Competitive Intelligence

Dr. Richard MichonTRSM 1-040

rmichon@ryerson.cawww.ryerson.ca/~rmichon/mkt731

Scope of this Course Michael Porter Business economics Economic reasoning underneath

business strategy

Is this course matching your personal motivations?

Intellectual curiosity Abstract concepts Quantitative reasoning

Paris Hilton would not do well in this class

Is this course matching your student motivations? Minor or Major?

Motivation to workand learn

“A” students?

Students only doing time at Ryerson do not do well in this class

Grading

D- D D+ C- C C+ B- B B+ A- A A+

Is this course matching your professional motivations?

Will not bring you practical hands-on job skills

Will give you business insight

Will make you look more intelligent and help you make your way around as a smart kid!

Course Framework Cost, Pricing, and Value

Sustainable advantage

Understanding the industry structure and competitors’ behaviour

Course Content (1) Part 1: Firm Boundaries

Microeconomics (2) Economies of scale and scope (3) Vertical integration & diversification (4)

Part 2: Market and Competitive Analysis Competition and Competitors (5) Competition, strategic commitment, and dynamic

pricing strategy (7) Industry analysis (8)

Course Content (2) Part 3:Strategic Positioning and Dynamics Positioning for competitive advantage (9) Sustaining Competitive Advantage (10)

Part 4: Internal Organization Structure, culture and strategy (11) Markstrat wrap-up (12)

Course material David Besanko, David Dranove, Mark Shanley, Scott

Schaefer, Economics of Strategy, 6th Edition, Wiley, 2013 $141 (Binder) or $69 (e-book)

Markstrat online license and manual (60 USD)Purchase: www.stratxstore.com

Additional readings are posted on the website

Course evaluation Three quizzes out of four (individual) 15% Midterm exam 20% Markstrat Simulation 35%

Markstrat industry simulation (group) 15% One Markstrat industry analysis report (group) 10% Markstrat peer evaluation (individual) 10%

Final Exam (cumulative, must pass) 30%

100%

Enduring Principles

“He who loves practice without theory is like the sailor who boards ship without a rudder and compass and never knows where he may cast.”

Leonardo da Vinci

Enduring Principles "Theory without practice is empty;

Practice without theory is blind."--Immanuel Kant

"Practice without Theory is blind,Theory without practice is sterile"-- Karl Marx

"Practice without theory is dangerous, but theory without practice is madness".--Mao-Tse-Tung

Evolution of the Modern Firm Strategy = f (Business Conditions, Industry

structure, Monopoly Power)

Business Condition = f (Country’s Infrastructure, Technology, Governments)

Infrastructures = f (Transportation, Communications, Finance, Institution)

1840… Infrastructure (Lack of …)

Transport: Sea, Rail, Waterways (Canada and US) Communications: Mail, Telegraph, No market info. Finance: Small private banks, No asset financing, No spot

markets

Technology: Artisan, piecemeal production

Governments: Investments, lack of laws and regulations

Firms: Small, local, family owned & operatedProducer-Merchants-Brokers-Agents-Buyers

The Chicago Hub

1910… Infrastructure (Transaction efficiencies)

Transport: Efficient rail/waterways Logistics Communications: Telephone Finance: Investment bankers, accounting practices (i.e.

financial reporting and inventory turnovers), stock exchanges

Technology: Large throughputs, Economies of scale and scope (ROI), Office efficiency

Gov: Safety, antitrust, insurance, regulations

Firms: Some small, some large, professional managers, hierarchical organizational structures, vertical integration.

Yesterday… 1980s Infrastructure

Transport: Air and ground (multi-modal) Communications: EDI, IT and Web based Finance: Financial instruments, LBO, mergers

Technology: CAD and CAM, JIT tech and logistics

Government: Relaxed rules, support R&D & industrial clusters

Firms: Large conglomerates and portfolio holdings, diversifications

Today… 2010s Infrastructure

Transport: Air and ground (multi-modal) (global warming/costs) Communication: EDI, IT and Web based, Web 2.0 (Social Mkt) Finance: Collapse of institutions, credit crunch, ethics and governance

Technology: CAD and CAM, JIT tech and logistics,turnaround cycles, short runs, small volumes

Government: Tightening rules, re-invest in infrastructures, social programs

Firms: Downsizing (lean and mean), back to their knitting, focusing on core activities, outsourcing the rest, networking, flat structure, virtual organizations, governance

Learning Strategies Adaptive responses to the

environment and competition Following recipes Failures Principles are universal

Infrastructures drive businesses Large upfront investments Cost advantages only if

large throughputs Microeconomics theory

Applications are localized Distribution chains (short or long) Vertical integration or quasi integration Functions remain the same but can be performed by

different players.

Next Week, for Survivors

Microeconomic Primer Demand and cost functions

More on Markstrat