GBUS 600
Week 9
External Analysis & Digital
Marketing
Digital Marketing
Agenda
• Digital Marketing (7-8:15 pm)
External Analysis
• Break (8:15-8:30 pm)
• External Analysis (8:30-9:25)
• Wrap-up (9:25-9:30)
Wrap-up
Digital Marketing
Nick Charrow
• Director of Media at Princess Cruises
• Formerly Acquisitions Manager at Sonic
Electronix, Inc and Internet Marketing
Strategist at Dream Products, Inc
• BA in Arts and MBA from CSUN »
External Analysis
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• Political factors: Tax policy, employment laws,
environmental regulations, trade restrictions and
tariffs and political stability.
• Economic factors: Growth, interest rates, foreign
conditions, exchange rates, and prices.
• Social factors: Health consciousness, population
growth rate, age distribution, career attitudes and
emphasis on safety.
• Technological factors: R&D, automation,
technology incentives, rate of technological
change.
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Strengths and Weaknesses
Current performance • Brand power • Cost
structure • Product portfolio • R&D pipeline •
Technical mastery • Employee skills • Company
culture
Opportunities and Threats
Customers • Pricing constraints • Competitors •
Distribution issues • Technology •
Macroeconomy • Regulation • Workstyle trends
• Major uncertainties • Suppliers • Potential
partners
Harvard Business Review (2005). Strategy: Create and implement
the best strategy for your business. Harvard Business School Press.
S
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Goal
• To achieve AND sustain an above average
rate of return
• HOW?
• Position your company where the industry is
the weakest. What do others NOT do?
• Exploit changes in the Five Forces (next slide)
• Rearrange the forces in your favor »
Porter’s Five Forces
What forces are
powerful and can
reduce profits?
What forces are
weak and can be
exploited? »
Porter, M. E. (2008).
The five competitive
forces that shape
strategy. Harvard
Business Review,
86(1), 78–93.
1. Threat of new entrants
• Supply-side: fixed costs
(scale)
• Demand-side: buyer
loyalty (scale)
• Switching costs
• Capital requirements
• Inventory
• Financing
• Distribution channels
• GOVERNMENT! »
As they shifted from DVD-by-mail
to streaming, barriers to entry
were low enough to allow new
entrants like Amazon Prime and
Hulu to establish themselves in the
market. Even later, giants like
Disney+ and Apple TV joined. The
capital requirement for setting up
a streaming service is significant,
but not insurmountable for large
tech or media companies. Hence,
there's a persistent threat of new
entrants in the streaming space.
2. Customer bargaining power
• Number of buyers
• Elasticity of demand
• Large share of budget
• Limited income
• Quality does NOT matter
much
• Easy substitutes »
With many streaming options
available, consumers can easily
switch between services. If Netflix
increases its prices or if consumers
feel the content isn't valuable
enough, they might migrate to
other platforms. This gives
consumers substantial bargaining
power. Recognizing this, Netflix
invests heavily in original content
to retain its subscriber base.
3. Supplier bargaining power
• Switching costs
• Limited substitutes
• Forward & backward
integration »
Who are your suppliers?
https://dealroom.net/blog/forward-integration
Content creators and production
houses are critical suppliers for
Netflix. As Netflix grew, many of
these suppliers started realizing
the value of their content. For
instance, Disney pulled its content
from Netflix to launch its own
streaming service, Disney+. This
showcases the significant
bargaining power that key content
creators possess, which can drive
up costs for Netflix or even deprive
it of essential content.
4. Threat of substitutes
• There is a substitute for
everything!
• Definition of industry
matters
• Switching costs?
• Price-performance
tradeoff »
Apart from direct competitors like
Disney+ or Amazon Prime Video,
there are other forms of
entertainment that can serve as
substitutes to Netflix. This includes
traditional TV, YouTube, video
games, or even non-digital forms
of entertainment like books or
outdoor activities. The more
appealing these substitutes
become, the more pressure there
is on Netflix to innovate and keep
its audience engaged.
5. Rivalry
• Numerous competitors
• Slow growth
• Difficult to exit
• Homogeneity »
The rivalry in the streaming
industry is intense. Netflix
competes with a range of
platforms, from HBO Max and
Disney+ to newer entrants like
Peacock. Each of these platforms is
vying for exclusive content,
partnerships, and technological
innovations to lure and retain
subscribers. This rivalry can lead to
increased marketing expenses,
higher content acquisition costs,
and the need for continuous
innovation.
SWOT example
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Strengths
Weaknesses
• Global presence
• Increasing debt
• Data-driven decision making • Dependence on content
• Extensive content library
production
• Brand recognition
• High subscriber churn rate
• Flexible business model
• Rising content costs
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Opportunities
• Diversification (e.g., games,
live events, shared viewing)
• Local
content, edutainment
Opportunities?
• Technological innovation
(e.g., VR)
Threats
• Intense competition
• Regulation (e.g., censorship)
• Economic
downturns
Threats?
• Infrastructure (networks)
• Changing viewer habits
Common Pitfalls
• Defining the industry too broadly or too narrowly
• Making lists instead of engaging in rigorous analysis
• Paying equal attention to all of the forces rather than
digging deeply into the most important ones
• Confusing effect (price sensitivity) with cause (buyer
economics)
• Using static analysis that ignores industry trends
• Confusing cyclical or transient changes with true structural
changes
• Using the framework to declare an industry attractive or
unattractive rather than using it to guide strategic choices
»
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86 (1), 78–93.
STRATEGY
• Any good strategy starts with a statement
of where you are going! – a VISION!
• Mission – why we exist, what we do.
• Values – what we believe in (ethics, green, …)
• Vision – what we want to be! »
Your Strategy
• If it is the same as any competitors, you do
not have one.
• GOALS – SMART
• Specific, Measurable, Assessable, Reasonable,
Time bound.
• Scope – whom do we serve?
• Benefits of a strategy? »
Wrap-up
Wrap-up
• Next class: Business Data with Dr. Pouyan
Eslami
• Round 4 decisions due Saturday 10/11
• External Analysis due 10/21
• Round 5 memo due 10/21
• Key Competitors Analysis due 10/28