SMM221 MANAGING INTERNATIONAL BUSINESS

3. Industry Analysis
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SMM221 MANAGING INTERNATIONAL BUSINESS
3. Industry Analysis
In the below section, one will gain a po!o"n# "n#estan#ing o! the co$petiti%e en%ion$ent o! the
bab& !ee#ing bottle in#"st&' The (e& taget o! an& !i$ is to ean $a)i$i*e# po!its' The b"siness
stateg& is an essentiall& +"est !o po!it $a)i$i*ation' Thee!oe, the pi$a& tas( !o an&
s"ccess!"l b"siness stateg& is to i#enti!& the so"ces o! po!its an# the !actos in!l"encing the
$aco,en%ion$ent' The !i$-s po)i$ate en%ion$ent is its in#"st&-s en%ion$ent' The
en%ion$ent o! the !i$ consists o! all e)tenal in!l"ences that a!!ect its #ecision,$a(ing pocess
an# pe!o$ances' This will help a !i$ to i#enti!& the !actos in!l"encing its s"ppl& an# #e$an#
channels, new entants an# the theats !o$ s"bstit"tes on the in#"st& le%el' The s&ste$atic,
contin"o"s scanning o! the e)tenal in!l"ences ae necessa& an# incl"#e .ESTLE, .ote-s si)
!oces, S'/'O'T an# the St"ct"e,0on#"ct 1.e!o$ance $o#el !o 2ee# Me Bottles Lt#' in the
bab& !ee#ing bottle in#"st&'
3.1 PESTLE analysis
The .estle anal&sis, $aco,en%ion$ental !actos which wi#el& ha%e the powe to alte the #e$an#
o! the po#"ct o!!ee# b& an& !i$ in an in#"st&3 the wa& in which a po#"ct is #istib"te# , pices
ae change# o the wa& in which !i$s co$pete with each othe in the in#"st&' The below si)
$aco,en%ion$ental !actos consi#e the i$pact on the Bab& !ee#ing bottle in#"st&'
3.1.1 Political Factors
The Intenational health bo#ies li(e /ol# 4ealth Oganisation 5/4O6 an# $an& othe national
health oganisations ha# p"t a pess"e on Go%en$ents to eg"late the "se o! B.A o to ban B.A
po#"cts in ega#s to health iss"es especiall& !o the babies' The Unite# States 7 0ana#a banne#
the pol&cabonate bab& bottles in 2eb"a& 2889 !ollowing EU in No%e$be 2818 5Le%&, S., 288:6'
To#a&-s cons"$e 5$o$s6 is e#"cate# an# e)pose# to lot o! in!o$ation on intenet which is a
won#e!"l %ehicle !o the in!o$ation an# awae o! new #e%elop$ent in the $a(et' The&
"n#estan# B.A an# its i$plications' Thee!oe, s"pplies an# etails ha%e espon#e# %e& well to
this iss"e an# to#a& B.A 1!ee bab& !ee#ing bottles ae a h"ge point o! ent& in the bab& cae
accesso& catego&' 2o e)a$ple To&s ;R< Us, is the wol#-s lea#ing #e#icate# to& an# ="%enile
po#"cts etaile, ha%e change# all bab& bottles an# bab& 1!ee#ing po#"cts sol# in stoes o tho"gh
thei websites to B.A !ee b& 1 >an"a& 288: 5Le%&, S., 288:6'
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SMM221 MANAGING INTERNATIONAL BUSINESS
3.1.2 Economic Factors
Econo$ic eco%e& is %e& slow in $at"e $a(ets li(e the Unite# ?ing#o$ an# the Unite# States,
which has geat i$pact on li!est&le o! the people' 2o e)a$ple, @at ose to 28A in the Unite#
?ing#o$ in >an"a&, 2811, will not $a(e $"ch #i!!eence to the pices o! s$all ite$s b"t o%eall
i$pact can be seen on cons"$e-s p"chasing powe' Less $one& will be le!t !o #iscetiona& o
high en# p"chases 5Mintel, 28116' 0ons"$e will thin( twice be!oe b"&ing e%en s$all thing which
will be o! shot peio# "se' Econo$ic !actos elate# to s"ppl& an# #e$an# ae also i$potant' The
!i$s that so"ce thei goo#s !o$ china will see highe po#"ction cost #"e to ising costs in labo",
aw $ateial an# less pe!eential ta) teat$ent in china 5www'globalso"ces'co$ 28116'
3.1.3 Social factors
0ons"$e-s p"chasing powe is a e!lection o! the li!est&le an# cons"$e-s taste which !inall&
#ete$ines the $agnit"#e o! #e$an#' In to#a&-s wol#, "bani*ation lagel& a!!ects the si*e o!
!a$il&' .eople ha%e beco$e $oe a$bitio"s an# the& ae $o%ing towa#s cities' B"e to thei
li!est&le, co"ples ae t&ing to beco$e $oe !inanciall& sec"e be!oe stating a !a$il& which lea#s
to ti$e be!oe $aiage an# paenthoo#' This is a clea sign o! aging, as wo$en lea%e it "ntil late in
li!e to ha%e chil#en, conta& this is a positi%e sign !o the $a(et !o bab& an# n"se& goo#s as
ol#e $othes ae !inanciall& sec"e# an# can a!!o# to spen# $oe on thei babies' The ise o!
celebit& c"lt"e an# the C&oga $o$s- pheno$enon, will help to incease the sales !o bo"ti+"e st&le
etailes an# $an"!act"es o! high en# #esigne bab& po#"ct 5E"o$onito Intenational, 288D6'
3.1.4 Technological Factors
As $entione# abo%e, the intenet has beco$e an i$potant %ehicle !o in!o$ation' /i#e
a%ailabilit& o! in!o$ation an# opinions abo"t shopping !o babies !o$ $aga*ines, intenets 5social
netwo(ing websites li(e 2aceboo(, tho"gh blogsE b&$o$s!o$o$s'blogspot'co$6 an# s$at
phone applications $a#e eas& !o cons"$e to select po#"ct' E%en ban#s now #a&s "se these blogs
to get $oe in!o$ation on po#"cts !o new #e%elop$ents' E%en $oe, ban#s ha%e t"ne# thei
attention in ceating an# #e%eloping online pesence beca"se o! e,wol#' 2o e)a$pleE all bab&
po#"ct ban#s an# shops ha%e online shops li(e www'$othecae'co$, www'1stbab&shop'co'"(,
www'a%ent'co$, www'to$$eetippee'co$, www'(i##icae'co$ an# $an& $oe'
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SMM221 MANAGING INTERNATIONAL BUSINESS
3.1. Legal Factors
The !i$s ha%e to a#="st thei po#"cts an# the wa& the& opeate in the in#"st& as pe #i!!eent
eg"lato& an# legislati%e !a$ewo( that go%en each po#"ct in the co"nt& in which the& ae
acti%e' Incease in global co$$ece which has i$pacte# the intenational legal en%ion$ent in te$s
o! stan#a#i*ation o! $an& pocesses an# othe aspect o! po#"ct' Intenational oganisation li(e
B.A, IB2AN ae in the pocess o! stan#a#i*ing the pocesses in the %al"e chain o! the bab& bottle
po#"cts' As e)plaine# ealie ega#ing ban o! B.A che$ical b& $an& co"nties b& law in the
$an"!act"ing o! bab& bottles, has $a#e $an& $"ltinational co$panies an# etailes to change bab&
bottles to B.A !ee bab& bottles'
3.1.! En"ironmental Factor
Awaeness o! the e!!ects o! to)ics contents in the po#"ct ha%e le# to incease# the e!!ots to #e%elop
technological $etho#s o sol"tion to the poble$s' The ten# o! oganic po#"cts in the $a(et
especiall& !o bab& po#"cts has incease#' The !i$s li(e A%ent 5.hilips6 ha%e alea#& #e%elope# a
ange o! the bab& po#"cts which is B.A !ee 5A%ent'co$6' B"e to pess"e go"ps an# "se o!
intenet, cons"$es ae getting e#"cate# abo"t #i!!eent po#"cts an# theis a#%antages an#
#isa#%antages' 2o E)a$ple, now #a&-s cons"$es ae going bac( to ta#itional wa&s li(e "se o!
bab& !ee#ing bottles $a#e o! glass which is $oe eco,!ien#l& an# sa!e !o the bab&' This has le# to
new ange o! glass !ee#ing bottles which ae also a%ailable on etail shel%es'
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SMM221 MANAGING INTERNATIONAL BUSINESS
3.2 The Porter#s $odel% the si& forces
Two i$potant !eat"es which shape the nat"e o! co$petition o con#itions !o the !i$ to s"%i%e
in the in#"st& ae in#"st& li!e c&cle an# $aco,en%ion$ent !actos $entione# in abo%e section'
The stages o! in#"st&-s li!e c&cle an# $aco,en%ion$ent will a!!ect the ele%ant !oces o!
co$petition within the in#"st&' The stonge the !oces ae, !iece the co$petition an# #i!!ic"lt to
$a(e po!its'
H
Firms# ri"alry
in an Industry
Firms# ri"alry
in an Industry
Po'er of
com(lementors
Po'er of
com(lementors
Threat of entry )y ne'
com(etitors
Threat of entry )y ne'
com(etitors
Po'er of
Su((liers
Po'er of
Su((liers
Threats from
su)stitute (roducts
Threats from
su)stitute (roducts
Po'er of
)uyers*customers
Po'er of
)uyers*customers
2ig"e 1E The si) !oces $o#el
So"ceE 4abebeg an# Rieple 52889E 1196
SMM221 MANAGING INTERNATIONAL BUSINESS
Below table e)plains how si) !oces changes an# shapes the st"ct"e o! the !i$ within the in#"st&'
Table 1,
So"ceE ?BMS, cons"ltanc& go"p'
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SMM221 MANAGING INTERNATIONAL BUSINESS
3.3 S.+.,.T Analysis
The S'/'O'T' anal&sis will anal&se the intenal Stengths an# /ea(nesses o! the bab& !ee#ing bottle in#"st&,
an# then i#enti!& the potential Oppot"nities an# Theats in the e)tenal en%ion$ent'
Table 2
So"ceE ?BMS, cons"ltanc& go"p
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SMM221 MANAGING INTERNATIONAL BUSINESS
3.4 Structure - .onduct - Performance /S.P0
As pe Mason 51:F:, 1:G:6 7 Bain 51:H1, 1:HD, 1:H:6 theo& o! St"ct"e , 0on#"ct , .e!o$ance
e)plains the beha%io" an# pe!o$ance o! the !i$s an# the in#"sties to which the& belong' This
appoach e)plains how the st"ct"e o! a $a(et in!l"ences the con#"ct o! the !i$s opeating in the
$a(et, which in t"ns in!l"ences the pe!o$ance o! the !i$s'
3.4.1 Structure
St"ct"e chaacteistics changes slowl& an# can be ega#e# as !i)e# %aiables' 2ew i$potant
%aiables which in!l"ence the st"ct"e o! the $a(et ae a6 The n"$be an# si*e #istib"tion o! the
b"&es an# selle b6 ent& an# e)ist con#itions c6 po#"ct #i!!eentiation #6 %etical integation an#
#i%esi!ication'
The num)er and si1e distri)ution of the )uyers and seller
In the Bab& !ee#ing bottle in#"st&, the !oc"s is on n"$be o! si*e o! selle as po#"ct cates to one
patic"la seg$ent o! cons"$e' Mat"e $a(ets li(e the Unite# States, the Unite# ?ing#o$, an#
E"ope ae well %ese# with po#"cts an# #e$an#s !o po#"ct +"alit& stan#a#s ae high' Big
pla&es in the in#"st& li(e A%ent 5.hilips6, M' Bown, an# To$$ee Tippee 5Ma& bon6 hol#s $a=o
shaes in the $a(et globall&' Still, the $a(et powe is on the #e$an# si#e an# as well on the
s"ppl& si#eE hee in this case 5bab& !ee#ing bottle in#"st&6 b"&e can e)ecise #iscetion o%e pices
the& want to pa&'
Entry and e&ist conditions /2arrier to entry and e&ist0
Ent& o! baie is %e& low in the bab& !ee#ing bottle in#"st& as e)plaine# in pote si) !oces 5the
theat o! new entant6 b"t to s"%i%e in the in#"st& is #i!!ic"lt as $a(et o! bab& !ee#ing bottle is
#i%en b& c"sto$es #e$an#' The bab& !ee#ing bottles can be eplicate# an# can easil& be po#"ce#
with $ino changes b"t po#"ct e$ains si$ila' The st"ct"e o! the in#"st& is %e& co$petiti%e
5e)istence o! $onopolistic6' At the sa$e ti$e, e)ist con#ition !o an& !i$ wo"l# be #i!!ic"lt #"e to
incease in ie%esible in%est$ent co$$it$ent, $a(es #i!!ic"lt !o !i$ to with#aw'
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SMM221 MANAGING INTERNATIONAL BUSINESS
Product differentiation
Tho"gh the chaacteistics o! the bab& !ee#ing bottle ae %e& basic b"t #"e to #e$an# o! s"peio
+"alit&, bette technolog& !o$ c"sto$es, !oces !i$s to #i!!eentiate thei po#"ct !o$ i%als'
Now #a&s, the %aiet& a%ailable on the etail shel%e is ince#ible' Bab& !ee#ing bottles co$es with
#i!!eent shapes, with #i!!eent !eat"es li(e close to nat"e 5To$$ee Tippee6, anti colic, wi#e $o"th
opening, B.A !ee ,which $a(es po#"ct #i!!eent !o$ each othe'
3ertical integration 4 di"ersification
@etical integation pla&s i$potant ole in st"ct"ing the !i$ in the in#"st&' The $a=o pla&es in
the in#"st& with global pesence ae highl& %etical integate# an# #i%esi!ie#' These !i$s ha%e
geate cetaint& in obtaining s"pplies o! aw $ateial an# g"aantee# #istib"tion o! the s"pplies'
These #i%esi!ie# !i$s en=o& the econo$ies o! scale an# less pone to is(' 2o e)a$pleE The bab&
cae ban# CA%ent- is !o$ well enowne# co$pan& Ro&al .hilips Electonics o! the Nethelan#s,
which is highl& #i%esi!ie# an# !"ll& %etical integate# 5 .hilips'co$6' Anothe Ban# CTo$$ee
Tippee- !o$ Ma&bon Go"p Li$ite# is also a highl& #i%esi!ie# an# !"ll& %etical integate#
co$pan& with #i!!eent po#"ct line in bab& cae wol# an# well establishe# R7B
#epat$ent5Ma&bon'co$6'
3.4.2 .onduct
0on#"ct e!es to the beha%io" o! !i$s in the in#"st& which is in!l"ence# b& chaactes o!
st"ct"e !actos e)plaine# abo%e' 2ew I$potant %aiables o! con#"ct ae a6 B"siness ob=ecti%es b6
picing policies c6 po#"ct #esign, ban#ing, a#%etising an# $a(eting #6 eseach an# #e%elop$ent
e6 $ege 5i! an&6'
Pricing (olicies
The e)tent to which a !i$ can #ete$ine its own pice in the $a(et #epen#s lagel& on the
in#"stial st"ct"al chaacteistics' B"e to high #e$an# in +"alit& an# stan#a#s, the co$petition is
!iece in the bab& !ee#ing bottle in#"st&' This !iece co$petition contols the picing o! the po#"ct
in #i!!eent $a(ets' This (in# o! en%ion$ent 5$onopolistic6 in in#"st&, a%oi# the #iect pice
co$petition lea#ing to $"t"all& #est"cti%e pice was'
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SMM221 MANAGING INTERNATIONAL BUSINESS
Product design5 )randing5 ad"ertising and mar6eting
As #isc"sse# ealie in the po#"ct #i!!eentiation, section abo%e, thee is a !iece co$petition in the
in#"st& beca"se o! high #e$an# in +"alit& an# stan#a#s #"e to which ban#ing, a#%etising,
po#"ct #esigning an# $a(eting gets a!!ecte#' To get $oe $a(et shae, !i$ ties to #i!!eentiate
thei po#"ct tho"gh #esign, ban#ing, a#%etising an# $a(eting' The poble$ with niche $a(ets
li(e this is one o! citical $ass' It is e)pensi%e to "n long,te$ a#%etising ca$paigns, patic"lal&
on tele%ision an# so ca$paigns ten# to be shot,li%e#' To ceate ban# awaeness, !i$s ae "sing
inno%ati%e $e#i"$s to get in to"ch with the c"sto$es as !i$s ae into#"cing s$at,phone
applications !o the $obile phones'
7esearch and de"elo(ment
St&le an# #esign inno%ation has to"che# al$ost e%e& pat o! the $a(et' Most $an"!act"es see
inno%ation as highl& i$potant in sti$"lating #e$an# an# sta&ing ahea# o! co$petitos' .o#"ct is
"n#i!!eentiate# an# co$petition is !iece to get $a(et shae' So $a=o pla&es, in the in#"st&
constantl& (eep on inno%ating new po#"ct line to sta& ahea# o! the i%als' 2o +"alit& o! the
po#"cts an# se%ices, !i$s (eep constant chec( on cons"$e #e$an#s li(e To$$ee Tippee clai$s
that the& ae in close contact with $"$s, as(ing the$ what e)actl& the& want' A%ent an# B' Bown
5B'Bown'co$6 clai$s that thei po#"ct ae inno%ate# b& pae#iatician as the& (now best abo"t
bab&Is poble$'
3.4.3 Performance
The st"ct"e o! the !i$ an# how it beha%es in the in#"st& lea#s to the pe!o$ance' The !inal
in#icatos ae a6 .o!itabilit& b6 gowth c6 +"alit& o! po#"ct an# se%ices #6 technological pogess
e6 po#"cti%e an# allocati%e e!!icienc&'
Profita)ility
Being highl& co$petiti%e $a(et, the po!its !o the !i$s ae no$al as it has been shae# b& othe
i%als in the in#"st&' The po#"ct 5 the bab& !ee#ing bottle6 is %e& basic , "n#i!!eentiate#, can
easil& be eplicate# with !ew $ino changes' To be ahea# o! the i%als an# to taget abno$al po!its,
the !i$ nee#s to ta(e #ecision to contin"e in the in#"st& b& into#"cing new inno%ati%e po#"ct
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SMM221 MANAGING INTERNATIONAL BUSINESS
lines constantl&' Big .la&es li(e A%ent, M, Bown, To$$ee Tippee clai$s to ha%e Reseach an#
#e%elop$ent #epat$ent' As pe Steve Parkin, the Managing Director of the Tommee Tippee C2H A
of sales each year comes from innovation 52"t"e sto& To$$ee Tippee,28186'
8ro'th
Ne%etheless, the pe!o$ance is the $ain an# basic in#icato !o gowth !o an& !i$ b"t in to#a&-s
wol# i! !i$ is inceasing its global pesence an# cons"$e can ecall its ban# easil&, then it is
consi#ee# as one the $ain in#icatos !o the gowth' In the bab& !ee#ing bottle in#"st&, $a=o
ban#s ae easil& ecogni*able b& c"sto$es acoss globe' To$$ee Tippee is a lea#ing ban# in bab&
!ee#ing bottle in#"st& with stong pesence in Ital&, Spain, 2ance, Scan#ina%ia, .olan#, >apan,
A"stalia, Mi##le East an# pepaing !o giant $a(ets o! 0hina' The& ha%e ecentl& la"nche# in the
Unite# States, which again a giant $a(et !o an& in#"st& 52"t"e sto& To$$ee Tippee, 28186'
9uality of (roduct and ser"ices
J"alit& o! the po#"cts an# se%ices is an i$potant in#icato o! pe!o$ance' As #isc"sse# ealie,
this in#"st& is #i%en b& cons"$e-s #e$an#' The po#"ct is elate# to a sensiti%e iss"e o! bab& cae
an# +"alit& stan#a# pla&s %ital ole' A%ent an# B' Bown clai$s that thei po#"cts ae #e%elope#
b& pae#iatician as $entione# ealie in the epot'
Technological (rogress
B"e to high #e$an# in stan#a#s, +"alit& an# co$petition !o the bab& !ee#ing bottle, the c&cle o!
inno%ation an# #e%eloping a new po#"ct is on constant $o%e' 2o that !i$s ae in%esting h"ge in
eseach 7 #e%elop$ent an# into#"cing new technological pocess in the po#"ction' Most
$an"!act"es see inno%ation as highl& i$potant !acto in sti$"lating #e$an# !o po#"ct an#
sta&ing ahea# o! co$petitos' To$$ee Tippee clai$s that 2HA o! thei sales each &ea co$e !o$
inno%ation'
O%eall, the le%el o! co$petition, eg"lations !o$ go%en$ent an# intenational bo#ies an#
technological pocess has lowee# the ent& o! baies which $a(es this $a(et o! bab& !ee#ing
bottle a $onopolistic $a(et' In %it"e o! the elati%el& !ee ent& o! new !i$s, the long "n pice
$a(es $onopolistic $a(et si$ila to pe!ect co$petition' B"t #"e to this po#"ct #i!!eentiation, it
co$e closes to $onopol& $a(et'
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SMM221 MANAGING INTERNATIONAL BUSINESS
3. In the Industry
The abo%e anal&sis o! the bab& !ee#ing bottle in#"st&, with the s"ppot o! .otes si) !oces an#
S0., #epicts that the in#"st& is at the stage o! gowth in its in#"st& li!e c&cle, with chaacteistics
o! a $onopolistic co$petition' As !i$s po#"ce a less,#i!!eentiate# po#"ct, the& will ha%e a
cetain a$o"nt o! $a(et powe #"e to ban# lo&alt&' 2i$s ae thee!oe not pice ta(es, as the&
can aise pices witho"t losing all o! thei c"sto$es' The #e$an# c"%e will be #ownwa# sloping,
b"t elati%el& elastic #"e to the n"$be o! close s"bstit"tes' Th"s, the !i$ that has been patic"lal&
s"ccess!"l in !"l!illing the #e$an#s o! c"sto$es $a& contin"e to ean e)cess o! po!its with the
a#="st$ent $a#e, towa#s changing the in#"st& en%ion$ent' On the othe han#, yoomi is a new
sel!,wa$ing bab& !ee#ing bottle with a #i!!eent concept an# technolog& which is new to the
c"sto$e an# $a(et an# $a(es &oo$i a sole po#"ce' The &oo$i is a "ni+"e po#"ct an# thee is
no s"bstit"te &et a%ailable in the $a(et' In a n"tshell, 2ee# Me Bottles Lt#' has into#"ce# an
inno%ati%e po#"ct which is co$pletel& #i!!eentiate#' These !eat"es position the &oo$i in a
$onopol&' Rega#ing, &oo$i-s #e$an# c"%e is e+"al to the $a(et #e$an# c"%e an# o"tp"t
#ecision #ete$ines the $a(et pice'
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SMM221 MANAGING INTERNATIONAL BUSINESS
2i)liogra(hy
A%ent .hilips 528116, A%ailable atE httpEKKwww'a%ent'co$ 5Accesse#E 22 Mach 28116
Ban# .ac(aging 528896 Glass baby bottle in demand, Ma&K>"ne, Bsiness Sorce !omplete
LOnlineM' A%ailable atE httpEKKweb'ebscohost'co$K 5Accesse#E F Apil 28116'
B' Bown 528116, A%ailable atE httpEKKwww'#bowns'co'"(Kpo#"cts'php 5Accesse#E 22 Mach
28116
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4abebeg, A' an# Rieple, A' 528896 Stategic Management# Theory and $pplication. New No(
U'SE O)!o# Uni%esit& .ess'
Lipc*&ns(i, >', /ilson, >' an# Go##a#, >'5288H6 %ndstrial &rganisation #!ompetition, Strategy,
Policy 52
n#
E#'6,4alow E2T, .entice 4all
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28116
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5Accesse#E G Apil 28116
Q
SMM221 MANAGING INTERNATIONAL BUSINESS
Me#ical Be%ice Bail& 5288:6 !anada moves to ban BP$ baby bottles, >"l& D, p '9, Bsiness Sorce
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.op"la plastic an# pac(aging 528186 "rance bans baby bottles made of BP$)based prodcts, >"ne,
p 'DD, Bsiness Sorce !omplete LOnlineM' A%ailable atE httpEKKweb'ebscohost'co$K5Accesse#E G
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Roche, A' 528186 C3, to ban Bisphenol $ in baby bottles 1/22,.actica Me#icala , H'NR',Apil G, p'
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9
SMM221 MANAGING INTERNATIONAL BUSINESS

Academic a((endi&
1. 2PA % Bab& .o#"ct association
2. 2PA % Bisphenol A
3. 2arrier to entry% An& !acto which $a(es the a%eage cost o! a wo"l#,be entant highe than
that o! an inc"$bent, o which i$pe#es ent& in an& othe wa& 5Lipc*&ns(i et al', 288HEQ2D6'
4. 2arrier to e&ist% An& cost inc"e# b& an inc"$bent wishing to e)ist !o$ an in#"st&
5Lipc*&ns(i et al', 288HEQ2D6'
. I2FA: % Intenational bab& !oo# action netwo(
!. Industry life-cycle% A $o#el o! a how a t&pical in#"st& pogesses !o$ its bith, with the
ceation o! a new po#"ct t&pe, to its #e$ise, with the sale o! its %e& last po#"ct '5 4abebeg
an# Rieple, 2889E9826
;. $acro-en"ironment% The set o! !actos an# in!l"ences that is not speci!ic to an oganisation o
the in#"st& in which it opeates, b"t that nonetheless a!!ect the$'5 4abebeg an# Rieple,
2889E18H6'
<. $ono(olistic mar6et% Ma(et st"ct"e with a lage n"$be o! !i$s po#"cing si$ila b"t not
i#entical po#"ct, with !ew ent& baies' 2alls between the pola cases o! pe!ect co$petition
an# $onopol& 5Lipc*&ns(i et al', 288HEQF86'
=. $ono(oly% Ma(et st"ct"e with a single !i$, po#"cing a "ni+"e po#"ct an# potecte# !o$
co$petition b& ins"$o"ntable ent& baie' 5Lipc*&ns(i et al', 288HEQF86 A $onopol& e$ains
2ig"eE In#"st& li!e c&cle
So"ceE 4abebeg an# Rieple 52889E11H6
Into#"ction Gowth $at"it& #ecline


Ti$e
Into#"ction Gowth $at"it& #ecline


Ti$e
Total sales
:
SMM221 MANAGING INTERNATIONAL BUSINESS
the onl& selle in its $a(et beca"se othe !i$s cannot ente the $a(et an# co$pete with it'
Baies to ent&, in t"n, ha%e thee $ain so"ces' a6 Monopol& eso"ces b6 go%en$ent
eg"lations c6 po#"ction pocess' The (e& #i!!eence between othe co$petitions is the
$onopol&-s abilit& to in!l"ence the pice o! its o"tp"t' Beca"se $onopol& is the sole po#"ce in
its $a(et, it can alte the pice o! its goo#s b& a#="sting the +"antit& it s"pplies to the $a(et'
Its #e$an# c"%e is the $a(et #e$an# c"%e' I! $onopolist aises the pice o! the goo#s o! its,
cons"$e b"&s less o! it' The $a(et #e$an# c"%e po%i#es a constaint on a $onopol&-s
abilit& to po!it !o$ its $a(et powe' A $onopolist wo"l# pe!e, i! it wee possible, to chage
a high pice an# sell a lage +"antit& at that pice' The $a(et #e$an# c"%e $a(es that
o"tco$e i$possible' In patic"la, the $a(et #e$an# c"%e #escibes the co$binations o! pice
an# +"antit& that ae a%ailable to a $onopol& !i$' B& a#="sting the +"antit& po#"ce#, the
$onopolist can choose an& point on the #e$an# c"%e, b"t it cannot choose a point o!! the
#e$an# c"%e' Below !ig"e 1, the $onopolist-s po!it, the height o! the bo) 5seg$ent B06 is
pice $in"s a%eage total cost, . 1 AT0, which is the po!it on the t&pical "nit sol#' The wi#th
o! the bo) 5seg$ent B06 is the +"antit& sol#, J' Thee!oe, the aea o! the bo) is the $onopol&
!i$-s total po!it'
O J J"antit&
Maginal e%en"e
Be$an#
A%eage total cost
Maginal
cost
0osts an#
Re%en"e
Monopol&
.ice

A%eage
total cost

B
0
B
E
2ig"eE Monopolist
So"ceE Man(iw 52889EF216
18
SMM221 MANAGING INTERNATIONAL BUSINESS
1>. ,ligo(oly% A $a(et st"ct"e with s$all n"$be o! !i$s, whose po#"ct $a& be i#entical o
#i!!eentiate# an# whee thee ae baies to ent&'
11. Perfect com(etition% A Ma(et st"ct"e with lage n"$be o! !i$s po#"cing i#entical
po#"cts, an# with !ee ent&' The #e$an# c"%e !o co$petiti%e !i$s is absol"tel& hoi*ontal'
The #e$an# c"%e !o a pe!ectl& co$petiti%e !i$ is pe!ectl& elastic3 co$petiti%e !i$s can
sell all the& want to the $a(et pice' The !i$ is pice ta(e 5Lipc*&ns(i et al', 288HEQF16'
12. Product differentiation% The pactise o! $a(ing close s"bstit"tes appeas #i!!eent, so that
c"sto$e no longe ega#s the$ as si$ila o i#entical 5Lipc*&ns(i et al', 288HEQF16'
13. Structure - .onduct ? Performance% A $etho#ological appoach !o eseach in in#"stial
oganisation, in which the st"ct"al chaacteistics o! in#"sties ae ass"$e# to in!l"ence o
#ictate the con#"ct an# pe!o$ance o! the in#"st&-s $e$be !i$s' Moe sophisticate# $o#els
allow !o !ee#bac( e!!ects, wheeb& con#"ct an# pe!o$ance %aiables help shape the
in#"st&-s !"t"e st"ct"e 5Lipc*&ns(i et al', 288HEQFF6'
14. 3ertical integration% @etical integation e!es to the e)tent to which !i$ is in%ol%e# in
#i!!eent stages o! the sa$e po#"ction pocess o the e)tent to which an oganisation e)ten#s
Maginal cost
Maginal e%en"e
.PMR
J"antit&
.ice
.
O
J
2ig"eE .e!ect co$petition
So"ceE Man(iw 52889EF216
11
SMM221 MANAGING INTERNATIONAL BUSINESS
contol o%e its acti%ities C !owa#- towa#s the c"sto$e an# C bac(wa#- towa#s the
po#"ction o! its aw $ateial 5Lipc*&ns(i et al', 288HEQFG6
12