!!!!Internaonal!Business!! Environmentand!Strategy! …...!!!!Internaonal!Business!! Environmentand!Strategy! Compe((on!Analysis!! –the!real!forces!of!compe((on! Porter!5?forces!

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


Revision – fill in the gaps




hLp://www.youtube.com/watch?v=mYF2_FBCvXw (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


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

A global airline alliance:-‐



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?



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.


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?


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


Is this the full picture ?




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.


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.


The Compe((on Commission takes ac(on against an3-‐compe33ve behaviour

hLp://www.compe((on-‐commission.org.uk/ (c) Robert Jones 2013

hLp://ec.europa.eu/compe((on/index_en.html (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

United States An(trust Division

hLp://www.jus(ce.gov/atr/about/index.html (c) Robert Jones 2013

hLp://www.wto.org/english/tratop_e/comp_e/comp_e.htm (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


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?




hLp://www.youtube.com/watch?v=oJCuYNvrE8g




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.




Some sectors e.g. banks and financial are being heavily Re-‐regulated as a result of misconduct.


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


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)


!!!!Internaonal!Business!! Environmentand!Strategy! …...!!!!Internaonal!Business!! Environmentand!Strategy! Compe((on!Analysis!! –the!real!forces!of!compe((on! Porter!5?forces!

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