Apec: Sales and Buyer Bargaining Power Essay

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Business & Operations Strategy Alignment
• Business Strategy
• Operations Strategy
• Generic Performance Objectives
1. Cost
2. Dependability
3. Speed
4. Flexibility
5. Quality

Business Strategy Options
• Thinking strategically about a company’s external environment
+
• Thinking strategically about a company’s internal environment
=
• Identifying promising strategic options for the company

Assessing the External Environment
Seven key issues
1. The Industry’s dominant economic features.
2. Strength of competitive forces facing industry members.
3. Forces driving industry change.
4. Market position occupied by industry members.
5. Likely strategic moves by rivals.
6. Key factors for future success in the industry.
7. Industry attractiveness and profitability.

The Industry’s dominant economic features
1. Market size/growth rate
2. Number of rivals
3. Scope of rivalry
4. Number of buyers
5. Product differentiation
6. Product innovation
7. Supply/demand conditions
8. Technological change
9. Vertical integration
10. Economies of scale
11. Learning and experience

Five-Forces Analysis
1. Firms in Other Industries Offering Substitutes
• Competitive pressures coming from the attempts of companies outside the industry to win buyers over to their products/services
2. Buyers
• Competitive pressures stemming from buyer bargaining power and buyer/seller collaboration
3. Potential New Entrants
• Competitive pressures coming from the threat of entry of new rivals
4. Suppliers of Raw Materials, Parts, Components, or Other Resource Inputs
• Competitive pressures stemming from supplier bargaining power and supplier/seller collaboration
5. Rivalry Among Competing Sellers
• Competitive pressures created by jockeying for better market position, increased sales and market share, and competitive advantage

Rivalry Among Competing Sellers
• Tactics for competing with rivals and attracting buyers include
1. Lower prices
2. Better products/quality
3. Stronger brand image
4. Wider selection
5. Bigger dealer network
6. Lower-rate financing
7. More innovation
8. Better customer service
9. More customization

• Rivalry is generally stronger when
1. Buyer demand grow slowly or falls off
2. Number of rivals increases
3. Rival’s products are commodities
4. Costs to switch brands are low
5. Rivals make aggressive moves to attract buyers
6. Rivals have diverse strategies

• Rivalry is generally weaker when
1. Buyer demand is growing
2. Rival products are strongly differentiated
3. Customer loyalty is high
4. Costs to switch brands are high
5. There are fewer than five sellers

Threat of Market Entrants
• Entry threats are stronger when
1. Many possible entrants
2. Entry barriers are low
3. Industry is expanding
4. Good profit outlook
5. Rapid demand growth
6. Industry members are weak
• Entry threats are weaker when
1. Few potential entrants
2. Entry barriers are high
3. Poor industry outlook
4. Slow demand growth
5. Industry members are strong

Sellers of Substitute Products
• Competitive pressure from substitutes is weaker when
1. Not of good quality
2. Higher priced
3. Cost to switch is high
• Competitive pressure from substitutes is stronger when
1. Readily available
2. Attractively priced
3. Have better features
4. Cost of switching is low
• Signs that competition from substitutes is strong
1. Sales of substitutes are growing faster than sales of the industry
2. Producers of substitutes are adding new capacity
3. Profits of producers of
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