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• Industry and Competitive Analysis– Industry Structure– Evolution of Industries– Industry Supply Chain– Potential Industry Earnings– Porter’s 5 Forces Analysis– Competitive Intensity– Strategies for minimizing competitive forces– Perceptual Map– Barriers to Entry/Incumbency advantages– DSIR effect
• Company Resources and Capabilities– ARC Analysis/HR– SWOT Analysis– Value Creating Processes/Core
• Consumer habits are formed, which are difficult for new entrants to change
• Consumer demand forces retailers to carry the brand limiting access to shelf space for new entrants. Creating a barrier to entry.
• New entrants have to spend more on advertising to induce trial to cause consumers to switch and incent retailers to carry their product.
Incumbency advantagesaccrue at each stage in the value
creation process
R&DInnovation advantage
Manfscale economiesLearning economies
Distributionscale & learning
RetailersPromotional Consumers
loyalty
New entrant
Barrier to entry
What is: “network effect”? “First mover advantage”?
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Network Era Is Being Driven by the Interaction
of Three 'Laws'more computing power
More-valuable networks
more communication bandwidth
Moore’sLaw
Metcalfe’sLaw
Gilder’sLaw
Source: Prof. N. Venkatraman, Boston University
Moore’s Law
Metcalfe’s Law
Gilder’sLaw
Demand Side Increasing Returns
Network EffectNetwork Effects occur when the benefits of a product increase to each user as the number of users increases. An example of network effects is telephone service. The more people who use them the more valuable they are to each user. The Web is an example with even more rapidly increasing DSIR than telephones or fax machines.
Industries with Demand Side Increasing Returns have the characteristics of “winner takes all”. Many of the Web based industry exhibit this characteristic, example: eBay and more recently the social networking sites such as Facebook.