Porters 5 Forces comparison with Brandenburger and Nalebuffs Co opetition
University Business School Executive MBA Strategic Management Comparison of Porter’s 5 Forces with Brandenburger & Nalebuff’s Value Net 20th October, 2003 Contents; Page No. 3 4 4 4 4 5 5 6 6 7 7 7 8 9 10 11 12 13 15 19 1. ... 0 Porters 5 Forces Analysis of the Global Semiconductor Industry 2. ... 5 Competitive Rivalry 3.0 The Value Net Comparison to 5 Forces Analysis of the Semiconductor Industry 3. ... 0 Conclusions 5.0 Appendix A - Background to the Semiconductor Industry 5.1 Appendix B – Industry Drivers and Risks 5.2 Appendix C – Key Players 5.3 Appendix D - Industry Terminology 5.4 Appendix E – Additional Information on The Value Net 5.5 Appendix F – Additional information on Porter’s Model 6. ... 0 Introduction; The objective of this essay is to compare Porter’s ‘Five Forces’ approach with Brandenburger and Nalebuff’s ‘Value Net’ and ‘Co-opetition’, in the analysis of the Global Semiconductor Industry. For detailed introductions to both ‘ Brandenburger & Nalebuff’s Value Net’, and ‘Porter’s Five Forces’, see appendices E and F (pages 14 & 15) 2.0 Porters 5 Forces Analysis of the Global Semiconductor Industry; Industry rivalry is at the heart of the framework because it’s affected by the other forces. (Figure 1 – Porter’s Five Forces Framework); Threat of New Entrants Bargaining Power of Suppliers IndustryRivalry Bargaining Power of Buyers Threat of Substitutes 2. ... 5 Competitive Rivalry – Competing requires continual progress in leading-edge technology, while enduring volatile market conditions. ... However, the Value Net approach challenges companies to consider how co-operating can add value to their products and services. ... This environment; · promotes co-operation, competition, innovation at each level/component of the PC. ... 4 Complementors – Players can create markets by co-operating with competitors to develop common complements. Customers want to see both competition and co-operation among their suppliers and partners. Hence the spirit of co-opetition, which is evident in ventures such as Symbian, (Motorola, Ericsson, Nokia and Psion). ... Value Net Co-opetition, according to Adam Brandenburger, a Harvard Business School professor and co-author of ‘Co-opetition: A Revolutionary Mindset That Combines Competition and Cooperation’ (Currency/Doubleday), is a way to avoid destructive competition and to build a market for all participants, including competitors, suppliers and customers. ... Brandenburger and Nalebuff introduced the idea of the ‘Value Net’ as a counterpart to ‘Porter’s 5 Forces’. The ‘Value Net’ not only assesses threats to profits, but also highlights opportunities that arise from co-operating with other industry ‘players’. ... Todays brand of co-opetition has its roots in game theory, a mathematical method of analysing competitive situations to pick the best course of action. ... Brandenburger and Nalebuff use the Value Net to explain the interdependencies amongst the players. ... Horizontally, Brandenburger and Nalebuff state that "complementors are just the mirror image of competitors. ... Appendix F:- Additional Information on Porter’s Five Forces Threat of New Entrants Bargaining Power of Suppliers IndustryRivalry Bargaining Power of Buyers Threat of Substitutes (Figure 1 – Porter’s Five Forces Framework) “The essence of strategic management is to identify the sources of profit available to the business enterprise, and to formulate and implement strategies that exploit these sources of profit”. ... This ‘ 5 Forces Framework’ remains effective, and is flexible enough to enable changes in the nature of competitive environments that have emerged in the recent past. Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organisation’s external environment. ... Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organisation. Porter’s model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of the industry. The Five Competitive Forces are typically described as follows: 1. ... 5. ... Five Forces Analysis provides valuable information for three aspects of corporate planning: Static Analysis: The Five Forces Analysis allows determining the attractiveness of an industry. ... Moreover, the model can be used to compare the impact of competitive forces on the organisation with the impact on competitors. Competitors may have different options to react to changes in competitive forces from their different resources and competences. ... Dynamic Analysis: In combination with a PEST-Analysis, which reveals drivers for change in an industry, Five Forces Analysis can reveal insights about the potential future attractiveness of the industry. Expected political, economical, socio-demographical and technological changes can influence the five competitive forces and thus have impact on industry structures. Useful tools to determine potential changes of competitive forces are scenarios. Analysis of Options: With the knowledge about intensity and power of competitive forces, organisations can develop options to influence them in a way that improves their own competitive position. ... Thus, Porters model of Five Competitive Forces allows a systematic and structured analysis of market structure and competitive situation. ... Following, all relevant forces for this market are identified and analysed. Hence, it is not necessary to analyse all elements of all competitive forces with the same depth.