This document discusses some caveats to using industry analysis and the five forces model. It notes that while substitutes can limit industry profits, some low-profit industries can still yield high returns for companies with sound strategies. It also cautions that five forces analysis assumes a static situation, whereas industries are dynamic. Additionally, it introduces the concept of strategic groups within industries - clusters of companies that share similar strategies regarding factors like product scope, pricing, and distribution methods.
This document discusses some caveats to using industry analysis and the five forces model. It notes that while substitutes can limit industry profits, some low-profit industries can still yield high returns for companies with sound strategies. It also cautions that five forces analysis assumes a static situation, whereas industries are dynamic. Additionally, it introduces the concept of strategic groups within industries - clusters of companies that share similar strategies regarding factors like product scope, pricing, and distribution methods.
This document discusses some caveats to using industry analysis and the five forces model. It notes that while substitutes can limit industry profits, some low-profit industries can still yield high returns for companies with sound strategies. It also cautions that five forces analysis assumes a static situation, whereas industries are dynamic. Additionally, it introduces the concept of strategic groups within industries - clusters of companies that share similar strategies regarding factors like product scope, pricing, and distribution methods.
Threat
of
SubsGtute
Using
Industry
Analysis:
A
Few
Products
and
Services
Caveats
Substitutes limit the potential returns of an Managers must not always avoid low profit industry industries Can still yield high returns for players with sound Ceiling on the prices that firms in that industry strategies can profitably charge Implicitly assumes a zero-sum game, Price/performance ratio determining how a firm can enhance its position relative to the forces. The fact of complements. Five Forces analysis is essentially a static analysis.
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Strategic
Groups
within
Industries
The
World
Automobile
Industry:
Strategic
Groups
Two unassailable assumptions in industry
analysis No two firms are totally different No two firms are exactly the same Strategic groups Cluster of firms that share similar strategies Breadth of product and geographic scope Price/quality Degree of vertical integration Type of distribution system