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Requirements in Each Stage of Industry’s Evolution Embryonic: Know-how, educating customers, opening distribution channels Growth: Know-how for continued innovation, financing, build demand Shakeout: Dominant market position, low cost producer, high capacity Maturity: low cost production, brand loyalty Declining: lowest cost production, reduce capacity * * Strategic Implications of theFive Competitive Forces Competitive environment is unattractive from the standpoint of earning good profits when: Rivalry is strong Entry barriers are low and entry is likely Competition from substitutes is strong Suppliers and customers have considerable bargaining power * Strategic Implications of theFive Competitive Forces Competitive environment is ideal from a profit-making standpoint when: Rivalry is moderate Entry barriers are high and no firm is likely to enter Good substitutes do not exist Suppliers and customers are in a weak bargaining position Strategic Groups Companies do not compete against all companies in an industry Companies compete against several other companies that follow similar strategies A strategic group consists of those rivals with similar competitive approaches in an industry Examples ways of competing: Price -- Range of products Innovation -- Customers served Research Quality * Procedure for Constructing aStrategic Group Map STEP 1: Identify competitive characteristics that differentiate firms in an industry from one another STEP 2: Plot firms on a two-variable map using pairs of these differentiating characteristics STEP 3: Assign firms that fall in about the same strategy space to same strategic group STEP 4: Draw circles around each group, making circles proportional to size of group’s respective share of total industry sales * Example: Strategic Group Map of the Video Game Industry Types of Video Game Suppliers/Distribution Channels Overall Cost to Players of Video Games Low (Coin-operated equipment) Medium (