2016年3月27日 星期日

External Analysis: Industry Structure, Competitive Forces (全英文)

這篇主要是寫給自己, 用來提醒自己分析公司外在環境時需要怎麼做. 有興趣的朋友, 可以google中文的資料. 


Competitive forces in an industry have a direct bearing on a firm’s profit potential

At the start of the strategic management process, it is critical for managers to conduct a thorough analysis of the firm’s external environment to identify threats and opportunities. The initial step is to apply a PESTEL analysis to scan, monitor, and evaluate changes and trends in the firm’s macroenvironment. This versatile framework allows managers to track important trends and developments based on the source of the external factors: political, economic, sociocultural, technological, ecological, and legal.



The PESTEL model groups the factors in the firm’s general environment into six segments:
  • Political
  • Economic (growth rates, levels of employment, interest rates, price stability (inflation and deflation), currency exchange rates)
  • Sociocultural
  • Technological
  • Ecological
  • Legal




波特的五力分析
Porter derived two key insights that form the basis of his seminal five forces model:
  1. Rather than defining competition narrowly as the firm’s closest competitors to explain and predict a firm’s performance, competition must be viewed more broadly, to also encompass the other forces in an industry: buyers, suppliers, potential new entry of other firms, and the threat of substitutes.
  2. The profit potential of an industry is neither random nor entirely determined by industry-specific factors. Rather, it is a function of the five forces that shape competition: threat of entry, power of suppliers, power of buyers, threat of substitutes, and rivalry among existing firms.

Porter’s model identifies five key competitive forces that managers need to consider when analyzing the industry environment and formulating competitive strategy:
  1. Threat of entry
    • Incumbent firms can benefit from several important sources of entry barriers (有些看起來好熟.....其實就是Morningstar的護城河):
      • Economies of scale.
      • Network effects.
      • Customer switching costs.
      • Capital requirements.
      • Advantages independent of size.
        • Government policy.
        • Credible threat of retaliation
    • Power of suppliers.
    • Power of buyers.
    • Threat of substitutes.
    • Rivalry among existing competitors.



    The Five Forces Competitive Analysis Checklist


    The threat of entry is high when:
    1. images The minimum efficient scale to compete in an industry is low.
    2. images Network effects are not present.
    3. images Customer switching costs are low.
    4. images Capital requirements are low.
    5. images Incumbents do not possess:
      1. images Brand loyalty.
      2. images Proprietary technology.
      3. images Preferential access to raw materials.
      4. images Preferential access to distribution channels.
      5. images Favorable geographic locations.
      6. images Cumulative learning and experience effects.
    6. images Restrictive government regulations do not exist.
    7. images New entrants expect that incumbents will not or cannot retaliate.
    The power of suppliers is high when:
    1. images Suppliers’ industry is more concentrated than the industry it sells to.
    2. images Suppliers do not depend heavily on the industry for their revenues.
    3. images Incumbent firms face significant switching costs when changing suppliers.
    4. images Suppliers offer products that are differentiated.
    5. images There are no readily available substitutes for the products or services that the suppliers offer.
    6. images Suppliers can credibly threaten to forward-integrate into the industry.
    The power of buyers is high when:
    1. images There are a few buyers and each buyer purchases large quantities relative to the size of a single seller.
    2. images The industry’s products are standardized or undifferentiated commodities.
    3. images Buyers face low or no switching costs.
    4. images Buyers can credibly threaten to backwardly integrate into the industry.
    The threat of substitutes is high when:
    1. images The substitute offers an attractive price-performance trade-off.
    2. images The buyers’ cost of switching to the substitute is low.
    The rivalry among existing competitors is high when:
    1. images There are many competitors in the industry.
    2. images The competitors are roughly of equal size.
    3. images Industry growth is slow, zero, or even negative.
    4. images Exit barriers are high.
    5. images Incumbent firms are highly committed to the business.
    6. images Incumbent firms cannot read or understand each other’s strategies well.
    7. images Products and services are direct substitutes.
    8. images Fixed costs are high and marginal costs are low.
    9. images Excess capacity exists in the industry.
    10. images The product or service is perishable.

    (Source: Adapted from Porter, M.E. (2008), “The five competitive forces that shape strategy,” Harvard Business Review, January.)

    Applying Porter’s five forces model allows managers to understand the profit potential of an industry and to obtain clues on how to carve out a strategic position that makes gaining and sustaining a competitive advantage more likely. Follow these steps to apply the five forces model:
    1. Define the relevant industry. In the five forces model, industry boundaries are drawn by identifying a group of incumbent companies that face more or less the same suppliers and buyers. This group of competitors is likely to be an industry if it also has the same entry barriers and a similar threat from substitutes. In this model, therefore, an industry is defined by commonality and overlap in the five competitive forces that shape competition.
    2. Identify the key players in each of the five forces and attempt to group them into different categories. This step aids in assessing the relative strength of each force. For example, while makers of jet engines (GE, Rolls-Royce, Pratt & Whitney) and local catering services are all suppliers to airlines, their strengths vary widely. Segmenting different players within each force allows you to assess each force at a fine-grained level.
    3. Identify the underlying drivers of each force. Which forces are strong, and which are weak? And why? Keeping with the airline example, why is the supplier power of jet engine manufacturers strong? Because they are supplying a mission-critical, highly differentiated product for airlines. Moreover, there are only a few suppliers of jet engines worldwide and no viable substitutes.
    4. Assess the overall industry structure. What is the industry’s profit potential? Here you need to identify forces that directly influence industry profit potential, because not all forces are likely to have an equal effect. Focus on the most important forces that drive industry profitability.

    Source: "Strategic Management: Concepts" by Frank T. Rothaermel

    2016年3月25日 星期五

    Industry, Firm, and Other Effects Explaining Superior Firm Performance

    這篇短書摘, 比較像是寫給自己看的. 要提醒自己: 公司的表現, 除了跟自身有關外, 跟外在環境(產業, 景氣循環....等)也有很大的關係. 挑股and研究個股時, 不能只看個股表現, 還要著眼於大環境.  
    • Firm performance is determined primarily by two factors: industry and firm effectsIndustry effects describe the underlying economic structure of the industry. They attribute firm performance to the industry in which the firm competes. The structure of an industry is determined by elements common to all industries, elements such as entry and exit barriers, number and size of companies, and types of products and services offered. 
    • In a series of empirical studies, academic researchers have found that about 20 percent of a firm’s profitability depends on the industry it’s in
    • Firm effects attribute firm performance to the actions managers take. 
    • For now, the key point is that managers’ actions tend to be more important in determining firm performance than the forces exerted on the firm by its external environment. Empirical research studies indicate that a firm’s strategy can explain up to 55 percent of its performance.
    • Although a firm’s industry environment is not quite as important as the firm’s strategy within its industry, they jointly determine roughly 75 percent of overall firm performance. The remaining 25 percent relates partly to business cycles and other effects.
    • Competition—the ongoing struggle among firms to gain and sustain competitive advantage—does not take place in isolation. Managers therefore must understand the relationship between strategic management and the role of business in society. 



    資料與圖片來源: "Strategic Management: Concepts" by Frank Rothaermel