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EXTERNAL ANALYSIS:
THE IDENTIFICATION OF
INDUSTRY OPPORTUNITIES
AND THREATS
Dr(Prof) M Ambashankar - Corporate Strategies and New
03/04/24
Realities
3-2
OT
• Eli Lilly’s Prozac – antidepressant drug went out of patent
in 2001
Potential Competitors
New entrants into an industry threaten incumbent
companies.
Barriers to entry:
• Brand loyalty
• Absolute cost advantages
• Economies of scale
• Switching costs
• Government regulation
e.g.
• Brand loyalty – Coka cola, Pepsi
• Absolute Cost Advantage –
by Superior production operations - HUL
Control on particular inputs
Access to cheaper funds
Economies of scale – Nirma
Switching cost – Microsoft Windows
Government regulation – Petroleum, Telecom
03/04/24 Dr(Prof) M Ambashankar - Corporate Strategies and New Realities 3-8
Competitive Structure
Continuum of
Industry Structures
Fragmented Consolidated
Many firms, Few firms, One firm or one
no dominant shared dominance dominant firm
firm (oligopoly) (monopoly)
03/04/24 Dr(Prof) M Ambashankar - Corporate Strategies and New Realities 3-10
Substitute Products
The competitive threat of substitute products increases
as they come closer to serving similar customer needs.
Far Close
03/04/24 Dr(Prof) M Ambashankar - Corporate Strategies and New Realities 3-13
Complementors:
• Companies whose products are sold in tandem with another
company’s products.
• Increased supply of a complementary product collaterally
increases demand for the primary product.
Example:
• Faster CPU chips fuel sales
of personal computers.
03/04/24 Dr(Prof) M Ambashankar - Corporate Strategies and New Realities 3-14
Punctuated
Equilibrium
and
Competitive
Structure
03/04/24 Dr(Prof) M Ambashankar - Corporate Strategies and New Realities 3-20
Factor
endowments