Transcript for:
Strategic Management Lecture - Chapter 2 Summary

good morning everyone how are you welcome to live learning classes by Board of studies we are studying strategic management and I see gun Diva hardik shankaran already joined in good to see you guys on time all right I see more people joining in we have s j hi San Jennifer J kadur how how's the festive season going how's the navaratri going you guys are going and enjoying some Dura Puja and navaratri or is it you're just sitting at home and studying I'm good and thank you for asking hi Kadri hi tanu Ram DEA Rami is there s joti belua rudra tamai how are you good good good morning Jay Kushi harad we doing chapter 2 almost there with chapter 2 I know these chapters are long this same strategic management is just five chapters but these are long chapters and really interesting Concepts that we have broughten now Prince Kushi J how are you you guys enjoying your Festival season or just studying sitting at home slogging into your books Anisha par Diva har Jay Kushi Prince bua D freti Simon I'm good Simon thanks for asking hi tamaray no question questions okay yesterday you're you're going you went yesterday okay you went to a fair yesterday they were good to see that somebody's enjoying at least right if not all of us it's good to go and enjoy the festive season as well just don't keep studying I'm I'm glad you're here from Foundation as well so I'm really happy you have reached intermediate now so good to see you here and we'll be happy to see you in finals as well just studying at home PA go out enjoy a little as well that's that's what I would say just don't keep studying it's a festive season sham go two three hours roam around go to some fed go to some pandal go to somewhere right hang out with friends enjoying both people are enoy joining both that's that's what we expect you to do I'm good Jay thank you so much awesome we were doing chapter 2 any questions any doubts anything any concept that you feel is not clear let's spend a minute to see if you have any doubts before I start the session right we doing chapter 2 we talking about strategic analysis of external environment we talking about internationalization of businesses we're talking about product s we talking about Industries we're talking about how organizations really develop a strategy around their external environment how do they respond to it what all does come into the external environment right we've been doing this and today we will complete a chapter 2 and try to start chapter 3 as well otherwise we will do some questions right I do have some questions for you guys as well so we'll do that we'll touch upon right we'll touch upon some study material questions as well November LLC only one lecture every day that's not possible one lecture every day means in in in totality prints you your syllabus anyway it's it's well designed to help you complete the syllabus well in time see ICI wants to give you time for Sal study as well let me be be honest with you right I feel a lot of you think that the classes are going slow or they're taking a lot of time but that's how it's supposed to be right the classes will take time why because we are giving you time for sales study as well it's not just you come here you study you go back the habit of sales study has to has to come up and I in your especially in C examinations I can tell you with experience right most of my exam I cleared because I did a lot of sales study after looking at books after talking to friends or listening to some lectures online I used to go back and do sales study a lot of it right because when you teach yourself you teach yourself the best okay Sal study means you're teaching yourself nowadays you have this chat GPT right you have this AI if you have ever used chat GPT you would go there and see that you prompt anything it learns from your questions it does a self-learning and then gives the answers why is it called so disruptive a technology because it's working on selflearning it's doing a selflearning that's why it's going to disrupt the the entire Industries right and here we are saying we need you to spoon feed everything tell us everything we don't want to spend time with ourselves teaching eles because that's not going to help what's going to help is self study and you have to do that okay that's that's my advice might be right might be wrong might not suit you that's a different case but that's what I feel okay spend a lot of time studying yourself rather than being dependent on the classes classes are here to clear your doubts classes should be used to clear some Concepts that you are not able to understand classes should not idly be a source of your preparation is what I feel okay I am part of these classes but I'm still telling you this honestly you will succeed only when you study yourself as simple as that bottom line cool no questions let's get going into our chapter 2 where we left off right we left off our chapter 2 somewhere talking about right somewhere talking about about product and industries we were talking about strategic analysis what are the kind of external internal analysis or SWAT analysis we were talking about figure out your strengths work on your weaknesses find opportunities in the environment balance it out with your weaknesses and the threats that are there in the in the environment strength weakness opportunity and threats what analysis right then we talked about risks in the shortterm and long-term external and internal risks that come to your your analysis of the environment your analysis might be wrong something might change in the environment your resources might not be capable enough to meet your dreams or desires of an organization or something inconsistent might happen with within your organization all of this can cause a lot of risk to your environment analysis to your strategy and that is what strategic analysis or strategic risk was all about right why was it important to determine opportunities and threats give a direction continuous learning image building meeting competition that's why strategy and business environment study is important okay micro and macro we were talking about macro in this chapter where we were talking about the external macro environment which is demographic social cultural economic political legal and and technological environment we talked about a tool which is called pestel analysis which helps you analyze the macro environment of an organization of a business of a company political economic social cultural technological legal and environmental aspects of the environment are analyzed by using pestal analysis which helps you build strategies based on what you gather information about the external environment what are the demographics what is the social cultural setup of the Society of the market that you're catering to okay great then we talked about certain examples or use cases of business strategies of pesel analysis like replacement of technology technology changes or the economic situation of the country changes for example Palestine versus Israel right the war is going on the economy of the countries are changing okay the economy of us is changing because of this the economy of India might get impacted right social like for India India is a developing country a lot of jobs being created in India a lot of mnc's coming going to India and you would see a lot of Lifestyle Trend changes in India a lot of people have started going to gym a lot of people have started eating healthy food people are buying a lot of cars people are buying a lot of gadgets right iPhones and I your Apple watches and Samsung phones this and that and redmi phones OnePlus 40 50,000 Rupees OnePlus phones these are Trends these are lifestyle trends that people want to spend on technology people want to spend on lifestyle they become affluent day by day so this is where companies analyze their macro environment and figure out opportunities and threats right even from a legal aspect how the law is changing how the GST is changing how easy it is to do business in the country are the codes supportive of business or is it really tough for a business to do a to do an an operation in a particular country where the courts do not support or the employment law is very strict or the competition law is very weak so it's not a fair ground for them what what's happening there the organization the company has to be aware of that then you have political environment how are the political parties how volatile they are how strong they are what are their the probably policies for businesses are they more investment Centric or are they more socialist where they say collect money give it to the poor or they like we want more people to become entrepreneurs what kind of a policy does the political party in the country has all these aspects of macro environment are analyzed in pesel analysis okay then we talked about International businesses what is characteristic of a global company how do you develop International companies right we talked about certain Indian companies that have gone Global like TCS Vio vidanta Reliance AEL all these India companies have now gone Global right TCS has developed velopment centers in Chicago in Netherlands in Australia in every part of the world every big country of the world TCS with proant Reliance AEL all of these have operations all of these have offices all of these have really really talented people working for them in different uh different countries most of you after becoming chared accountants if you plan to get into employment and you want to get into these companies or any other big company they're just very few names there thousands of companies which have gone Global you can you can opt for a global role like a child accountant working in newand or a chartered accountant working with vipro in let's say in in Ireland or UK right all these companies have gone Global so we studied why do they go Global because there are certain things it's not just about more Market that's one more Revenue more margins better margins more market share that's one that's for sure but other things are for example reduced time the internet has broken down the barriers access to resources increases more talented people across the globe they can exploit exploit in terms of utilize the word exploit is just used here but it's more about utilizing the talent globally right then you have cost reduction opportunities like Zara and H&M took an example are coming to Indonesia Vietnam for making their products right Bangladesh they are manufacturing their all the clothes all the jeans and tops and shirts and all the fashionist stuff you see on Zara and H&M it's made somewhere in Bangladesh somewhere in Vietnam or maybe Indonesia right cost reduction because producing the same thing in let's say us in Canada and somewhere in Europe is really costly for them but these countries like Bangladesh India or Vietnam Indonesia right these countries are really really cheap for them as compared to those countries so they want to come to these countries start their operations start their manufacturing PLS and then take it back to those countries right and sell those in the same countries as well right then economic integration ease of forming alliances within the companies like Starbucks coming to India with Tata right Range Rover Land Rover being bought by Tata there Reliance buying a lot of international Brands international hotels right ease of forming strategic Alliance is way more in in today's time people are aware of global things people are aware of global Trends people are aware of global resources so it's time to use all of this right then we were doing multinational analysis Regional analysis and Country analysis that from top to bottom you go analyzing each aspect of the international environment you talk about different countries which country suits my needs the best then within the country what region east west south north of of that particular region of that particular area that does make sense for me and that you get into a particular country to analyze what kind of markets are there what kind of opportunities there what kind of threats are there how can you manage those and build a business there right that that is the layer of analysis you do for internationalization of your business okay great and then we were finally talking about about understanding product and Industry like when we say product we are also talking about services not just hardcore products like chocolates and cars we are also talking about Resorts you go to a resort pay 27 28,000 rupees for one night to enjoy the scenic Beauty the services they have the food the lounge the pool the gardens the rooms right all of that is also part of product right and Industry like a dentist servicing or somebody selling tea on the road or in a stall or a coffee right all of this is product and Industry great uh I see something in the chat let's see why ESG regulation is not considered as a separate chapter in Strategic Management this concept is manary disclos in annual report of large listed companies because strategic management is not just talking about legal aspect we are talking more about strategy wherein we are touching about the legal aspect as well we are talking about what compliances you have to do we are talking about value systems right shasan we have talked about value systems we have talked about ethics we have talked about intent all of that philosophically covers these Concepts that you have to do the right thing right Strategic Management leaves this topic for the law for the like papers which are more technical Centric what we're talking here about is a broad strategy where we do touch upon concepts of intent value we do talk about doing the right thing triple bottom line we'll talk about that as well okay black rock is coming with Geo Financial Services to enter into India's mutual fund Market Bar thanks for that information that's a great thing that you're reading the news and that's absolutely right that's internationalization of business as well one of the biggest investment Banks black rock is coming to India with Geo Financial Services right building a product here selling something to Indians here so that's inter internationalization of business again great we talking about products and industries right we talked about tangible and intangible products tangible products being something that you can touch like a phone like a mug water bottle bed pillow the tube lights the watch the the a perfume bottle a cream right all of that is tangible product intangible products is like Insurance Services your sim card services your television channels right your OT platforms these are intangible products you can't touch them but you can experience them you can feel them right those are also products pricing Dynamics like pricing are determined by supply chain or your supply and demand or quality marketing if the marketing is good they will charge a higher price if they had have a bigger brand person like amitab ban or doni doing a particular ad you know this they're going to charge more money because they have got that person to promote their product right so we know if donon is advertising a particular product or amab bachan is advertising a particular particular product it's going to charge or it's going to have costlier pricing than a basic product right that's called pricing Dynamics making the customer feel that see we can charge more money it doesn't make sense to be honest but that's how pricing Dynamics work okay also not just this but sometimes competition also sets the price for you as well you might be having a particular stall of Sandwich outside a college and you say that boss I want to charge about 100 rupees for one sandwich somebody comes and opens a stall and is selling sandwiches for 75 rupes you will be bound to sell for 75 or 80 you cannot sell for 100 right it will be really difficult for you to sell the sandwich at 100 rupees that's how competition P pushes you or often sets the price prices for you in the market product features for satisfaction like product features satisfy the customer needs they are supposed to satisfy what the customer wants right and you need to take feedback at every stage of a product as an organization to ensure that the features are being updated upgraded every single cycle of your Innovation so that the customers are satisfied and feel happy about your product okay like apple does like Samsung does like LG does like Airtel does like Lenovo HP Microsoft Google every four or five weeks you would see Chrome update now you would go and see your Chrome it's again updated your software phone softwares are always getting updated the apps are getting updated why why are they being updated because the companies want to ensure that the customer feels engaged that the customer feels that they are being taken care of okay that that's why they keep upgrading the design the way the features this and that everything okay products are pivotal for business that means they are really important they are the center of the business right that is where the business stands a product or a service right they're Central to the business they drive production quality sales revenue margin everything comes from products and services for a business finally product life cycle we were talking about every product every every product has a product life cycle which starts from introduction goes to growth then maturity and then it sees a decline the question to you is that I already explained is right the question to all of you in the chat is which of the following which of the following segments within product life cycle or which of the stages in the product life cycle any business tries to expand the more most or elongate the most which stage in the product life cycle does an organization a company a brand wants to elongate or expand the most which stage in product life cycle do they want to elongate or stretch the most okay moan says growth okay maturity growth maturity growth there's a tussle between growth and maturity which I'm very happy to see because that's what I expected nagaraju uh non-trading concerns like education institutions and hospitals and other service industry for them it is necessary for strategy absolutely yes nagaraju every business needs a strategy right what what should be the pricing of a heart surgery what should be the pricing of a dent dental surgery what should be pricing of uh of replacing a a kneecap what should be the pricing of General Health checkup how do you do that that's strategy there is competition as well pricing is done strategy is done marketing is done promotion is done everything is done growth growth growth growth majority of the people saying growth okay now the ratio is 70 30 70 % of the people say growth 30% of the people say maturity okay we have a reason as well for maturity part says maturity because they will try to add new things until it will be substituted for something else right okay growth they want as soon as possible that's right but the question is which stage do they want to elongate the most you know the interesting thing is both the answers are right but it depends on the stage your organization is okay now I'll tell you what the interesting thing about product life cycle is the product life C life cycle also has the age of the company as a big factor for example a startup a startup would want to elongate their growth stage they would want to grow for the next 5 seven years they would want to grow at 100% every year we double the business if a startup today is let's say a 20 CR business they want to do 40 they want to do 80 they want to do 160 they want to do 320 they want to do 640 crores right they want to elongate their growth a company like a company like wellestablished company let's say for example PP drers or or let's say any po sari or nari these are Big Brands already 50 60 Years of Legacy they are at already maturity stage they know now I need to elongate my maturity of the product I am well established in the organ in the industry now I just need to maintain that position of top three top five in the industry right so that's where the product life cycle also comes into the picture it really depends on the age of the company as well right startups would want to grow crazy every year but a wellestablished brand would want to maintain their top five top three uh designation or their position in the market as long as possible so both the answers are absolutely right it really depends on the age of the organization right super I see a question how to decide now the company's which stage of its cycle yog you get to know that when you study a particular company right when you study a particular company you get to know what kind of stage they are in okay it's a 50 60 year old company doing a, CR rupees business has a gross profit of 80% has a net profit of 35% you know it's a mature company if I tell you okay so so to your question dream 11 right dream 11 you all know what is dream 11 you watch cricket it's a it's it's an it's a game app it's a betting app whatever you call it okay dream 11 is in what stage of their age or what age are they a new growing company or are they a mature company dream 11 it's a question to everybody specifically to yogan you will answer yourself dream 11 is a new age growing company or a wellestablished mature company Al is mature company a okay maybe I'm too old then if dream 11 is a mature company then I am maybe too old bua they're not yet mature the industry itself is growing at 200% how can a company be mature in online gaming and online betting industry the industry is building right now it's still growing it's just in cricket there are 10,000 Sports they're just doing Cricket right now that too they they only work when there's an Indian match you would see very less very less people on dream 11 in an Australia versus New Zealand match people are not people are there but they're not as as addicted to something what happens in an India match they're still growing company if if they would have been a mature company they would have people playing for every possible match right now people majority of the people only play the India match people are not playing New Zealand versus Bangladesh on dream 11 right people are but not in the same so it's still a growing company the industry itself is growing the company is so new it's growing so that is how you figure out that is how you figure out if the company is growing if the company is old mature you know what's happening to the industry what's happening to the company do I know about this company when was it started what kind of revenues they doing what is the potential of this company all of that depends or decides the age of the company right the second thing was value chain analysis again very interesting topic which talks about one simple thing value chain analysis talks about one simple thing that boss pick up one process in your entire business operations okay there are so many business operations just pick up one process of your business and be the best at it it can be delivery of product it can be design right it can be operations it it can be procurement it can be marketing it can be Services after sales Services it can be support actions like HR management firm infrastructure designing procurement technology pick up anything from the box above which is a part of your operations and be so good at it that it becomes your competitive Advantage something which is so unique and valued by the customer that people want to pay more money for it for example blinket says I will deliver the product within 10 minutes of you ordering but I will charge 50 rupees for it you say okay that's fine because you're delivering in 50 minutes Domino says you order if we we do not deliver within 30 minutes your pizza is free that's their value chain analysis that this is where we can charge more money from the customer by giving them extra value by giving them ex extra value and they creating this value by being extremely extremely efficient in their kitchen management the order comes and they start making a pizza there's a step by-step process within 7 eight minutes the pizza is out for delivery the delivery guide takes 15 to 20 minutes and they reach the home before 30 minutes they are so efficient and well planned and well structured that is their competitive advantage and that is why they are winning the game of Pizza in India right all the globe as well same for McDonald's standardization right any any business you pick up any business not just food be it clothes be it phones be it anything home decor headphones technology software development any business which is doing better than the competitors is because they have picked up one process right and they are extreme good at it and that's called value chain analysis and that is why they can charge a lot of more money from the customers by telling them boss listen we are so good at it that you will love this okay and people say I know you're really good at it and you deserve the money right that's what the kind of marketing that's what the kind of uh experience they give to the customer that they want they feel they have gained some value and they want to give you more money and that's where the value chain analysis is okay great absolutely power now they have a GST tax notice so political barrier pestal analysis dream 11 awesome super thanks anr I think I think I know a lot of South Brands as well because I've stayed there so I know a lot about that good to see you also know about those thanks hardik for Googling and telling us right 3,841 CR rupees of Revenue right that's such an inflated Revenue that's amount of transactions that happen on the app they wouldn't be getting such notices why Amazon and Netflix is still not generating cash flow even though they are generating huge revenues H that's interesting because the outflow is equally equally High Amazon has a lot of logistics cost salary cost technology cost Amazon spends a lot on quality okay Amazon spends huge amount of money on maintaining quality so they have a very high outflow as well even for Netflix they have a lot of cash outflow for buying the rights of the shows and Brands and and all the movies and good shows that you see they have to buy rights exclusive rights not just rights it's exclusive rights and they're really costly they're really costly right now imagine somebody comes and let's say you you made a fantastic note okay so let's say you are preparing for your examinations and you you have created a fantastic register of all the notes somebody comes and says boss give me this register I will have the right to distribute and print and give these notes to every student in India right but only I will have this right neither you neither anybody else can do that I will only have the right to sell the notes that you have made to everybody in India every student in India you would want to charge them really good money right you would say boss even I will not have right of distribution nobody I cannot share with anybody else only you exclusively will have the right then I will charge 100 crores right you would want to charge so much money from them that what happens with Netflix and all the otd platforms as well that's why they're charging 1,000 rupees 1200 rupees for subscription Tech markets are always growing and never at their maturity not necessarily we not necessarily Tech markets are always growing but the but the rate see maturity now you are missing one important thing is maturity doesn't mean no growth it means slower than earlier growth see maturity is still growing my friend maturity will not not saying maturity is not flat maturity is not flat maturity is still growing but at a slower rate right if this is like 10% growth this will be like 2 to 3% growth that's the only difference that's the only difference right 10% growth versus 2 to 3% growth it's still growing it is still growing super absolutely you can do that right settling abroad doing a CPA or that that's fantastic it's really your choice and a lot of my friends have done that so you can do that as well right and it's it's really really good if you want to settle outside right right but let me tell you next 10 to 20 years are for India but with it's fine it's your personal choice and you can absolutely do that after CA enter also after CA just read the eligibility for CPA and that should be good too how to prepare this subject for examination just hang on around for these classes go home study the study material solve a lot of questions and you're good to go cool question on your screen Sony PlayStation is almost at the end of its life right online platforms have disrupted it man who is this person that you see on your screen we'll study about how to write answers and all of that we have a specific session for that so hang on around with us we have many more classes you have a lot of time to spend with me right so we'll do everything possible for you right now tell me who is this person on your screen REO says I've got an answer from RTO but I'll not call it out RTO but you're right H unor says you don't know no problem adya says hint hint is you you would have heard his name in strategy you would have known this person from your business studies uh syllabus in cbsc right but no I'm pretty sure nobody had ever seen his face or nobody would have shown his face like this this is not Jerome po I see a lot of answers coming in and those are right R say this is Corporate Santa very nice cool this is Michael Potter this is Michael Potter right the father of strategic management concept of understanding industry right the the competitive strategy was built by this man okay this person built the competitive strategy for organization it's a general competitive strategy that means if you're entering a new industry if you want to exit a new industry if you're existing in an industry and you see a lot of competition around how do you analyze the competition in your industry how do you analyze your strategy when there is so much competition okay this guy is Michael Potter now Michael Potter has called out five forces of competition he says when you feel any of these five forces you should know there is huge competition in the industry number one number one when you see the existing competition is leveling up when the existing competition in the industry is doing something creative is innovating is bringing new techniques right that means the industry is getting really hot competitive okay that's one number two the power of the supplier if the suppliers are becoming powerful be very sure because the market is becoming really really tough number three the customers are becoming powerful again the market is becoming tough you have to strategize very smartly to sustain and succeed in the industry or in that business number four thread of new entrance a lot of new companies have started coming into your segment that means the opportunity is huge and so is the competition so get up start preparing start strategizing because a lot of new companies will come and take away your market share number five threat of substitute products right you are making something somebody creates something else and tells people it does the same thing you should buy my product and not that product and people start going to that product and then you lose your Market you lose your business right that is that is Michael Potter's five forces five forces of competition or five competitive forces that any any organization any brand any company any uh Enterprise needs to be aware of or needs to analyze in depth and that is what we also going to do in the next 105 minutes okay great you have completed MBA in finance from utkal University awesome awesome SOS good to see that you should be you should be really answering a lot of giving us a lot of information right which I am missing I'll be happy to take anything anything which you know which I'm not able to tell or explain here and then we can share it with everybody that would be really helpful for all of us great number one the threat of new entrance okay the threat of new entrance you beat new entrance when there is a threat of new people climbing to get the TR trophy right I've created this is new people trying to get your trophy or your business how do you manage the threat of new entrance okay before I go into this topic let me see how creative you are my question to you is is you are a company which is seeing a lot of new companies entering your industry you see a lot of new businesses entering your industry your business okay how would you ensure how would you ensure that you beat them in competition or how would you strategize around it how would you strategize when you see a lot of new companies are getting into your business what are the different tricks or what are the different strategies you would want to employ let's see how creative you are and then we get to what Michael Porter said maybe we are smarter than Potter who knows maybe we have ideas better than Potter price game will help moderate our products okay which means moderate our products means nagaraju what does moderate means change or innovate or design redesign price game will help R says price game will help so you're saying you break the prices bring the prices down so that the new companies have to charge less price and they will be out of the business okay low price high quality product differentiation okay creating barriers by reducing the price of improving technology which cannot be used by others decrease the price better products better quality make Dynamic product Innovation being proactive Innovative product quality and prices absolutely add value to product in a way strengthen are competitive Advantage for more techniques of customer satisfaction customer PG reduce the price of products modification in product improve quality almost there in the same line right quality and pricing customer satisfaction awesome great that's right that's what we can do that's what we can as a business and organization or as a brand we can do now Michael Porter says you can do absolutely the same thing what you all said with a few more tricks okay he said number one the simplest thing is create entry barriers when you see a threat of new entrance simply make entry barriers make it difficult for the new entrance to enter the industry make it difficult for the new entrance to enter the industry now the question is how how do I do that number one Capital requirement number one is Capital requirement what this means is what this means is really simple Capital requirement means I don't know what's happening with okay so high Capital needs restrict new entrance benefiting existing firms a cement industry a clothing industry right a cell phone manufacturing industry not anybody and everybody can start a cell phone Manufacturing Company not anybody everybody can start a cement industry or let's say huge steel industry or mining industry it's very difficult people can start homemade AAR you see uh you see a lot of companies in Shar tank India we are making face creams we are making hand wash we are making designer t-shirts we can we are making specs we are making earphones fine those are small consumer goods that do not really need huge investment but companies like cement cell phones or big big Industries right big huge packaging Industries like any big product that you pick up they need a lot of capital so high Capital needs restrict new entrance right and that benefits the existing firms so now Michael poter says now listen my friend if a if you see a lot of new companies entering into your business do not panic a lot because if you are in an industry which needs a lot of capital then you should know these companies are not going to sustain longer because they need a lot of money unless they have a lot of money then you figure out how you compete with them but one big entry barrier for some Industries when you're analyzing your competition right when you see a new company entering into your business but you know it will take them 1,000 CR Rupees to just set up a plant so you know know they already under loan they will have huge uh debt so that will take time for them to come and build and establish their brand right so you shouldn't just panic and start doing h no sit down relax and see what's happening so sometimes you do not have to respond quickly it's about analyzing and seeing what's happening and then you take a call that's what this guy says look at the industry you are in and decide how competitive things are going to be number two economies of skill scale increase your volumes right economy of scale means your per unit cost of producing a particular thing drops when your volume increases the more volumes you have the better cost you will have so some companies like Coca-Cola like LS like Cadbury or KitKat for that matter these companies of Balaji namken halam Namen right why have all why does all these companies or you go to A2B in South people from South would know A2B as well right why are these Brands able to sustain even when there are so many other sweet shops and fast food shops and whatever it is why are they able to do that because because they have economies of scale they are making huge volumes 15 CR bottles every day 10 CR packets of chips every day per unit cost of making a packet of chips is just 2 three rupees and they're selling it for 10 Rupees somebody starting a new Chips packet or new Chips manufacturing lays kind of a thing faers the cost will be 7 to8 rupees and they cannot charge 10 Rupees they will be in huge losses right so these companies these companies have created entry barriers they have cre created entry barriers by being huge in terms of volumes right by being huge in terms of volumes same thing with Tata Motors and maruti somebody wanting to start a car manufacturing or a car company will take huge amount of money to build a factory huge investment number one number two they will need to have a lot of volume now somebody says I want to start a car company they say how many orders do you have they say I have2 200 ERS are you going to set up an entire Factory to just make 200 Cars you will be out of business right but if you have an order so why do you think cars have a lead time of 6 months or seven months if you go and want to buy a new balino if you want to go buy a new Mahindra xqv 700 they will say boss it will take 6 months to deliver why because they're booking their orders right now so that they know how many cars we have to produce so that they're not wasting their resources because it's really costly it's really costly right so they are building that inventory order so that their economies or scales becomes more intact and they create an entry barrier for the competition that's what these companies are doing right another perspective when we are studying Michael Porter is very carefully another aspect that is important when we studying this entire m poter thing is think from both the companies one who are already working number two who are wanting to enter the industry as well if you are a new age car maker you would see all of these as challenges to enter a particular industry like a capital requirement is there economies of scale is there I don't have so much volumes how will I enter how will I compete you cannot you have to analyze this you have to strategize this okay number three product differentiation you all know what this is create something unique which actually attracts the customer more right you start that's an entry barrier now somebody comes and says my phone is better than an iPhone people are like come on man right we know how good an iPhone is or how good a Samsung phone is the Samsung camera even iPhones can cannot beat Samsung cameras right somebody comes and says listen my camera is better than Samsung people like boss come right you have to create something unique which is valued by the customer right and it's tough so now Samsung enjoys this entry barrier no company can come and claim that my camera is better than Samsung even if it is now people know Samsung's camera is the best it's an entry barrier no new company can come and beat Samsung now in camera quality in phones they have created a barrier for new companies that's how how these companies work right number four very interesting is switching cost this is called switching cost you know what a switching cost is who will explain give me an example of switching cost absolutely Samsung has built foldable phones Mahindra thar booking for of six months right these companies are creating entry barriers the question is what is switch give me an example don't tell me what a switching cost is give me an example of switching cost that's what go is doing to stop starlink in India that's right Hi D RJ too late but happy to see you here H that's that's that's a great one rashna changing software from busy to tally in in accounting firms that's right to move from one product to other but give me some examples Prince switching to different industry no switching one from one supplier to another no switching from one thing to another yes but how is it an entry barrier free delivery is that a switching cost no buying a new sim of other company means losing prepaid balance ah no not not really not really you will get that refunded a in your wallets PTM wallet or airl wallet you will get that switching cost is very simple okay let me absolutely I see a good one from Prince and Android and Windows to iPhone and MacBook right that's a switching cost switching cost as simple is you create something unique for the customer that they have to learn okay now you build an ecosystem where people are used to the things that you do okay and now if the customer has to go to a different product a different brand they will have to relearn a lot of things they have to relearn a lot of things and the customer does not have time to learn something new from another brand so you have actually created a barrier right for somebody for some other brand to enter your customers's mind because you have taught them a way of thing that's called switching C cost that's called switching cost classic example is right pen I know a lot of us do not realize this but all of us have a favorite pen right somebody will have an ad gel somebody will have an pilot V7 somebody will have pilot V5 somebody will have a ball pen somebody will have a renold's pen we all have a favorite pen okay changing to a different pen means changing my way of writing my color My Ink color my design my my beautification of my exam paper or my notes and a lot of us are not interested in doing that we don't want to switch to a new pen because we are so used to our own pen our that ink that style that length that depth of the ink somebody wants a thick thick ering somebody wants a lightering somebody wants color somebody wants black right this is called switching cost now those brands have all the customers that use that that particular product are not ready to switch to a different pen because they're so comfortable with that even if they know that the other pen might be good you might agree that okay that that pan that that pen might also be good but I don't want to switch I'm really comfortable with what I am using right now that's called switching cost that's called switching cost absolutely great example ba is switching to P switching from Petrol to Electric right A lot of people might feure electric I don't know if I I can manage an electric car keep charging it change the batteries and this and that doesn't work when when it rains it stops or whatever the problems are switching cost okay buyers face expenses and resistance when switching inhibiting entry right if you if you have created a comfort if you have created an ecosystem from the for the customer that it is difficult for them to exit that and to learn something new or to adapt to something new it's called switching cost great examples from Petrol to electric or from busy to T software from Android to O from IOS from iOS to Android great examples there those are switching cost so Microsoft has created entry barrier by creating switching cost all of us are using Windows we have Excel PowerPoint word Macos doesn't have all of those unless you buy a premium version of Microsoft sweet in that right and that's that's really costly so a lot of people face ch challenges that boss I don't want to use a Mac OS because I have to use Excel and PowerPoint and word so I'll I'll better be with my Microsoft based laptop designers in your editors your graphic designers your UI ux experts coding experts who are making iOS apps they will they will say boss I don't understand windows I would need a Macbook that's okay that's their work but it's a switching cost your person has to get out of comfort to learn something new okay even the keyboards are different Cool brand identity if you have a brand identity it becomes a barrier of entry for new brands absolutely if you are a big brand name new companies will face challenges when they want to enter the industry because you are an established brand right you are an established brand so people on new things on new entes or the people who want to enter the industry will face this challenge that how do I make the customer love me as well and I beat this somebody who is already a big brand name so that's always there so big companies create a brand identity so as to not allow new companies to enter the industry right last one is distribution channels distribution channels is basically a subset of economies of scale where big Brands big companies have such wide distribution Network that for new companies it becomes really really tough to compete with them right now Coke Pepsi thumbs up Mountain Dew you go to uh Kadar Nat you go to kanyakumari you go to the you go to nagaland somewhere you go to kohima or you go to runoff cach in Gujarat you will have all of these in every shop every 1 kilometer you will see a shop on the road somebody having soft drinks and chips in their shop how is that possible right they have a massive distribution Channel a new product would say I want to be in every shop of India they say boss you know how difficult that is you cannot beat Coca-Cola you cannot beat PepsiCo in that the distribution network is crazy right from ladak to kanyakumari to any part of the world you go to Indonesia you have that you go to uh turkey you have that you go to Italy you have that how every shop in Italy will have that yes every shop in India will have that yes every shop in in Nepal will have that yes by distribution channel so strong so wide that for a new company who wants to enter the the industry they will have to sit back and think boss how do we beat this Mammoth right that's what has created that's what has created barrier of entry for them in distribution Channel let me know the con I will do that for you like apple has a brand identity that's right there are people who get bored of old things and want to learn new that's why that's why people switch as well see we not saying everybody is not going to switch people are still switching to electric vehicles a lot of iOS people are going to Android a lot of Android people are coming to iOS it will keep happening but companies try to create entry barrier we're not saying they will be always successful it doesn't mean that nobody can come and beat Coca-Cola orb op anybody can who has the money and network now tomorrow think about this think about this rul okay that's a great point that you're bringing it up okay how will somebody beat Pepsi and how will somebody beat uh this Coca-Cola in distribution when they're so good at it see I can say the counter is what if patanjali brings soft drinks pangali has a network as well the the moment patanjali uses its distribution Network and says boss listen I have a better soft drink for you than Coca-Cola and Pepsi and I'm going to use my entire distribution Channel which is also now huge equally competitive you'll say boss every shop where you have a pangali product will now also have the pangali soft drink already disrupting Coca-Cola and Pepsi then now these companies Coca-Cola and Pepsi will be a little scared that boss they are coming into the market our competitive Advantage our entry barrier was distribution Channel and somebody with an existing distribution channel is coming for our market share simple element of macro element of macro soci cultural demographic demographic population character in demographic soci cultural values social systemology G compy right that is your legal political right that technological then demographic and social cultural these are your elements of macro bus external environment so how do they analyze that okay and we have given ample examples for it as well pangali is at maturity stage absolutely yes they're already there but they're growing again maturity does not mean stability m majority means still growing but at a lower State at a lower percentage still growing okay please remember that super Mony what about Maggie access to distribution Channel absolutely yes same thing great that's number one threat of new entrant the second competitive Force by Michael Porter G is bargaining power of the buyer now bargaining power of the buyer exists when you're welcome a cool let me know if you have any anybody has any doubt you want me to explain slowly or in your language I can do that concept should be clear now the question to you is we talking about about customers's bargaining power you're talking about the bargaining power of the customer when do you think a customer is more powerful than the seller when do you think when do you think the customer is more powerful than the seller when is a customer more powerful than the seller ficol has less competition right prin switching cost people brand identity fol has a lot of brand identity people nobody says gum nobody says get me an other they say ficol right that's brand identity okay customer has more power when high price and not to the Quality okay when there is competition or substitutes no bargaining of the consumer is high when there are lots of varieties with competitive prices absolutely yes when the buyer is experienced one yes when the customer has information about the product yes when he has a lot of substitutes I wouldn't say substitutes I would say options substitutes are different than variety when there are more suppliers that's right customers is more powerful in subj Mundy very nice ma ma it's 8 amm I can only think of subg Munday so let me give an example of subg Munday TI when the buyer has many options to choose from that's right when the customer has knowledge about the product multiple sellers when product is not good with the prices higher as we have to offer the product and services to the customer okay what else let's let's learn this very quickly the bargaining power of the buyer exists when number one information number one is information the buyer are well informed about the product sources and substitutes that means that means information I know where the product is made what is the costing of the product somebody okay now listen to this very carefully now somebody knows amul milk how much is one L L of amul milk just asking you guys or what's the cost of one liter of milk random let's see if you guys know this or not what's what's the cost or what's the price maybe not the cost but what's the price of one liter milk it can be any brand it can be nandani it can be Paris it can be amul mother da whatever your area has what's what's the general cost 66 52 depends on full toned or right right that toned milk or light whatever you're taking skimmed milk or whatever full cream toned double toned whatever the price is but 66 36 52 right you know the price right 50 to 60 55 70 58 60 44 54 70 to 80 rupees right correct now you know the price see everybody knows the price 58 56 57 50 whatever the price you're saying for the kind of milk you buy it's called information to the buyer now I come and tell you boss listen I come and tell you listen I will give you milk for 110 rupees one liter I am going to sell you milk at 110 rupees for one liter are you going to buy same milk same milk but packaging right what I've done is what I've done is I have created a very designer packing b b Su I have done a packing it's a beautiful aesthetic packing and I'm saying the same milk the milk is same I will sell it for 110 rupees will you buy ashoke I can see your chat as well yes I can see your chat great RNA good to see you here you have you're living your life absolutely everybody says no sorry okay majority of Raj says I will buy a Kai I I'll buy a cow instead of buying your milk Raj why are you fighting me those time just trying to do some business yeah absolutely nobody is going to buy my product because the buyer is more powerful here they know the pricing of the market simple that's what Michael Porter is saying the buyer is more powerful than the seller when they have information about the market by 50 to 60 rupees why are you charging 110 rupees I don't want to buy simple the buyer is more powerful I am telling you see my pack packaging is so beautiful this is so organic this is recyclable packaging you're like I don't care 110 rupees I'm not paying because the buyer is informed the buyer has information about prices about costing buyer knows milk cannot cost 100 rupees for them to make it will be 30 40 rupees can charge 50 60 rupees for distribution and whatever cost you have you can't charge 110 rupees right why because you have information the buyer has information right the buyer has information and that's why they will not buy Ash I might be missing you but but I'm not ignoring you why will I ignore you I'm reading all the chat see I'm answering you absolutely no unless there's a change of quality or something else you're not going to buy bu my product that's number one information to the buyer that's where the buyer is more powerful number two number two is significant spending buyer are major purchaser in the industry that means the buyer has the power okay now another example you are a manufacturer of yeah any let let me give you an example I don't know if you have heard this or read this news recently I was reading this news there is there is a workshop in Kerala there's a workshop in Kerala that makes Army and police uniforms for Israel okay now Israel is at War but so there was this news that that one tayor has has a workshop in Kerala and he makes all the uniforms of Israel's Army and police force it goes from Kerala and they make about one lakh t-shirts and shirts right they make one lakh t-shirts and shirts every year for the Israeli Israeli Defense Forces Okay g now okay now for this company or for this person for this person right Israeli government Defense Force is a very powerful buyer is a very powerful buyer because 99% of the revenue for this B his business is coming from them when 99% of the business is coming from from them then the buyer that is the Israeli Defense Force will have their terms and conditions they will say boss listen we will only pay 500 rupees per set of of shirt and a pant that's it we're not going to pay more right you have to deliver it yourself any wastage goes back to you we are not taking any TA shirts any anything that is damaged is your cost you have to deliver it to my port right every year I will change the color you have to change the color as well use this thread I want this quality the terms and conditions are dictated by the buyer because buyer does a significant spending for you right they're one of the biggest buyers for you so you will be like okay that's that's what I'll have to do because most of my business comes from you so the buyer is more powerful the buyer is more powerful and you do not really have a lot of say in your business now cool that is where this competitive Force comes into the play number two is one the buyer has information number two when the buyer is is one of the biggest buyers for you the majority of the business comes from you then you will be like boss tell me what what I need to do right that's how business is that's number two number three is product importance right product importance is another aspect Now industry's product isn't vital to the buyer and they're con concentrated making it easy to switch to Alternatives that means can we say it as bulk order that's right okay buyers can easily switch to substitutes that's nishad will go to substitutes that's that's a different uh force all together right now I'm saying product importance product importance is If the product is not important to the buyer then the buyer has more power okay now for example for example when the buyer H does not really want your product then the buyer is more powerful somebody selling somebody selling a particular product right which is not needed by the buyer then you will be like please buy please buy this is good that is good we do this this product can do this you will have to upsell a lot you will have to convince them a lot and the B like no I don't need this I don't use this I don't want this I've never used this they will be more powerful so the seller will have to be please buy please buy please buy that is where the competitive Force comes into the picture where that is where another force of competition comes into the picture because it's difficult for you to do the business you have to understand that as a new company starting up as well this is not just about existing companies Michael Porter is not just about existing companies it's also about new companies who are wanting to start up okay now if a product is not so important for your customer then you will have a hard time selling that product it's going to be a tough difficult business that's what your competitive analysis is that is I'm getting into a tough business it's going it's going to take a lot of time for me to sell this product to people because people don't really need it selling dishwasher in India is a really tough product right selling a dishwasher in India is a really tough we have people who come to our houses and they help with washing utensil and cleaning our houses that's how India is that's how system here is right we we don't really need a dishwasher we have people to help us we do it ourselves right that's culturally there we are we are happy to do it ourselves or we have helpers at home that's how the society works for us now somebody comes and says I will sell see 150 CR Indians I will sell dishwasher to every Indian such a big Market people like are you stupid people the product is not of importance to the Indian customer you cannot just sell dishwasher to every Indian that 2 for rupes 8 lakh 8 lakh rupees for a dishwasher nobody's going to buy that people are paying 8 lakh the life in lifetime to their house help right 50 years may they will pay 8 lakh Rupees to the house help and you're saying you'll buy a dishwasher for 8 lakhs nobody's going to buy that okay so the product is not of importance that's a competitive force that you have to understand similar lines the power of the supplier buyer now let's switch roles and see when the supplier is more powerful number one the product is crucial to the buyer and substitutes are not available Doo kroen paracetamol comi flame these products are crucial to the buyer if you have a fever if you have a cuff you have a joint pain you're not feeling well two three brands only you will either buy a crosen or a doo or a comi flame right no not much substitutes available in the market and these products are crucial to the buyer you will buy them the supplier if tomorrow kroen says that boss one tablet is 100 rupees Doo says okay I will also do 100 rupees and comi Flame says I will also do 100 rupees you and me not have a choice you and me do not have a choice we will have to buy for 100 rupees the supplier the seller has more power here these products are crucial to us electricity is crucial to us right supplies power limited product offers only available for the limited period that's right that's also sellers power flip cart big uh big billion days seller is more powerful they have more power over the customer un know during the big billion days flip cart really plays with your brain okay you are we all are like zombies oh we don't understand what kind of pricing this is let I always wanted to buy this the price has dropped let me buy this they will make you buy everything that you you were that was there in your wish list that was there in your cut they will make you buy it power of the supplier right the second is they can erect High switching costs okay they can erect High switching costs now the the second part of that Israel Defense Force uh uniform maker in Kerala can be now this person says boss listen I make one lakh pieces for you and that person starts using a really high quality product for the uniform okay even if they that reduces the mark margin even if that reduces the margin for that person what he is doing is he's erecting a high switching cost now the Israeli Defense Force if has to switch to somebody else they will say I want this quality of product at this price the new person will say not possible I don't want to lose money the margins will be very less I don't want to do this business and then this Kerala man be like okay now you tell me my price is 7 00 rupees now because I am giving you high quality he or she is erecting a high switching cost when you are the supplier it can be revers also this is where the business Comes This is where strategy comes every single day the buyer is trying to buy the best product at the least price the seller is trying to sell a bare minimum product at a high price that's where the war is right the seller wants to sell a lowcost product at a high price the customer wants to buy a high cost product at a low price T this is where the business both the parties are actually strategizing and this is where one of them will always be in a better position than the other based on these criterias right number three they are more concentrated than the buyers that means very few suppliers coid vaccines you can either take kov Shield or you can take coaxin I want to take a third one not available hey there's nothing as a third option either you take coine or you take kov Shield right that's part of the supplier that is power of the supplier that boss there is no another they're super concentrated just one or two people you want to buy something online Amazon or Flipkart power of the supplier okay this is what happens you will either go to Amazon or you will go to flip cart there is no third option okay great any questions or we go to the next one Monopoly not not really not really Monopoly but just cases of Monopoly as well net packs of Geo have increased airel what Crazy Prices I was trying to do a recharge yesterday the prices are crazy 800 rupees for 80 days I'm like boss who is paying this Amazon flip cart both offer but the consumer choose place that is the supplier power either you you just have two options man you might feel that I am being smart by either switching to Amazon or Flipkart at at the end of the day you just have two options where else will you go let me just spend 30 seconds sorry to those who do not understand Hindi but let me just explain this to people who want this in Hindi in 30 seconds dendra purchasing power of the supplier right because powerful okay you will go and say right number three is product importance give it to your girlfriend right they selling trying to sell a product which is not of importance to you because you are powerful you don't need that product okay that is the product importance buyer powerful supper powerful when the products are crucial for the right second is switching that means right what you will have to do is compliance pricing change Behavior change negot terms and conditions that is switching cost number three is concentrated so suppliers are less buyers are more that is where the supplier will have more power right so they have more that is they are more concentrated than the buyer what we studying right now is Michael Potter right that is what Michael Porter competitive forces in an industry we have talked about three forces we have talked about threat of new entries customer power and supplier power take G that is what we is doing right now cool I think it's 8:26 it's time we take a short break as well and then we come and continue we'll complete our chapter 2 today right we just have two three more topics very quickly we'll complete those as well all right before I go to break let me just see the chat and then we go on the break uh okay Crystal Clear super thanks ringa like Ola they have a strategy to give option to a buyer to pay later after the right but without pay the outstanding amount of the customer won't be able to book another right right now that's an operational strategy that is how they want to ensure people are paying their money okay N I do not really know any South languages but I just know a few words not the entire sentence formation I've not learned that but but I really do want to learn and I do hear to a lot of South songs so yeah I know sidri Ram I hear Benny Dalal also so I know some people there cool great let's take a short break of of 10 minutes it's 82728 let's be back within 10 minutes and then we start with rivalry among competitors right and this is the fourth force in Michael Porter's uh competitive analysis cool super let's take a 10 minutes break and we will be back all right everyone we are back I'll just wait for all of you for next two minutes to join in as we continue with our Michael Porter Smith switching cost in Hindi is basically customer when the customer has to probably get into uh to learn something new for a new product switching cost okay we are back I'm just waiting for all of you you just give me a thumbs up a hello hi so that I know you're back too good diva is back I want all of you to come back and just give me a thumbs up or hello or hi right so that I know you're back and we can then quickly quickly start great I see ramadevi Raj Nas perin Diva J Nikita saki to prianka un Tam super san is there is there super all right let's continue with rivalry among competitors which is force number four okay rivalry amongst competitors tends to cut throat and Industry profitability reduces which means when the competitors are competing within themselves nobody new is coming in but existing players start fighting with each other this is where the the profitability starts cutting down because it's a price War it's a product War it's a customer War or where people are actually going and fighting with each other within the industry right tataa Motors fighting with Mahindra right that's that's rivalry amongst the competitors and for anybody who wants to enter an industry where the Rivalry among competitors is fierce right they should be very aware that it's going to be a tough industry for us as well because the existing players are so so like Furious are so for like war zone that probably it's very difficult for you as a new company to enter and win that competition because existing players are already really active in competition okay some of the things to consider when we are talking about rivalry among competitors is number one industry leader a dominant leader can DET a price Wars due to financial strength which means if there is one dominant leader in the industry they will cut through every person in the industry right maybe it prices quality or or they would have a lot of probably network with the Distributors a lot of power on the Distributors that say if you help this particular brand as well I'm going to take away the business from you they might they might comply or they might want to employ all these such tricks as well so when the Rivalry among the competitors is huge you need to figure out when you're entering an industry to see those who is who is the dominant leader in the industry because they are the one who are going to define a lot of things for the industry right they are the one who are going to define a lot of policies pricing the way the business is done for the industry okay number two is number of competitors if the number of competitors is huge too many people competing against each other then it's a crowded market right then it's a crowded market and it's really difficult for you to win because Co at any given point in time and that's going to be tough for you as a company fixed costs okay High fixed cost Drive firms to cut prices and excess capacity lowering industry profitability when there is fierce competition what people do is the fixed cost they start they start cutting down the prices by increasing their fixed cost that means when there is fierce competition people would want to sell more when they want to sell more that means their volumes are increasing they want to get into economies of scale to get into economies of scale they will have to invest more in manufacturing in units in building more facilities more development more trucks or you need raw material you need a bigger factory you need more people to work in your factory so you start increasing your fixed cost and when you start increasing your fixed cost right your economies of scales increases you start cutting down prices and that's fierce and that's Fierce for somebody entering in industry in this area people are still investing so much in fixed cost so it becomes really tough for them because that becomes a capital requirement issue for them right product differentiation product differentiation is when rivalry among the competitors is going Fierce product differentiation can Shield firms from Price balls when a lot of people are competing among amongst each other this is happening that is happening price offer this offer this free with this some companies are like boss listen we are very different our product is very different I don't give offers I don't give discounts I don't have Diwali bonus discounts in Diwali sales this is what it is this is what my brand is okay one of the few examples is if you go to Tommy hillfigure if you go to some big Brands right you go to a like a big brand like a nlv or let's say any Big Brand right they don't have Diwali sale why this our product is already different we don't have a Diwali we don't want to end our stock we would we don't want to clear our stock in Diwali some shops are doing 50% off some shops are doing buy three get 10 there are those shops as well and that's right that's their strategy but some product says I am a different product my product is differentiated from other products and I don't want to chase this competition I don't want to get into a wall of competition I am a different company altogether right that is how differentiation Shields firms from priz war it's an M fact it is frequently Asked statement by how does differentiation probably Shields a firm from Price B is because you are already a differentiated product you can charge different money or you can charge more money from the customer okay slower growth industry see Fierce rivalry as firms compete for market share for Industries where there is slow growth when the growth is slow you will see a lot of competition getting into there because everybody's fighting for the market share it's not about growth if the industry is growing the competition is not so Fierce why because everybody's growing okay now think about this dream 11 my circle 11 A2B Ramy Circle all of these companies are growing because the industry is growing there's no competition everybody is growing industry is growing but when the industries are stable an industry like Automotive an industry like airlin right Indigo spice Air Asia then you have aasa then you have Air India this is a mature industry slow growth it's not growing 100% every year right it's growing at A Kar of 7 8% every year that okay every year the industry Grows by 7 8% more passengers are coming into more flights we are investing more planes we are buying it's a growing industry but at a slow growth rate it's not a massive every year 2x airline industry right there is fierce competition that is where Fierce competition comes in because everybody wants a market share because the growth is not so much you're not growing your business by 2x so you need to gather more market share Air India wants the market share of indigo Indigo wants the market share of Air India right right so rivalry is fierce in terms of getting more market share when the growth is slow again an M fact right what happens to the competition when the industry growth rate is slow the competition is more because people or businesses are actually fighting for market share what happens to uh competition and rivalry when the market growth is high the competition is relatively low because the industry is at self growing so everybody will grow nobody's too scared about losing market share because Market is growing so much okay that is what you have to remember in this cool threat of substitutes substitute products impact on industry number one competition Catalyst okay now substitute products can be unexpected right and they can int intensify the competition in the industry especially when they offer price advantage or better performance somebody opening a s some a halwai right let's say you are you have a sweet shop which has Samosa and bread pakodas and patties and fried idly and this and that in your as a counter somebody comes and opens a Momo stall in front of you right somebody comes and opens a Momo stall in front of you now this is a substitute product somebody's going to come and spend 100 200 rupees either they will buy Samosa bread pakora or they will buy MOS now MOS is a substitute product it's doing the same thing it's a snack it's a fast food people are there to eat fast food now they have a substitute right they have a substitute simple same like soap and shampoo right some people are saying the soap is so good for your skin somebody saying use this B body wash soap use M body wash use right competition it's a substitute product a lot of girls will relate a lot of boys who take care of the skin would relate I don't take care of my skin so I don't relate the point is some companies are selling Soap by saying that see it's so cream intensive it's so good for your skin buy this soap and some brands are coming and saying soap is not good for skin it dries your skin use a body wash use a face wash use a shampoo use a scrub substitutes create they competing with jaw product right now substitute products can unexpectedly intensify competition because of the added advantage or the price Advantage soap is for rupees 70 they say you try body wash only rupes 100 and works twice as the soap soap will last it 15 20 days the body wash will last for 40 45 days you just have to take one small drop and you can just take a bath with that they're giving a competitive substitute to your product right T and coffee that's right second is R&D investment Industries investing heavily in R&D are susceptible to substitute threats that means they are prone to substitute threats if you are innovating yourself then the threat of substitute is less if you are innovating yourself if your company is innovating if your brand is innovating then you are not so you should not be so scared about substitutes because you are innovating yourself as well okay this is what this means this is what it means if you're investing in R&D Innovation yourself then you should not be so scared about uh substitutes because you will innovate something as well number three price and profit limitations substitutes typically constraint prices and Industry profits because market share then they will constrain the prices and Industry profits the profits will start falling because the market share will be taken away by the substitutes okay identifying substitutes firms should spend a lot of time the marketing department of a brand should spend a lot of time in identifying the substitutes of the existing products of the brand they should spend time in identifying substitutes identifying products that serve the same fun function as the offerings to see where the threat can come from SW analysis my friend threat of substitutes comes under SWAT analysis because it's a threat from external environment that is your competitor right substitute products should be analyzed always that this is what can disrupt my business this is what can disrupt my product okay and that is my friend Michael Porter's five forces of competitive analysis right any questions or we go to our next topic which is attractiveness of Industry any questions or or we go to the next one quickly I want to complete this chapter today and we will we have like 40 45 minutes we do that super let's go to the next one then how to use these competitive analysis if you're a new company figure out what's happening in the competition landscape rivalry threat of substitutes entry barriers is is there a seller who is powerful or the buyers are powerful in the industry analyze all of that before getting into the business that's how you use this cool let's get to the next one which is attractiveness of the industry okay dendra will do this in Hindi a concept I'm not going to repeat the entire thing in Hindi that's not what we are supposed to do you need to give your exams in English right concept I'll do that in Hindi I'm allowed to do that okay cool the question to you is the question to everybody on the chat is people are not so active right now I think they they lost interest but whatever okay the question to you is which industry is attractive and why if you had one choice to do a business what business would you do in which industry would you want to do a business and why that is my question to you my question is very simple if you have had to do business what business like which industry would you do business in and why business or RI says dress and food clothes and food adiya says clothing okay what about others give me why as well you're not giving me why take you would do clothing you would do dress you would do food industry f food industry Puja and dya says fast food right but why also tell me why electronics business and food clothing byya why give me the answer with why R says gaming industry because it is creative and you're very fond of gaming right that's that's one point that's good so that industry is attractive to you sport sports cars young people Trend and interested people want to spend more money ad that's good gaming industry because it's growing in India service industry like Equity broking jalad super tech gadgets because more Innovation is possible and there are many applications in Practical life good restaurant business or a salon okay products because there is huge demand of products okay what products I see maybe some tech business people are addictive fallowing trends right industry which have more opportunity to grow food because I love to cook and eat okay Innovation to make different Innovations food and Industry mobile phones because everyone can buy some tech piness technology is changing day by day electronic Vehicles because Market in India for E vehicle is emerging got it translate infrastructure because that GD per capiz in greeing people will spend more okay that's a very economic answer build and developer making lots of money real estate nagaraju is going to do real estate please give us two houses nagaraju we in really need big need of houses super Telecom beauty products because nowadays Everyone likes to look beautiful right naan a them becoming the candle Jenner and Kylie Jenner of India okay restaurant because going to restaurant you like there okay you want a Health Products in gym because nowadays everyone wants to be body and fit absolutely see you guys know which industry you want to Target and why that's exactly what we are going to study in the next five minutes is attractiveness of Industry what makes what makes an industry attractive the question is simple what makes an industry attractive number one growth potential right if an industry has a growth potential it's going to grow in the future it's a promising industry electric vehicle gym food beauty product GDP real estate Equity broking right all of you are giving that answer because you know the growth potential of in India is huge number one you gave that answer that's why the industry is attractive because there is growth potential number two current and future competition current competition conditions are favorable to profitability and future right more competition will come or right now there is less competition so I want to do this business right now there is less competition in this industry and the growth potential is huge so I want to do this business that's how you're analyzing your business opportunity that's what we are saying number three driving forces right how will prevailing industry forces impact profitability what you also need to analyze is the current indust current prevailing practices with will impact profitability means like you said GDP is going in the right direction people are start have started investing in equity so Equity broking is going to be huge people have started investing in looking beautiful so beauty products people are spending 1,500 1,700 on a lipstick or a foundation or whatever we guys are spending like creams night creams essential oils like oil droplets and what not for 5,000 6,000 rupees the driving forces impact profitability there is a Trend people are ready to spend money that's a driving force where you were also focusing that boss okay people are ready to spend money I will do this business number four competitive position when you decide you will see your own competitive standing right whether it's going to be improving or weakening that means who is the business leader once you start doing the business you will figure out who are the industry leaders what are they doing what is their profitability are they really making money or not right then you will also look after weaker Rivals that how are they positioned in the industry can you buy out weaker Rivals can you just probably leverage weaker Rivals vulnerability for opportunities that means you can buy them off you can beat the smaller Rivals to to actually fight with the big rivals in the industry can you do that that's what you got to analyze as well defense mechanism can the company defend against industry attractiveness factors like government policy change demonetization digitization of this online shopping people are assing we saying who want to do Cosmetics business or trading or this and that you already have zeroa in grow you already have Flipkart Amazon Mish show it's going to be tough are you ready to defend against the factors which are going to make it tough for you to do the business yes or no you need need to decide that's where your strategy will be these are just factors to consider for identifying attractiveness of the industry okay risk and uncertainty how risky the business is to figure out the attractiveness of the B business that how risky is a restaurant how risky is equity broking how risky is real estate how risky is uh a hair salon how risky is electric vehicle or a clothing industry right herb products food Innovation Cosmetics you say the fast food industry is growing too much or Cloud kitchens and delivery Logistics right you need to analyze the risk and uncertainty of all these industries before you start investing your time effort and money into any business okay that's industry environment analysis of finding the attractiveness of the industry great two great Concepts what we now will study is experience curve and value creation very simple super simple but these are M facts okay these are your M facts that you got to remember both these is number one experience curve a typical experience curve may be depicted as follows this is cost per unit this is cumulative production we're talking about economies of scale okay I'm talking about economies of scale we call it EOS economies of scale that's talking about experience curve as the experience increases the cost of doing thing Falls the cost of doing something Falls as you gain experience right you remember you started uh learning scooty or you were doing you were learning to ride a scooter it's it was too heavy you were not able to handle now you're using your phone and going on scooty to somewhere right which is absolutely wrong you shouldn't do that but I'm saying the experience curve right the experience curve the cost of doing thing decreases the effort in doing something decreases over a period of time if you keep doing that if you keep repeating something the effort the cost in doing anything falls down and this is what businesses want to achieve businesses want to achieve a place where they are most efficient where the cost is B minimum and that is where they start charging a lot of money that is what lawyers do that is what lawyers or Chartered Accountants do they say I have an experience of 30 years I charge 10,000 rupees for 30 minutes of my consultation right because you have accumulated experience over time and now the cost is so less for you that you know everything you don't have to go back to books and study how do I manage how do you don't have to put a lot of efforts you have the experience you can answer right away and charge 10,000 when you're a new person you will have to go back study and understand what the question was the solution is spend two three nights then come back and say uh I have charge 10,000 they say no you don't have the experience you are very new you pressure I will only pay 2,000 Rupees you will say okay right but when you gain experience the cost and effort of doing things decreases as you grow in your particular expertise area and then you can charge your margin increases when the cost Falls the amount you charge increases and thus your margin increases it's called margin expansion it's called margin expansion okay the same concept if I take to Value creation experience curve leads to Value creation which means look at this table the cost of value creation this is your cost okay let's say this is your cost the cost is 10 Rupees the cost of a particular product is 10 Rupees okay now the firm says I want to make a margin of 20 rupees on this right so the selling price by now the selling price now becomes 30 rupees okay now the product is for 10 Rupees the company sells it for 30 rupees so 20 Rupees is margin 10 Rupees is the cost this is how the company is the concept of value creation says it is the process of increasing the overall Worth or utility of a product service business exceeding the cost of resources used it involves delivering benefits that exceed customer expectations fostering growth and generating a competitive advantage in the marketplace thus increasing customer s satisfaction and profitability classic example iPhone take G the cost of an iPhone let's assume is 15,000 rupees Okay g the cost of an iPhone is let's say 15,000 rupees the cost of an iPhone is 15,000 rupees now the company knows I want to make 25,000 rupees on it I want to make 25,000 rupees on it so company says okay my selling price is going to be what 40,000 rupees 40,000 price but but but they're giving something unique it involves delivering benefits exceeding customer expectations value to the customer value to the customer okay the cost is 15 I want to make 25,000 but see I'm giving value to the customer for about 30,000 rupees added value there people will feel rich people will feel design the quality The Experience they selling the idea of an iPhone to you and they say boss the price is 70,000 rupe and you and me as a customer feel that okay 70,000 Rupees to price take because even if they make it for 15 20,000 rupees yeah it's an iPhone iPhone right now this is where they creating value in the eyes of the customer this is called value creation this is called called value creation give me one second while this yeah this is called value creation it's the process of increasing the overall worth the process of increasing overall Worth right the process of increasing the overall worth of a utility of product exceeding customer satisfaction does increasing satisfaction and profitability real branding this is your real branding right this is your cost you try to reduce this cost through experience curve you try to reduce this and you try to expand this and this you try to expand this and this through branding you try to reduce this by customer by experience curve so you're reducing your cost you're increasing your value creation Gap when this Gap is huge the bigger the Gap the better the company is this is called profitable pricing brand right this is where the money is made this start this should reduce right this should go down and this should go up as simple as that this is where the businesses are working day in day out how do you reduce this through experience curve how do you increase this through branding through marketing through strategy through competitor analysis right experience curve as the experience increases the cost decreases that's as simple as experience curve old bike companies like Bajaj and hero have reduced the cost so much that no new company would be able to beat them that's the competitive advantage that's their value chain analysis that's their experience curve and that is why they are so rich companies because the cost is less and the brand value is huge now right this is where they're making money great market and customers the next topic for us is market and customers a customer is a person who buys the product right customers are important because they provide Revenue very simple very simple concept customer con anybody who's buying your product is a customer customer analysis is really important this is where a new topic in Strategic Management has been introduced this is your customer analysis okay customer analysis is vital in strategic planning because it involves evaluating all of this which is evaluating customer desires using surveys and datas crafting profiles understanding what they want how much price they can pay why will they pay where do they buy when do they buy all of that they do that to create a strategy for the customer they buy maximum product at maximum price that is what the business wants them to do right and that is where customer who are the buyers when will they buy how much price can they pay do they buy online or offline how do they buy how often do they buy what is are they a frequent person are they onetime or purchase you have to identify that while doing that also you have to identify customer customer Behavior okay customer behavior is to examine element like shopping frequency product preferences perception of Marketing sales and servicing offers do people really want after sales services do people really value warranty and guarantee right all of these factors is customer Behavior right do they really want to pay more for a warranty do they really want to like pay more for a good packing like you said for milk that even if the packing is good I don't care I I wouldn't buy your product if the packing is good I'm just concerned about my milk that that's a customer Behavior I need to understand that Indian customer will not buy my product if my packaging is good they will already be like manga right they will think like I don't want to spend money on a basic necessity right an Indian customer would think that I just have to throw away the packet why will I spend money to buy a packet when I just have to empty it in in a in a utensil and just throw the packet why will I pay 50 rupees for that every day right customer Behavior customer Behavior that's that's where you figure this out now you understand customer Behavior Indian customer like you and me we are we are the young even younger than me so the customer behavior is we are looking for good quality technology at a cheaper price you you give me headphones for 12200 rupees I will buy it without even thinking you tell me these headphones are for 7,000 rupees I might not buy I might just say I don't I don't think 7,000 is worth buying for a headphone but you say 12200 rupees I say okay but even the quality is half you'll say very good half to 7,000 half is 3500 I'm getting it for 1,200 right this is how the customer Behavior works this is what the business and the company analyzes you know it just smart enough I'm just giving you examples but this is what we are probably talking about okay if we increase quality of milk then people may buy absolutely absolutely J B kator kakor okay so that is where the business people will buy because when we increase the quality people would surely come and buy say boss listen our quality is better than the existing product packaging is not a USB our us p is quality now you would if you're watching KBC right in K Cati what they're selling is Gohan g k amab ban keeps shouting Goan G Goan G Goan G is saying we are the best quality right that is that is where they're creating a branding and they can charge more price just like iPhone they're trying to create a brand right you go in the market it's 100 rupees costlier than any ghee possible right that's how businesses want to charge more money from us cool let's go to the next one this is simple okay consumer decision making how does a consumer makes a decision a new topic for you a new topic in Strategic Management new syllabus that's where if you have studied ICI syllabus is becoming Global it's becoming new age it's becoming futuristic the these are the topics where we want to touch upon it's a mini MBA for you right consumer decision making external influences advertisements mouth to mouth publicity right peer recommendations your friend says go buy that face wash it's a really good face wash you will go and buy it advertisement tiger shof comes and tells you drink this thing it's good for health you're like huh he's a fit person he would know what's good for health right social Norms affect consumer choices as well right divided into marketing efforts and environmental factors somebody selling umbrellas in Mumbai Pune makes so much sense because it's always raining right external influences so somebody doing an advertisement of umbrellas in Mumbai makes sense somebody doing advertisement of umbrellas in uh let's say madhi Pradesh or somebody somewhere in Rajasthan okay if somebody wants to sell umbrella in Rajasthan people like are you crazy it doesn't rain here but you would say you would need it for the the sun shade as well people don't use uh umbrellas for sun shades in India right so external influences understanding the customer choices the right Market the right placement of the product is where consumer decision making starts with you see something on the advertisement somebody tells you about it you see A Holdings you hear about it on the social media you see somebody doing something on social media that is the initiation point from an external influence that you get to know about a particular product right that is where you that idea of that product comes into your mind you w you see new shoes now Nike sneakers what a marketing trick right everybody wants to wear a Nike sneaker now 10,000 15,000 20,000 30,000 they just shoes my friend right all these social media influencers or everybody you see all the stars are making these Nike Jordans and this they're creating awareness they're just putting stuff into you that this is from externally you're getting information yeah this is what rich people do this is what affluent people do this is what looks like a good design right that is init initiation of a consumer decision making the second is internal influence external something comes from the outside and tells you that boss this is happening this is what you should buy then comes internal influences like psychological factors like motivation and attitude shape consumer decisions that means they will tell you right they will tell you will start feeling that I deserve this I have done good today I deserve this I have scored good Marks in My examinations I deserve this right your brain psychologically starts telling you that you should buy this because you have done efforts for this you deserve this this will look good on you people will look look at you when you do this right you want to feel good you want to be liked by people around so your internal influences decide or play with your decision making right then comes the real decision making process real decision making process involves problem recognition seeking Alternatives information gathering and making a final choice right first you figure out why am I not able to do this while others are doing this then you seek Alternatives how can I do that right somebody's wearing let's say a smartwatch right somebody's your friend is wearing a smartwatch let's say external Factor external influences your your friend is wearing a smartwatch and she tells you boss it's a fantastic thing I love this i' I've been using this for two months now it's it's a great product it's a great Gadget external influence to you you were not thinking about it but now you say maybe it's a good product then internal influence psychological psychological pressure will come to you that I can also buy why am I not buying let me also try why am I missing out that is where your fomo comes into picture right the fomo is fear of missing out you get into foro that is fear of missing out and internal influence builds inside you that what if I am missing this what if I'm not getting this why am I not able to do this you get into a fomo fear of missing out you're missing out something your brain tells you you're missing out on the fun it creates a pressure then you go and figure out what's the problem is it money maybe yes maybe no is it the need maybe yes maybe you don't need it maybe maybe yes maybe no right then you seek Alternatives then you try to convince yourself I don't I don't need this why should I buy this it's a costly thing why should I waste my money I'll use my money somewhere else right you start debating yourself then you start gathering information how are the reviews which all brands are there different brands have different prices which one will suit my need right and then you finally decide no problem let me buy and see smart let me try and wear this right you make a final choice this is a consumer decision making process right most significant for high impact purchase like cars TVs and refrigerators you do a lot of research information gathering especially for gadgets and Technology right post decision making process after you have taken a decision after the purchase is done consumer reactions vary based on satisfaction leading to repeat purchase or recommendation or dissatisfaction and dissonance now after purchase you might feel I shouldn't have bought this or it can be absolute fantastic purchase I will buy this again I will buy the latest version as well right so this is an entire process of consumer decision making from external influence to internal influ infuence to decision making process to postdecision making process right this is a new topic this is where the syllabus is getting more mini MBA that's that's what we keep telling right Global Centric practical based cabus this is where we want to focus now okay consumer decision making external influences leading to in internal influences leading to a decision-making process and postdecision making process review was it worth it will you repurchase or will you recommend to others or you'll be like boss waste of money I don't want to buy this again right there is there's an ad okay Gorilla Marketing that's right there is a ad for hlex it gives immune power to fight against cold at the time of climate change period now yeah that's right they're placing the ad so smartly now you would see when the winters come there will be a lot of pollution in in north in IND in Mumbai in Pune in South India as well in Chennai right in Bangalore as well you will see a lot of pollution and you will see a lot of chaman prash a lot of vitamin tablets a lot of uh cough syrup ads coming up as the season changes right that's also happening cool very quickly let's get to to the next topic which is competitive strategy right after this we will be just short of one topic and we will completed today we have 10 minutes we'll do that in 10 minutes so don't worry tomorrow we'll do a lot of questions we will start try to start with chapter three as well we will do that and we'll do some questions let's just do our last two topics in next 10 minutes and then wrap up okay the competitive strategy of a firm within a business is analyze using two criterias one creation of competitive advantage and protection of competitive Advantage as simple as that right competitive strategy means one creating a competitive Advantage something unique and valued by the customer number two protecting it and sustaining it for a longer period of time okay competitive landscape is very simple right understanding competitive landscape is very simple first identify y the competitors understand what they do what are their tricks what are their areas of focus what are their strengths what are their weaknesses number three determine their strengths and number four determine their weakness as simple as that identify the competitors who are they what do they do right what are what they do the best and what they are weak at right simple here competitive landscape when you're looking after the competitive strategy competitive landscape is first who are my competitors what do they do number three what are they good at number four what are they not so good at okay once you gather all this information you analyze and figure out what you need to do next right how do you how do you want to compete these PE with these people right you want to be like make them vulnerable for their weakness and kill them in the in in the market or you want to fight on this strengths and create something unique for yourself right really depends on how you want to build your strategy it can be anything any of the two okay an interesting topic is key factors for competitive success which is ksfs this is the last topic of this chapter and very interesting and again it's an M fact very frequently Asked in examinations most of the questions I make I make from this I love this topic because it's it's very wide yet very informative okay key success factors we call them ksfs when any company any brand is building a strategy is building a competitive strategy or trying to build an overall strategy they should just figure out that whether how do I check my success how do I check My Success how do I ensure I am being successful key success factors identify okay key success factors that shape whether a company will be financially and competitively successful key success factors whether I will be successful financially and competitively I can identify that I can ensure that when I'm building a competitive strategy by building or understanding my ksfs which is key success factors okay they vary industry to industry it's not the same for any everyone it varies for every industry okay every industry will have a different set of ksfs okay only rarely does an industry have more than three or four key success factors at any one time the question will be how many k ksfs does a particular industry have maximum three or four does every industry have the same KSF no every industry will vary in their ksfs but what are ksfs what are key success factors what are the key success factors okay the to answer to three questions help identify any industry's key success factors the answers to these three questions will help identify the ksfs of any industry and every industry has a different KSF number one question you want to ask answer is on what basis do customers choose between the comp competing brands of sellers what product attributes are crucial to sales what are people buying on people are buying cell phones for the software for the design the beauty of the phone the camera the speed the processor the cost price what makes a customer bu the product of the competitor number one question that you have to figure out number one question that any business in any industry has to figure out is why are people buying this product is it because of design is it because of pricing is it because of quality is it because of uh like they like this they use this it's a daily product why are people buying this why are people buying rice basmati rice why are people buying toothpaste why are people buying toothbrush why are people buying laptops why are people buying phone charges why are people buying clothes why within clothes people are buying formal clothes what makes a customer buy a suit right it can be an occasion it can be a quality of the competitor why are people buying suits from Van husin why are people buying suits from uh let's say Zara why are people buying suits from Raymonds right what makes the customer buy from them what's so good good about them number one number two what resources and competitive capabilities does a seller need to have to be competitively successful better human capital quality of product quantity of product or cost of service right what resources do I need to give to provide this product why are customers buying this product from this person number one what resources and capabilities do I need to make that product number three what does it take for seller to achieve a sustainable competitive Advantage I don't want to play shortterm shortterm I want to play longterm right the focus is longterm what it takes to do all of this what it takes to do all of this for a long period of time for years and years and years how do I build a strategy that is longterm if you can answer these three questions these become your ksfs the key success factors the product the resources and long-term sustainability right any industry pick any industry if anybody in any industry answers these questions these three answers are your key success factors this means if you're able to answer these figure out answers to these and work on it your brand your company will be successful if you are able to answer these questions and figure out a strategy to build on that your business will be successful the this is called key success factors key success factors okay with that your chapter number two is also complete on time 9:30 a.m. and we are done with our chapter number two as well great thanks Puja and happy navaratri to you as well Puja is like class kutam they exit thanks Puja I'm here for another 2 three minutes you want to ask any questions you want to share any concepts you have some doubts I'm happy to solve that right tomorrow we do questions and we will try to start with chapter three as well but my focus will be more on questions great thanks Mony Jay take a guess which city am I from take a guess let's see if we can guess or not thanks prianka fire session I like I like the Emojis of fire absolutely Rohit uh just after I close this session I will upload this on the portal and should be there I will upload it right away once we exit the session J says I'm from harana do I start the class by saying R Ro B I am starting this class why do you feel I'm from Arana yeah rad have guessed it right most of you are right Jay says I'm from Mumbai T thanks do I look like a Mumbai girl TI thanks all clear super yeah I'm from Delhi yes most of you know how I know relation between competitive landscape and key factors of competitive success uh see everything is interrelated you cannot just pick one simple relation between ksfs and competitive landscape but when we talk about this right it starts from here competitive landscape only then you can figure out the why are people buying the competitors brand or what resources will you need unless you do not understand who the competitors and what they do you cannot really answer these questions so you need to have a knowledge of competitive landscape to answer the KSF questions awesome J got from lingin Super H start building your Linkin that's that's great place to begin with as well Super ma you are from Delhi too awesome says us accent English okay if there no doubts let's let's let's you're from surj Awesome by you are enjoying your life you're eating loo in the morning Surat loo famous I know right shatri the best place to enjoy navaratri all the dance and Garba cool with that I I look similar to that okay cool with that let's end the session here have a great Saturday enjoy your festive season I'll see you tomorrow same time 7 a.m. Sunday right see you tomorrow we start with a lot of questions from chapter 1 and two scenario based and we will try to begin with chapter 3 as well I think we'll start with chapter 3 till then take care I'll see you tomorrow