2013
Government / European Union rules and regula(ons can have a direct Influence on compe((on.
An(-‐compe((ve behaviour is not allowed.
WTO is also ac(ve in this area.
(c) Robert Jones 2013
Compe((on or collabora(on or collusion ?
British Airways fined £58.5m for fuel price-fixing British Airways is to pay a reduced £58.5m fine for colluding with rival Virgin Atlantic on fuel surcharges, finally putting to bed an investigation that has lasted more than five years.
(c) Robert Jones 2013
The Compe((on Commission takes ac(on against an3-‐compe33ve behaviour
hLp://www.compe((on-‐commission.org.uk/ (c) Robert Jones 2013
Agreements between two or more independent market operators which restrict compe((on are prohibited by Ar3cle 101 of the European Treaty. The most flagrant example of illegal conduct infringing Ar(cle 101 is the crea(on of a cartel between compe(tors (which may involve price-‐fixing and/or market sharing).
Ar3cle 102 of the Treaty prohibits firms holding a dominant posi(on on a determined market to abuse that posi(on, for example by charging unfair prices, by limi(ng produc(on, or by refusing to innovate to the prejudice of consumers.
hLp://ec.europa.eu/compe((on/an(trust/overview_en.html (c) Robert Jones 2013
These policies really started in 1983 in the UK, implemented by Prime Minister Thatcher, Based on much earlier wri(ngs of Peter Drucker
Junior minister
Cabinet minister
(c) Robert Jones 2013
Example:
Deregula(on of European airspace encouraged new entrant airlines
Ryanair (as a Low Cost Airline) in 1992
easyJet (as a LCA) in 1995
How did Bri(sh Airways respond?
Ignore the new entrants?
Tolerate them?
Retaliate against them?
(c) Robert Jones 2013
Bri(sh Airways gave Barbara Cassani (a senior manager at BA) £25 million to create a new LCA.
She created a new airline called GO in 1998
BA planned to retaliate against the new entrants and at the same (me learn about this new business.
BA sold GO in 2001 for £100 million.
easyJet bought GO in 2002 for £378 million
None of the players was damaged, the market for air travel in the UK grew by 40% a year.
(c) Robert Jones 2013
Some sectors e.g. banks and financial are being heavily Re-‐regulated as a result of misconduct.
(c) Robert Jones 2013
Recap:
Revisit the classic Porter 5-‐forces of compe((on model
Understand its purpose and apply examples
Ques(on validity of model and update to include more forces
Five forces-‐plus
Ques(ons
(c) Robert Jones 2013
Sources
Porter, M.E. (1980) Compe((ve Strategy: Techniques for analyzing industries And compe(tors, Free Press (Simon & Schuster Inc.)
Michael Porter interview on YouTube hLp://www.youtube.com/watch?v=mYF2_FBCvXw accessed 10 Sept 2011
TNS Worldpanel (market intelligence reports) hLp://www.tnsglobal.com (accessed 10 Sept 2011)
Brandenburger, A. and Nalebuff, B. (1998) Co-‐ope33on, Currency Doubleday
D’Aveni, R. (1995) Hypercompe((ve Rivalries: Compe(ng in highly dynamic environments, Free Press.
hLp://www.compe((on-‐commission.org.uk/ (accessed 12 October 2013)
hLp://ec.europa.eu/compe((on/index_en.html (accessed 12 October 2013)
hLp://www.jus(ce.gov/atr/about/index.html (accessed 12 October 2013)
hLp://www.wto.org/english/tratop_e/comp_e/comp_e.htm (12 October 2013)
Mike O’Leary on YouTube: hLp://www.youtube.com/watch?v=oJCuYNvrE8g (12 October 2013)
(c) Robert Jones 2013