In deze samenvatting vind je de stof die behandeld is tijdens de colleges ter voorbereiding van de endterm.
Met afbeeldingen vanuit de slides ter extra illustratie.
● Economic value created = difference between perceived benefits gained by a
customer and the full economic costs.
- Value: What are you willing to pay?
- Price: What you pay
- Cost: How much it costs to produce
● Consumer surplus: Value - price
● Producer surplus: price - cost
● Economic value: value - cost
● Accounting measures;
- Profit ratio’s
- Liquidity ratios
- Leverage ratios
- Activity ratios
● Economic measures
- The cost of debet
- The cost of equity
- Weighted average cost of capital (WACC)
WACC < ROA < Industry Avg. ROA
● Why external analysis?
- Discover opportunities/threats
- Analyze potential for profits
- Understand the nature of competition
● Level of Analysis
- General environment
- Industry (part of the task environment)
- Strategic group
- Individual Group (internal/competitor)
,● General External Environment (outside -> not in the industry)
● Concepts of general environment:
- Demographics: Age, sex, ethnicity, income etc.
- Culture: Values, beliefs, norms etc.
- Economic climate: Health of economic systems within which a firm operates.
- Legal and political conditions: law/legal system -> rules etc.
- Specific international events: Wars, terrorism, nature etc.
- Technological: A change in technology (come-up of the internet for instance)
● The Structure-Conduct-Performance model (SCP model)
- Developed to spot anti-competitive conditions for anti-trust purposes
- Became a model that assesses the possibilities for above normal profits for
firms within an industry.
,● Industry Analysis - 5 forces
● Industry: Set of companies that fulfill a similar need with a similar process.
- Too narrow: Actual competitors are labelled substitute or new entrant
- Too broad: Actual substitutes are labelled direct competitors
● Industry conditions that generate a high threat of existing competitors:
- Large number of competitors
- Slow or declining industry growth
- Low product differentiation (leading to low customer loyalty and switching
costs)
- Industry capacity added in large increments
● Industry conditions that generate a high threat of new entrants:
- High industry growth rate
- Low barriers of entry
- Economies of scale
- Product differentiation
- Government regulation of entry
- Retaliation of incumbent
- Proprietary technology
- Managerial know-how
- Favorable access to raw material
- Learning-curve cost advantages
● Threat of substitute products -> products are form a different industry but fulfill a
similar need (e.g. Coke and Pespi are rivals, milk is a substitute for both)
● Industry conditions that generate a high threat of substitutes:
- High potential of fulfilling the same need
- Low switching costs for customers
, ● Threats of supplier leverage:
- Small number of firms in supplier’s industry
- Highly differentiated product
- Lack of close substitutes for supplier’s products
- Focal firm is an insignificant customer of supplier
- High switching costs for focal firm (= a central company who control their
supply chain)
● Threat from buyers influence
- Small number of buyers
- Low level differentiation
- Low switching costs
● Complementors as a sixth force
- Customers value the focal firm’s products more when the customers also own
the product of the other firm
- Complementors increase the size of the market
- Examples:
Airline industry and the hotel industry
Consoles and video games
● Drawback 5-forces
- Averages with big variance
- Unclear weight separate forces
- Highly dependent on industry definition
- Oversimplification / not complete
- Catch 22 -> Five forces is hard to make when the industry is complex, but
also most important IF the industry is complex.
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