Professional Documents
Culture Documents
Michael E. Porter
Competitive Strategy
Was not developed for IS use
Government policy.
Fixed costs.
Switching costs.
Exit barriers.
Substitute products / service
An alternative to doing business with the SBU.
Switching costs.
The power of buyers
The extent to which buyers of the products or
services in an industry have the ability to influence
the suppliers.
A buyer has power if:
It has large, concentrated buying power that
enables it to gain volume discounts and/or special
terms or services.
PhP5
D = elastic
Kinked D Curve
D = Inelastic
100 Quantity
Duopoly:
Industry dominated by two large firms
Possibility of price leader emerging rival will
follow price leaders pricing decisions
High barriers to entry
Abnormal profits likely
Highly interdependent
Monopoly:
Origins
Through growth of the firm
Through amalgamation, merger or takeover
Through acquiring patent or license
Through legal means Royal charter, nationalisation,
wholly owned plc
Monopoly:
Pure monopoly industry is the firm!
Actual monopoly where firm has >25% market
share
Natural Monopoly high fixed costs electricity
Monopoly:
Monopoly power
Refers to cases where firms influence the market in
some way through their behaviour determined by the
degree of concentration in the industry
Influencing prices
Influencing output
Erecting barriers to entry
Pricing strategies to prevent or stifle competition
May not pursue profit maximisation encourages unwanted
entrants to the market
Sometimes seen as a case of market failure
Monopoly:
High barriers to entry
Firm controls price OR output/supply
Abnormal profits in long run
Possibility of price discrimination
Consumer choice limited