1. Prepared by: Hotma Rina Sitorus Julio Lauritz Silvia Puspita
INDUSTRY ANALYSIS
PERFORMING FIVE FORCES ANALYSIS
Prepared by:
Hotma Rina Sitorus
Julio Lauritz
Silvia Puspita

2. Assestment of industry and firm performance
Indentification of key factors affecting performance in vertical trading relationships and horizontal competitive relationship
Determination of how changes in the business environment may effect performance
Indentifying opportunities and threats in the business landscape.

3. LIMITATIONS The Five forces framework has several limitations:
It pays little attention to factors that might affect demand
It focuses on a whole industry rather than on that industry’s individual firm
The framework doesn’t explicitly account for the role of the government, except when the government is supplier or buyer

4. PERFORMING FIVE FORCES ANALYSIS
ENTRY
SUPPLIER
POWER
INTERNAL
RIVALRY
BUYER
POWER
SUBSTITUTES
AND
COMPLEMENTS

5. INTERNAL RIVALRY Degree of Seller concentration?
FACTOR AFFECTING RIVALRY AMONG EXISTING
COMPETITORS:
Degree of Seller concentration?
Rate of industry growth?
Excess capacity?
Cost structure of firms:sensitivity of costs to capacity utilization?
Degree of product differentiation among sellers?
Brand loyalty to existing sellers? Cross-price
elasticities of demand competitors in industry?

6. INTERNAL RIVALRY
Buyers’ costs of switching from one competitor to another?
Are prices and terms of sales transactions observable?
Can firms adjust prices quickly?
Large and/or infrequent sales orders?
Use of “facilitating practices” (price leadership, advance announcement of price changes?

7. INTERNAL RIVALRY History of “cooperative” pricing?
Strength of exit barriers?
High industry price elasticity of demand?

8. ENTRY FACTORS AFFECTING THE THREAT OF ENTRY:
Significant economies of scale?
Importance of reputation or established brand loyalties in purchase decision?
Entrants’ access to distribution channels?
Entrants’ acces to raw material?
Entrants’ acces to technology/know-how?
Entrants’ access to favorable locations?

9. ENTRY Experience-based advantages of incumbents?
Network externalities: demand-side advantages to incumbents from large installed base?
Government protection of incumbents?
Perceptions of entrants about expected retaliation of incumbents/reputations of incumbents for “toughness”?

10. SUBSTITUTES FACTORS AFFECTING OR REFLECTING PRESSURE
FROM SUBSTITUE PRODUCTS AND SUPPORT FROM
COMPLEMENTS:
Availability of close substitutes?
Price-value characteristics of substitutes?
Availability of close complements?
Price-value characteristics of complements?

11. POWER OF INPUT SUPPLIERS
FACTORS AFFECTING OR REFLECTING POWER
OF INPUT SUPPLIERS:
Is supplier industry more concentrated than industry it sells to?
Do firms industry purchase relatively small volumes relative to other customers of supplier? Is typical firm’s purchase volume small relative to sales of typical supplier?
Few substitutes for suppliers’ input?

12. POWER OF INPUT SUPPLIERS
Do firms in industry make relationship-specific investments to support transactions with specific suppliers?
Do suppliers pose credible threat of forward integration into the product market?
Are suppliers able to price-discriminate among prospective customers according to ability/willingness to pay for input?

13. POWER OF BUYERS FACTORS AFFECTING OR REFLECTING POWER OF BUYERS:
Is buyers industry more cincentrated than the industry it purchases from?
Do buyers purchase in large volume? Does buyers’ purchase volume represent a large fraction of the typical seller’s revenue?
Can buyers find substitutes for industry’s product?
Do firms in industry make relationship-specific investments to support transactions with specific buyers?

14. POWER OF BUYERS
Is price elasticity of demand of buyers’ product high or low?
Do buyers pose credible threat of backward integration?
Does product represent significant of cost in buyer’s business?
Are prices in the market negotiated between buyers and sellers on each individual transaction, or do sellers post “take-it-or-leave-it” price that applies to all transactions?

15. GAME THEORY

16. GAME THEORY 2 Types of games: Rule-based games Freewheeling games
Egocentrism vs Allocentrism
Changing Game
From Lose-Lose to Win-Win

17. GAME OF BUSINESS What is it about? Value: creating it & capturing it
Value Net
Cooperation and Competition
CUSTOMER
COMPLEMENTS
COMPANY
SUBSTITUTES
SUPPLIER

18. CHANGING THE GAME Elements of the game: Players Added Values Rules
Tactics
Scope

19. CHANGING THE PLAYERS Dealing with Substitutor
Pay Me to Play
NutraSweet, HSC, Coke & Pepsi
McCaw, Lin BroadCasting Corp, BellSouth
Dealing with Complementors
Cheap Complements
3DO , Panasonic, GoldStar, Sanyo & Toshiba

20. CHANGING THE ADDED VALUES
Raise your own added value
TWA
Lowering others’ added value
Card Games Illustration
Nintendo Power
Customers : Toys R Us, Wal-Mart
Suppliers : Ricoh, Sharp (microchips) Marvel, Disney (game characters)
Complementors : Acclaim, EA (software)
Substitutors: Atari, Commodore (hardware)

21. CHANGING THE ADDED VALUES
Pumping Up Profits
Softsoap (Minnetonka)
3 things to remember
No guarantee that any player will get all its added value
Even if you have no added value, doesn’t prohibit you from making money
Rules constrain interactions among players

22. CHANGING THE RULES One price to all Strategy : Judo Economics
Kiwi is No Dodo
Kiwi Airlines & Delta Airlines
Solid Profits from Gas
Producers of CO2 (Airco, Liquid Carbonic, Air Liquide) & Customers of CO2 (Coke & Pepsi)
Meet the Competition Clause (MCC)

23. CHANGING PERCEPTIONS Reducing misperception ( lift the fog)
The New York Fog
New York Post vs Daily News
Maintaining uncertainity (thicken the fog)
Disagreeing to Agree
Investment Bank, Clients & % fee

24. CHANGING THE SCOPE Sega’s 16-bit system video games
Nintendo wait to years to respond

25. THE TRAPS OF STRATEGY You have to accept the game as it is
Changing the game must come at expense of others
Have to find something to do that others can’t
Failing to see the whole game
Failing to think methodically about changing the game

26. Case of Five Forces Analysis
21 Theater
21 THEATER

27. History of 21 Cinema
Founder: Cineplex 21 Group Since 1988 and has 75 % market share of All of Indonesia Lobby and Cafe Concepts (see pictures below)

28. Five Forces Analysis Existing Competitor: Blitz Megaplex
Comparison between 21 and Blitz Megaplex (see the next page)

29. 21 vs Blitz Megaplex No. Details 21 Cineplex Blitz Megaplex 1
Existing of Brand
Pioneer of Theater
Follower 2
Price of ticket
Easy to adjust, consumer has some choices (from cheapest price to most expensive price of ticket) according to the variant of products
Price of ticket more expensive, describing the luxury, prestige, modern and convenience 3
Sound system
Dolby Digital, THX 4
Facility
Lobby with many queue-lines and studios, Café, waiting room/seat, games area, smoking room, rest room
Large lobby with many queue-lines and studios and high tech computer of reservation, Café, waiting room/seat, games area, smoking room, rest room, merchandise shop 5
Concepts of Coziness
Complete, Luxury (depends on the offering of variant of products, such as Cinema 21, Cinema XXI, The Premiere), Cozy, Family Concept interior design
Complete, Modern, Cozy, "Teen, Young and Minimalist" Concept interior design", large lobby, 3D movies

30. 21 vs Blitz Megaplex Continue…
No.
Details
21 Cineplex
Blitz Megaplex 6
Variant of Products
Cinema 21, Cinema XXI, The Premiere (different level of coziness per each)
1 theater with different facilities per each (Ordinary, 3D movie, Velvet Class) 7
Buying ticket
buy directly to cinema, ticket online, membership ticket, buying ticket via sms 8
Numbers of branches
exist in almost every big cities in Indonesia, except Papua
exist only in Jakarta and Bandung 9
Location
Mall, own building
Mall only 10
Round-play films
Western films and Indonesian films
Western films, asian films (no indonesian films), independent films)

31. Concepts of Blitz Megaplex
Cafe
Velvet Class (Pacific Place)
Ordinary Studio
The performance of Film Advertisement

32. Threat of Entry Government Regulation
Location (access and the favorableness)
The rights to buy new films from outside
Economic situation

33. Substitute Products and Support from Complements
TELEVISION
DVD
INTERNET
MOVEABLE SCREEN (LAYAR TANCAP)
DVD RENTAL
COMPLEMENT
CAFÉ
Credit Card (New Offering and Cooperation), e.g: UOB, CITIBANK, MANDIRI, HSBC. etc.
FICTION OR REFERENCE BOOKS
MALL/PLAZA
MERCHANDISE/GIFT, e.g: MUG, DOLLS, TSHIRT, PEN, HAT, FREE TICKET, etc.

34. POWER OF INPUT SUPPLIERS
SUPPLIER POWER:
RIGHTS OF PLAYING FILM IN ADVANCE
COOPERATE WITH STAKEHOLDERS (GOVERNMENT, OTHER INSTITUTION RELATED TO THE FIELD OF THEATER AND FILMS)
TICKETS OFFERING
PRODUCT VARIANTS (CINEMA 21, CINEMA XXI, THE PREMIERE)
SOUND SYSTEM (DOLBY DIGITAL AND THX)

35. POWER OF BUYERS
FREE TO CHOOSE OTHER THEATER (BLITZ MEGAPLEX) ACCORDING TO:
TYPE OF FILM
TICKET (PRICE, BUYING TRANSACTION, ETC)
COZINESS (SEAT, CAFÉ, BUYING TICKET SYSTEM, TIME, ETC)
FREE TO CHOOSE SUBSTITUTES (TV, DVD, BOOKS, MOVEABLE SCREEN, ETC)

36. Thank You…
Question and Answer…