1. Michael Porter Checklist Businesses as systems within systems of systems* *Brian Berry’s classic paper "Cities as Systems Within Systems of Cities" Papers in Regional Science (1964) is acknowledged

2. Business: A system within systems … The players Rivals Suppliers Customers Potential entrants Government regulators Producers of substitutes Producers of complements The macroeconomic environment

3. Porter’s Five Forces in Industry Analysis Rivalry Entry … and barriers to entry Substitutes … and complements Bargaining power of customers Bargaining power of suppliers

4. Porter’s Five Forces in Industry Analysis What’s the industry you will analyze? –Firms affected by same factors Technologies Legal constraints Customer preferences Broad definition of industry –Identify niches relevant to your analysis Narrow definition of industry –Pay attention to substitute products relevant to your analysis

5. Substitutes … and Complements Substitutes Increase demand elasticity facing your industry Limit industry profitability –Will firms offering substitute products compete aggressively? –Will new substitutes be developed? Complements: Their gain … your gain …their gain –How well does your industry piggyback? –Will new complements come along?

6. Customer Bargaining Power How concentrated are client industries? Is your industry’s product a major budget item for client industries? Is it essential to client industry’s product? –Impact on product quality Can customer switch … or is customer locked in? Is customer well informed?

7. Supplier Bargaining Power How concentrated is supplier industry? Are there substitutes for supplier’s products? Is your industry a major customer? Is supplier’s product an essential input? Can you switch … or are you locked in?

8. Threat of entry … Barriers to entry Barriers Economies of scale Economies of scope Product differentiation …brand loyalty Capital requirements for entry Access to distribution channels Access to specialized resources Entrant learning curve Your customer lock-in Aggressive opposition to entry? Resources in reserve … scare ‘em off

9. Rivalry in Industry Price competition? Industry concentration –Niches Product differentiation –Customer switching costs … customer lock in Industry growth Ease of exit