BUSINESS POLICY

AND STRATEGY
 AGENDA

A. Learning Outcomes
B. Rules of Engagement
C. Discussion of the Lesson
D. Deepening
E. Synthesis
F. Task Analysis
 LEARNING OUTCOMES

At the end of this lesson, the students should

be able to:
 Distinguish the various market structure.
 Explain the Porter’s Five Forces Model
 RULES OF ENGAGEMENT

 Reading the textbook and the assigned article

 Active participation in class
 Respect each other
 Listen to the person who is sharing his/her
ideas during the class discussion
 TOPICS

 Market Structure
 Porter’s Five Forces Model
 MARKET STRUCTURE

There are three important structural

features of the market which should be
considered by any organization:
1. Market Concentration
2. Entry Barriers
3. Product Differentiation
 MARKET STRUCTURE

1. Market Concentration
 It is the degree by which small number
of companies dominate a particular market
 It then predicts for new entries on how to
enter the market.
 It also provides decisions on what to expect
and whether it is possible to enter the
market at a particular period.
 MARKET STRUCTURE
2. Entry Barriers
 This refer to the difficulties and challenges
by potential new entrants which are
entering the market.
 New companies should be ready to face the
barriers that existing firms would pose in
the chosen industry.
 It is crucial to anticipate these challenges to
avoid rival companies from taking over.
 MARKET STRUCTURE

3. Product Differentiation
 It refers to the degree by which a company
is able to distinguish its product to other
players in the market as values by
consumers
 It is the uniqueness of the features in a
particular brand.
 MARKET STRUCTURE

Bain and Qualls developed another market

structure based on the sellers in the market:
1. Atomistic – perfect competition exists
because of the existence of many small
companies
- because there are so many companies, no
one is able to dominate the market.
- results in low profit but low cost for
clients or consumers
 MARKET STRUCTURE

2. Oligopolistic – few large sellers have a high

level of interaction with one another
- players in in the oligopolistic competition
can set their own prices, and competition is
somewhat fierce (e.g. oil industry)
 MARKET STRUCTURE

Product offerings that are semi-

standardized with differentiation:
1. Monopoly – there is one seller who
dominates the market.
- the company can dictate its own price
- companies sell products that are
differentiated from one another
 MARKET STRUCTURE

2. Homogenous Products – there are products

that are highly identical
- the characteristics of the product are not
differentiated from one supplier to another
e.g. wet market – fish, fruits, vegetables,
meat, etc.
 MARKET STRUCTURE

3. Differentiated Products – there are

products differentiated by design, quality,
branding, among others
- thy have certain features which
differentiate them from one another
e.g. branded products such as Iphone and
Samsung cellphones
 MARKET STRUCTURE

Under ease of market entry, there are three

subtypes:
1. Ease of Entry– there are no difficulties in
entering the market, including the new
entrants
- there are minimal barriers to entry and if
there are, they are manageable
 MARKET STRUCTURE

2. Moderately Difficult Entry – there are

barriers but not too difficult for sellers to
monopolize the market. However, it may be
difficult to enter the market.
- Some sellers may monopolize the market.
 MARKET STRUCTURE

3. Blockaded Entry – there are barriers that

are too high which potential players cannot
enter
- Existing companies monopolize the prices.
Moreover, these companies would make it
difficult for new players to enter the market
- It is very difficult to enter the market
THE FIVE-FORCES MODEL OF
COMPETITION

Copyright ©2013 Pearson Education

 THE FIVE-FORCES MODEL

1. Identify key aspects or elements of each

competitive force that impact the firm.
2. Evaluate how strong and important each
element is for the firm.
3. Decide whether the collective strength of
the elements is worth the firm entering or
staying in the industry.
Copyright ©2013 Pearson Education
 THE FIVE-FORCES MODEL
 Rivalry among competing firms
• Most powerful of the five forces
• Focus on competitive advantage of strategies
over other firms
 Number of competitors
 Quality Differences
 Other Differences
 Switching costs
 Customer loyalty
 Cost of leaving market, etc
THE FIVE-FORCES MODEL

Copyright ©2013 Pearson Education

 THE FIVE-FORCES MODEL

 Potential Entry of New Competitors

• Barriers to entry are important
• Quality, pricing, and marketing can overcome
barriers
 Time and cost of entry
 Specialist knowledge
 Economies of scale
 Cost advantages
 Technology protection
 Barriers to entry, etc.
 BARRIERS TO ENTRY

• Need to gain economies of scale quickly

• Need to gain technology and specialized
know-how
• Lack of experience
• Strong customer loyalty
• Strong brand preferences
• Large capital requirements
• Lack of adequate distribution channels
 BARRIERS TO ENTRY

• Government regulatory policies

• Tariffs
• Lack of access to raw materials
• Possession of patents
• Undesirable locations
• Counterattack by entrenched firms
• Potential saturation of the market
 THE FIVE-FORCES MODEL

 Potential development of substitute

products
Pressure increases when:
• Prices of substitutes decrease
• Consumers’ switching costs decrease
 Substitute performance
 Cost of change, etc.
 THE FIVE-FORCES MODEL
 Bargaining Power of Suppliers is increased
when there are:
• Large numbers of suppliers
• Few substitutes
• Costs of switching raw materials is high
 Backward integration is gaining control or
ownership of suppliers
 Number of suppliers
 Size of suppliers
 Uniqueness of service
 Ability to substitute
 Cost of changing, etc.
 THE FIVE-FORCES MODEL

 Bargaining power of consumers

• Customers being concentrated or buying in
volume affects intensity of competition
• Consumer power is higher where products are
standard or undifferentiated
 Number of customers
 Size of each order
 Differences between competitors
 Price Sensitivity
 Ability to substitute
 Cost of changing, etc.
Conditions Where Consumers Gain
Bargaining Power

1. If buyers can inexpensively switch

2. If buyers are particularly important
3. If sellers are struggling in the face of falling
consumer demand
4. If buyers are informed about sellers’ products,
prices, and costs
5. If buyers have discretion in whether and when
they purchase the product
 DEEPENING

1. Form a group composed of 6-7 members

2. Make a SWOT analysis for La Consolacion
University of the Philippines using the
guidelines we have previously discussed.
3.Kindly use ¼ illustration board and various art
materials to illustrate your matrix.
 SYNTHESIS

Among the alternative strategies you

have learned today, which one do you
liked best. Explain by giving concrete
example.
.
 TASK ANALYSIS

1. Form a group composed of 6-7 members

2. Make a research on how to develop the
other strategy matrices: SPACE Matrix, BCG
Matrix, IE Matrix, and QSPM.
3. Prepare a brief PowerPoint presentation.
THANK YOU!
 REFERENCES

 David, F. (2013). Strategic Management Concepts and

Cases: A Competitive Advantage Approach Fourteenth
Edition. Pearson Education South Asia Pte Ltd
 Hill, C., Schilling, M., Jones, G. (2017). Strategic
Management Theory. CENGAGE Learning.
 Zarate, C. (2011). Business Policy and Strategy. Rex
Book Store.