MGMT 680 Readings
In Lee & Li, what was the SanDisk company?
A world-renowned authority on non-volatile memory technology. Based in Sunnyvale, California, the company was the world's largest supplier of flash memory data storage card products. It designed, manufactured and marketed "industry standard, solid-state data, digital imaging and audio storage products using its patented, high density flash memory and controller technology SanDisk was the only company that had the rights to manufacture and sell every major flash card format, including CF, SD, miniSD, SmartMedia, FlashDisk, MMC, MemoryStick Pro, xD-Picture cards and USB flash drives SanDisk controlled a significant portion of its flash memory wafer manufacturing through its joint venture, FlashVision, and many other strategic arrangements with fabrication facility owners These strategic and contractual partners included Toshiba, Samsung, Renasas Technology, United Microelectronic Inc. (UMC) and Tower Semiconductor Ltd Such a multiple-sources strategy enabled SanDisk to concentrate on product designs and development of its core competency SanDisk received a majority of its revenue from direct sales to retailers
In The Five Competitive Forces That Shape Strategy, what are the barriers to entry?
Advantages that incumbents have relative to new entrants 1) Supply side economies of scale 2) Demand side benefits of scale 3) Customer switching costs 4) Capital requirements 5) Incumbency advantages independent of size 6) Unequal access to distribution channels 7) Restrictive government policy
In Blowing the Pfizer Whistle, what happens when a drug losses its patent?
After 20 years, generic drug companies can make the same exact drug, but circumvent the research testing costs
In The Five Competitive Forces That Shape Strategy, what are the industries that the forces are strong?
Airlines Textiles Hotels Almost no company earns attractive returns on investment
In Blowing the Pfizer Whistle, what are the issues with first amendment issues?
Allergan (maker of Botox) sued the FDA over the ban of off label marketing for violation of the first
First amendment issues SPEAKING ROLE - Blowing the Pfizer Whistle
Allergan (maker of Botox) sued the FDA over the ban of off label marketing for violation of the first Allergan sold about one-third of its Botox for off-label purposes Botox drug that had yearly sales of $1.2 billion i'd be interested If the off label marketing is promoting an incorrect or misleading fact then you can face first amendment issues (yell fire in a crowded building) But if accurate to the best of their knowledge its fine, but very gray area
In Blowing the Pfizer Whistle, what was the first product?
An antiparisitic that treated intestinal worms
In Blowing the Pfizer Whistle, what are some of the benefits of off label marketing?
Aspirin - for diabetes and cardiovascular disease Prograf - auto immune disease Many pediatric medication prescriptions were "off label" because many diseases had no FDA approved medications for children, forcing doctors to guess when giving children drugs only approved for adults Forcing doctors to think outside the box can lead to positive discoveries, even though it was not FDA approved
In Blowing the Pfizer Whistle, what award was given to Pfizer's CEO Jeff Kindler in 2010
Award - Catalyst award --- from the Glaucoma Research Foundation For - Pfizer's glaucoma medication Xalatan --- most frequently prescribed to treat eye pressure
In Blowing the Pfizer Whistle, how were physicians encouraged to promote off label drugs?
Because they had owned equity in pharmaceutical companies and increasing drug sales for that company directly benefited them The companies also gave grants and stipends for research into the drug's effects
In Blowing the Pfizer Whistle, what did Phizer begin doing when WWII started?
Began supplying the government/army with penicillin for the war
In Lee & Li, how did the company handle the embezzlement?
Being well communicative toward both the client (SanDisk) and the public And made it clear what was being done about the matter The firm accepted full responsibility for what happened --- The client trusts us to represent them in Taiwan, and we cannot just let out clients down simply because of something bad happening
In Blowing the Pfizer Whistle, what did Phizer do after the civil war?
Bought a new location and hired 150 new employees Began working on citric acid, a major ingredient in the emerging cola market
In Blowing the Pfizer Whistle, what did Charles Pfizer do after Erhart died?
Bought up Erhart's shares and incorporated the company, keeping 100% of the shares Then began producing vitamins and secured the largest market share of the vitamin manufacturing industry
In The Five Competitive Forces That Shape Strategy, what makes a buyer powerful?
Buyers are powerful if they have negotiating leverage relative to industry participants, especially if they are price sensitive, using their clout primarily to pressure price reductions As with suppliers, there may be distinct groups of customers who differ in bargaining power A customer group has negotiating leverage if: There are few buyers, or each one purchases in volumes that are large relative to the size of a single vendor Large-volume buyers are particularly powerful in industries with high fixed costs, such as telecommunications equipment, offshore drilling, and bulk chemicals High fixed costs and low marginal costs amplify the pressure on rivals to keep capacity filled through discounting The industry's products are standardized or undifferentiated If buyers believe they can always find an equivalent product, they tend to play one vendor against another Buyers face few switching costs in changing vendors. « Buyers can credibly threaten to integrate backward and produce the industry's product themselves if vendors are too profitable Producers of soft drinks and beer have long controlled the power of packaging manufacturers by threatening to make, and at times actually making, packaging materials themselves A buyer group is price sensitive if: The product it purchases from the industry represents a significant fraction of its cost structure or procurement budget Here buyers are likely to shop around and bargain hard, as consumers do for home mortgages Where the product sold by an industry is a small fraction of buyers' costs or expenditures, buyers are usually less price sensitive The buyer group eams low profits, is strapped for cash, or is otherwise under pressure to trim its purchasing costs Highly profitable or cash-rich customers, in contrast, are generally less price sensitive (that is, of course, if the item does not represent a large fraction of their costs) The quality of buyers' products or services is little affected by the industry's product Where quality is very much affected by the industry's product, buyers are generally less price sensitive When purchasing or renting production quality cameras, for instance, makers of major motion pictures opt for highly reliable equipment with the latest features They pay limited attention to price The industry's product has little effect on the buyer's other costs Here, buyers focus on price Conversely, where an industry's product or service can pay for itself many times over by improving performance or reducing labor, material, or other costs, buyers are usually more interested in quality than in price Examples include products and services like tax accounting or well logging (which measures below-ground conditions of oil wells) that can save or even make the buyer money Similarly, buyers tend not to be price sensitive in services such as investment banking, where poor performance can be costly and embarrassing Most sources of buyer power apply equally to consumers and to business-to-business customers Like industrial customers, consumers tend to be more price sensitive if they are purchasing products that are undifferentiated, expensive relative to their incomes, and of a sort where product performance has limited consequences The major difference with consumers is that their needs can be more intangible and harder to quantify Intermediate customers, or customers who purchase the product but are not the end user (such as assemblers or distribution channels), can be analyzed the same way as other buyers, with one important addition Intermediate customers gain significant bargaining power when they can influence the purchasing decisions of customers downstream Consumer electronics retailers, jewelry retailers, and agricultural-equipment distributors are examples of distribution channels that exert a strong influence on end customers Producers often attempt to diminish channel clout through exclusive arrangements with particular distributors or retailers or by mar keting directly to end users Component manufacturers seek to develop power over assemblers by creating preferences for their components with downstream customers Such is the case with bicycle parts and with sweeteners. DuPont has created enormous clout by advertising its Stainmaster brand of carpet fibers not only to the carpet manufacturers that actually buy them but also to downstream consumers Many consumers request Stainmaster carpet even though DuPont is not a carpet manufacturer
In Blowing the Pfizer Whistle, what is Pfizer's way of growing?
By acquiring whole companies rather than developing its own products to enhance its growth Despite large amount of capital invested in its research and development program
In Blowing the Pfizer Whistle, what does the DOJ do?
Carry out the punishment of any off label marketing infringements
In Lee & Li, what was the agreed upon settlement between Lee & Li and SanDisk?
Cash: SanDisk received a cash payment of US$20 million on signing the settlement agreement on November 14. US$20 million Installments: Lee and Li to pay an additional US$48 million over a four-year period in 16 quarterly installments secured by irrevocable standby letters of credit granted by International Commercial Bank of China US$48 million Legal services: Lee and Li to provide SanDisk with legal services up to approximately US$1million per year for the next 18 years US$18.3 million Total: US$86.3 million
In The Five Competitive Forces That Shape Strategy, what are the 5 forces that shape industry competition?
Center Circle: Rivalry among existing competitors Outside going into circle: Threat of new entrants Bargaining power of suppliers Threat of substitute products or services Bargaining power of buyers
In The Five Competitive Forces That Shape Strategy, what makes a supplier powerful?
Companies depend on a wide range of different supplier groups for inputs A supplier group is powerful if: ---It is more concentrated than the industry it sells to. Microsoft's near monopoly in operating systems, coupled with the fragmentation of PC assemblers, exemplifies this situation ---The supplier group does not depend heavily on the industry for its revenues. Suppliers serving many industries will not hesitate to extract maximum profits from each one ---If a particular industry accounts for a large portion of a supplier group's volume or profit, however, suppliers will want to protect the industry through reasonable pricing and assist in activities such as R&D and lobbying ---Industry participants face switching costs in changing suppliers. For example, shifting suppliers is difficult if companies have invested heavily in specialized ancillary equipment or in learning how to operate a supplier's equipment (as with Bloomberg terminals used by financial professionals) Or firms may have located their production lines adjacent to a supplier's manufacturing facilities (as in the case of some beverage companies and container manufacturers) When switching costs are high, industry participants find it hard to play suppliers off against one another. (Note that suppliers may have switching costs as well. This limits their power.) ---Suppliers offer products that are differentiated. Pharmaceutical companies that offer patented drugs with distinctive medical benefits have more power over hospitals, health maintenance organizations, and other drug buyers, for example, than drug companies offering me too or generic products ---There is no substitute for what the supplier group provides. Pilots' unions, for example, exercise considerable supplier power over airlines partly because there is no good alternative to a well trained pilot in the cockpit ---The supplier group can credibly threaten to integrate forward into the industry In that case, if industry participants make too much money relative to suppliers, they will induce suppliers to enter the market
In Blowing the Pfizer Whistle, what does the FDA do?
Creates the rules for off label marketing infringements
In Blowing the Pfizer Whistle, who was Wyeth considering merging with before Pfizer?
Crucell, a vaccine manufacturer The merger with Pfizer limited Wyeth's growth potential
In Lee & Li, why did the "huge amount transfer" trigger any warnings?
During September, the Money Laundering Prevention Center (MLPC) of the Tatwanese government was informed of the huge amount of funds transfers but the information indicated that it was a routine notification of a "huge amount transfer" in excess of NT$1 million The transaction did not appear to be illegal for two reasons: First, the information MLPC received said that "SanDisk Corporation" had transferred earnings from the sale of UMC's stock to "SanDisk Investing Corporation" in Hong Kong, not to another company or individual Second, it appeared that Liu was fully authorized by both SanDisk and Lee and Li to sell the shares and transfer the earnings. Therefore, the transaction was judged a legal transfer by the MLPC
In Lee & Li, who did what and how?
Eddie Liu, one of the firm's senior assistants, had found a loophole in a power of attorney from one of the firm's clients that had allowed him to illegally sell the client's shares in a Taiwanese company and to sneak out of Taiwan with NT$3.09 billion ($92 million USD) Unfortunately, Lee and Li had no insurance to cover this embezzlement
In The Five Competitive Forces That Shape Strategy, what is the restrictive government policy incumbent advantage?
Government policy can hinder or aid new entry directly, as well as amplify (or nullify) the other entry barriers Government directly limits or even forecloses entry into industries through, for instance, licensing requirements and restrictions on foreign investment Regulated industries like liquor retailing, taxi services, and airlines are visible examples Government policy can heighten other entry barriers through such means as expansive patenting rules that protect proprietary technology from imitation or environmental or safety regulations that raise scale economies facing newcomers Of course, government policies may also make entry easier—directly through subsidies, for instance, or indirectly by funding basic research and making it available to all firms, new and old, reducing scale economies
In Lee & Li, what was the perpetrator's background? (Eddie Liu)
He joined Lee and Li in December 1989 as a legal assistant On August 1, 2003, he approached the management of the firm and asked for a 12 month's leave without pay to prepare for the bar exam Management approved his request on October 1 because the 41-year-old Liu was a trusted employee
In The Five Competitive Forces That Shape Strategy, what is expected retaliation?
How potential entrants believe incumbents may react will also influence their decision to enter or stay out of an industry If reaction is vigorous and protracted enough, the profit potential of participating in the industry can fall below the cost of capital Incumbents often use public statements and responses to one entrant to send a message to other prospective entrants about their commitment to defending market share Newcomers are likely to fear expected retaliation if: ---Incumbents have previously responded vigorously to new entrants. « Incumbents possess substantial resources to fight back, including excess cash and unused borrowing power, available productive capacity, or clout with distribution channels and customers ---Incumbents seem likely to cut prices because they are committed to retaining market share at all costs or because the industry has high fixed costs, which create a strong motivation to drop prices to fill excess capacity ---Industry growth is slow so newcomers can gain volume only by taking it from incumbents An analysis of barriers to entry and expected retaliation is obviously crucial for any company contemplating entry into a new industry The challenge is to find ways to surmount the entry barriers without nullifying, through heavy investment, the profitability of participating in the industry
In Blowing the Pfizer Whistle, why was there such a surge in pharmaceutical whistle blowers?
In 1986 a law was established that enabled whistle blowers to seize up to 30% of any money given to the Federal Government This created a reward for turning in companies for marketing malfeasance Combined with the growing fines being issued by the FDA, it is obvious why there was a surge
In Lee & Li, how did the embezzlement of $3 million happen?
In 2002, SanDisk authorized Lee and Li to file an investment application with the Tatwanese government This application was required to allow the remittance of the return on investment (the dividend) and the principle in the case of divestment to SanDisk because of the Tatwanese government's foreign exchange control. This arrangement required that SanDisk give Lee and Li a power of attorney The power of attorney should have empowered Lee and Li only to interact with the government on SanDisk's behalf. However, it contained a clause that allowed Lee and Li to deal with the brokerage house holding SanDisk's shares in UMC This clause meant that Lee and Li's representative could talk to the brokerage house on behalf of SanDisk For this clause to have been included in the power of attorney was very unusual. The inclusion of the clause should have been noted by Lee and Li and deleted The power of attorney authorized Lee and Li to make chops (signets) for SanDisk, and any transaction mvolving SanDisk required both these chops and those containing the name of Hsu, all of which were secured in a vault at Lee and Li Liu gained unauthorized access to the passbooks and chops for both accounts and could transact business through both accounts without any "actual" permission and/or supervision. He was not legally authorized to make any transactions but he had access to the tools that allowed him to do so
In The Five Competitive Forces That Shape Strategy, what are the factors but not forces?
Industry growth rate Complementary products and services Government Technology and innovation
In Blowing the Pfizer Whistle, what was the issue with the FDA's disclosed finalized guidance document?
It expressly stated that companies no longer had to provide the FDA with documentation of their peer reviewed marketing tools before distributing them to doctors This allowed companies to simply rely on aggressive marketing to win over doctors, instead of leaning on their drug's merits
In The Five Competitive Forces That Shape Strategy, the threat of a substitute is high if what?
It offers an attractive price-performance trade-off to the industry's product The better the relative value of the substitute, the tighter is the lid on an industry's profit potential For example, conventional providers of long-distance telephone service have suffered from the advent of inexpensive internet-based phone services such as Vonage and Skype Similarly, video rental outlets are struggling with the emergence of cable and satellite video-on-demand services, online video rental services such as Netflix, and the rise of internet video sites like Google's YouTube The buyer's cost of switching to the substitute is low Switching from a proprietary, branded drug to a generic drug usually involves minimal costs, for example, which is why the shift to generics (and the fall in prices) is so substantial and rapid
In Lee & Li, what are some of the firm's clients?
Lee and Li had several thousand clients, many of whom had been with the firm for decades One-third of these clients were headquartered in Taiwan, and the rest were foreign firms Companies from the United States, Europe and Japan had utilized Lee and Li's services The firm's client list included internationally well-known firms, such as General Electric, Ford, 3M, Bank of America, City Bank, IBM, Sony, McDonald's and Siemens Over the years, Lee and Li had represented almost all of the Fortune 500 firms and the multinational banks that were doing business in Taiwan
In Lee & Li, what were the 3 principles?
Lee and Li's core values encompassed three principles: caring for people, excellence in quality and client service. A core goal was "doing well by doing good." The firm's motto "we care, we serve, we excel" was prominently displayed at the entrance to the firm's head office in Taipei The partners and staff believed that adherence to these principles had made the firm a leader in each of its 28 practice areas
In The Five Competitive Forces That Shape Strategy, what is the problem?
Managers define competition too narrowly, as if only between direct competitors As different from one another as industries might appear on the surface, the underlying drivers of profitability are the same
In The Five Competitive Forces That Shape Strategy, what is the threat of entry?
New entrants to an industry bring new capacity and a desire to gain market share that puts pressure on prices, costs, and the rate of investment necessary to compete The threat of entry, therefore, puts a cap on the profit potential of an industry ---When the threat is high, incumbents must hold down their prices or boost investment to deter new competitors. In specialty coffee retailing, for example, relatively low entry barriers mean that Starbucks must invest aggressively in modernizing stores and menus It is the threat of entry, not whether entry actually occurs, that holds down profitability
In The Five Competitive Forces That Shape Strategy, what is the incumbency advantages independent of size incumbent advantage?
No matter what their size, incumbents may have cost or quality advantages not available to potential rivals These advantages can stem from such sources as proprietary technology, preferential access to the best raw material sources, preemption of the most favorable geographic locations, established brand identities, or cumulative experience that has allowed incumbents to learn how to produce more efficiently Entrants try to bypass such advantages. Upstart discounters such as Target and WalMart, for example, have located stores in freestanding sites rather than regional shopping centers where established department stores were well entrenched
In Lee & Li, why was the embezzlement so bad for Lee & Li?
On top of the damage to reputation Lee & Li will take The partners were especially vulneraterm-26ble because in Taiwan the partners of law firms shared unlimited liability. In addition, Lee and Li had no insurance to cover the embezzlement The partners at Lee and Li faced the possibility of losing all of their personal possessions as well as their professional livelihood and standing
In Blowing the Pfizer Whistle, what is the issue with trust in this article?
Patients could rely on FDA safety reports, but were not applicable to off label use Doctors then have a heightened responsibility to brief patients about the risks of medications, especially when the dangers were not listed by the gov. or pharmaceutical company due to lack of clinical testing But off label marketing convinces doctors that unproven treatments are effective
In Lee & Li, what were the Senior Partner's backgrounds? (Hsu, Chen, and Li)
Paul Hsu, C.V. Chen and Kwan-Tao Li, together with other senior partners who had retired before the turn of the century, had led the firm since the deaths of the founders, James Lee and C.N. Li Kwan-Tao Li joined the firm in August 1969. In addition, he started teaching at Soochow University Law School and Fu Jen Catholic University that same year Li had graduated from New York University Law School with his master's degree of law and had a master's of business administration from Kellogg/Hong Kong University of Science and Technology Hsu had joined the firm in September 1969, preceding Chen by about four years Chen joined in 1973 after having received his SJD (doctorate in law) from the Harvard Law School in 1972 and having taught at National Chengchi University Graduate School of Law Together, Hsu, Chen and Li had been with Lee and Li for a combined 98 years.
In Blowing the Pfizer Whistle, what happened before the DOJ lawsuit against Pfizer became public?
Pfizer was merging with Wyeth The initial stockholder reaction to the merger was largely negative, with Pfizer's stock falling 16% Pfizer was going to pay for the merger equally from debt, equity, and cash ($22.5 million each)
In Blowing the Pfizer Whistle, what happened in 1950?
Pfizer's discovery program made Terramycin, its first pharmaceutical drug that it sold under the company's label Sold the antibiotic internationally and Pfizer became known across the globe
In Blowing the Pfizer Whistle, what was the pharmaceutical sales group that advanced/pushed Pfizer's interests?
Phizer Pharmaceutical Sales Force Started as 8 salesmen spreading product information to pharmaceutical wholesales and physicians
In Blowing the Pfizer Whistle, what was Phizer's situation in 2010?
Phizer is the largest drug manufacturer in the world, selling more pharmaceuticals than any other company
In The Five Competitive Forces That Shape Strategy, what is the power of buyers?
Powerful customers, the flip side of powerful suppliers, can capture more value by forcing down prices, demanding better quality or more service (thereby driving up costs), and generally playing industry participants off against one another, all at the expense of industry profitability
In The Five Competitive Forces That Shape Strategy, what is the power of supplier's?
Powerful suppliers capture more of the value for themselves by charging higher prices, limiting quality or services, or shifting costs to industry participants Powerful suppliers, including suppliers of labor, can squeeze profitability out of an industry that is unable to pass on cost increases in its own prices Microsoft, for instance, has contributed to the erosion of profitability among personal computer makers by raising prices on Operating systems PC makers, competing fiercely for customers who can easily switch among them, have limited freedom to raise their prices accordingly
In The Five Competitive Forces That Shape Strategy, what rivalry among existing competitors?
Rivalry among existing competitors takes many familiar forms, including price discounting, new product introductions, advertising campaigns, and service improvements. High rivalry limits the profitability of an industry. The degree to which rivalry drives down an industry's profit potential depends, first, on the intensity with which companies compete and, second, on the basis on which they compete. The intensity of rivalry is greatest if: « Competitors are numerous or are roughly equal in size and power. In such situations, rivals find it hard to avoid poaching business. Without an industry leader, practices desirable for the industry as a whole go unenforced. « Industry growth is slow. Slow growth precipitates fights for market share. « Exit barriers are high. Exit barriers, the flip side of entry barriers, arise because of such things as highly specialized assets or management's devotion to a particular business. These barriers keep companies in the market even though they may be earning low or negative returns. Excess capacity remains in use, and the profitability of healthy competitors suffers as the sick ones hang on. « Rivals are highly committed to the business and have aspirations for leadership, especially if they have goals that go beyond economic performance in the particular industry. High commitment to a business arises for a variety of reasons. For example, state-owned competitors may have goals that include employment or prestige. Units of larger companies may participate in an industry for image reasons or to offer a full line. Clashes of personality and ego have sometimes exaggerated rivalry to the detriment of profitability in fields such as the media and high technology. « Firms cannot read each other's signals well because of lack of familiarity with one another, diverse approaches to competing, or differing goals, The strength of rivalry reflects not just the intensity of competition but also the basis of competition. The dimensions on which competition takes place, and whether rivals converge to compete on the same dimensions, have a major influence on profitability. 76 Rivalry is especially destructive to profitability if it gravitates solely to price because price competition transfers profits directly from an industry to its customers. Price cuts are usually easy for competitors to see and match, making successive rounds of retaliation likely. Sustained price competition also trains customers to pay less attention to product features and service. Price competition is most liable to occur ift « Products or services of rivals are nearly identical and there are few switching costs for buyers. This encourages competitors to cut prices to win new customers. Years of airline price wars reflect these circumstances in that industry. « Fixed costs are high and marginal costs are low. This creates intense pressure for competitors to cut prices below their average costs, even close to their marginal costs, to steal incremental customers while still making some contribution to covering fixed costs. Many basicmaterials businesses, such as paper and aluminum, suffer from this problem, especially if demand is not growing. So do delivery companies with fixed networks of routes that must be served regardless of volume. « Capacity must be expanded in large increments to be efficient. The need for large capacity expansions, as in the polyvinyl chloride business, disrupts the industry's supply-demand balance and often leads to long and recurring periods of overcapacity and price cutting. « The product is perishable. Perishability creates a strong temptation to cut prices and sella product while it still has value. More products and services are perishable than is commonly thought. Just as tomatoes are perishable because they rot, models of computers are perishable because they soon become obsolete, and information may be perishable if it diffuses rapidly or becomes outdated, thereby losing its value. Services such as hotel accommodations are perishable in the sense that unused capacity can never be recovered. Competition on dimensions other than price—on product features, support services, delivery time, or brand image, for instance—is less likely to erode profitability because it improves customer value and can support higher prices. Also, rivalry focused on such dimensions can improve value relative to substitutes or raise the barriers facing new entrants. While nonprice rivalry sometimes escalates to levels that undermine industry profitability, this is less likely to occur than it is with price rivalry. As important as the dimensions of rivalry is whether rivals compete on the same dimensions. When all or many competitors aim to meet the same needs or compete on the same attributes, the result is zero-sum competition. Here, one firm's gain is often another's loss, driving down profitability. While price competition runs a stronger risk than nonprice competition of becoming zero sum, this may not happen if companies take care to segment their markets, targeting their low-price offer ings to different customers. Rivalry can be positive sum, or actually increase the average profitability of an industry, when each competitor aims to serve the needs of different customer segments, with different mixes of price, products, services, features, or brand identities. Such competition can not only support higher average profitability but also expand the industry, as the needs of more customer groups are better met. The opportunity for positive-sum competition will be greater in industries serving diverse customer groups. With a clear understanding of the structural underpinnings of rivalry, strategists can sometimes take steps to shift the nature of competition in a more positive direction
In The Five Competitive Forces That Shape Strategy, what are the industries that the forces are weak?
Software Soft drinks Toiletries Many companies are profitable
In The Five Competitive Forces That Shape Strategy, what is the customer switching costs incumbent advantage?
Switching costs are fixed costs that buyers face when they change suppliers Such costs may arise because a buyer who switches vendors must, for example, alter product specifications, retrain employees to use a new product, or modify processes or information systems The larger the switching costs, the harder it will be for an entrant to gain customers. Enterprise resource planning (ERP) software is an example of a product with very high switching costs ---Once a company has installed SAP's ERP system, for example, the costs of moving to a new vendor are astronomical because of embedded data, the fact that internal processes have been adapted to SAP, major retraining needs, and the mission-critical nature of the applications
In Blowing the Pfizer Whistle, what were Phizer's contribution to the civil war?
Tartaric acid - laxative and skin coolant Cream of tarter - diuretic and cleansing agent
In Blowing the Pfizer Whistle, what happened with the company Warner Lambert?
The DOJ charged a subsidiary, Warner Lambert, with a $430 million fine for off label marketing of Neurontin, which was developed to treat epilepsy, but expanded its use to treat pain as well
In Lee & Li, who bore the financial burden?
The November 14 cash payment of US$20 million came from the savings of Lee and Li's senior partners and other partners To secure the irrevocable standby letters of credit granted by the International Commercial Bank of China to guarantee the payment of the USS$45 million over the next four years, Chen and Li agreed to forego their annual bonuses until Lee and Li had cleared its secure financial obligations to SanDisk in 2007 All the other partners and senior counselors agreed to receive reduced bonuses relative to what they had received in previous years, with the understanding that their bonuses would be increased if funds were available in later years Those who became partners after 2003 would not be required to forego any bonus to help repay SanDisk.
In The Five Competitive Forces That Shape Strategy, what are the differences in industry profitability?
The average return on invested capital varies markedly from industry to industry Between 1992 and 2006, for example, average return on invested capital in U.S. industries ranged as low as zero or even negative to more than 50% At the high end are industries like soft drinks and prepackaged software, which have been almost six times more profitable than the airline industry over the period
Options of responding to the Lee & Li? How might some of them been different if Lee & Li was a US firm? SPEAKING ROLE
The company could've not claimed responsibility for the crisis and blamed Liu --- lose reputation Not use savings to keep company afloat In the US, the limited liability could've offered the partners an easy way out and they would get to keep all of their savings --- could've also done the same and again keep savings
In Lee & Li, what was the firm's reputation?
The firm had advised Tatwan's government on vital social and economic policies, and several firm members had helped draft new governmental legislation Lee and Li lawyers had been involved in judicial reform and constitutional litigation work that were considered landmarks. Their work on pro bono cases had won them a reputation for "being a leader in public interest work in Tatwan." In 1999, the firm established the Lee and Li Foundation, a not-for-profit organization dedicated to promoting education and rule of law
In Lee & Li, what did the firm pioneer?
The firm pioneered the development of the banking and capital markets practice in the 1980s and had been pivotal in the establishment of the technology and law practice in the 1990s Lee and Li was structured into four departments (corporate, banking and capital markets, trademark and copyright, and patent and technology) with Hsu, Chen and Li jointly managing the operations Although the associate partners and staff worked almost exclusively for one of the four departments, they would, as a rule, engage in cross-fertilization with their colleagues in the other departments
In Lee & Li, what was the firm's history?
The firm that later became Lee and Li had been founded in Shanghai, China, in the mid-1940s James Lee, one of the two founders, had commenced practicing law with Allman and Kopps, and, in 1948, the firm was named Allman, Kopps and Lee Dr. C.N. Li, the other founding partner, had also practiced in Shanghai during the 1940s Both James Lee and C.N. Li were specialists in international legal matters In 1953, James Lee established his own law office in Taipei, Taiwan, and, in 1965, he was joined by C.N. Li James Lee died in 1970, and Li renamed the firm Lee and Li. After C.N. Li died in 1973, Paul Hsu, Kwan-Tao Li (C.N. Li's son) and C.V. Chen, together with other senior partners, led the firm through extraordinary growth to become one of the largest law firms in Asia and the largest in Taiwan Considered by many to be the top law firm in that country,' Lee and Li had offices in the cities of Taipei, Taichung, Hsinchu, Taman and Kaohsiung.
In The Five Competitive Forces That Shape Strategy, what is the capital requirements incumbent advantage?
The need to invest large financial resources in order to compete can deter new entrants Capital may be necessary not only for fixed facilities but also to extend customer credit, build inventories, and fund start-up losses The barrier is particularly great if the capital is required for unrecoverable and therefore harder-to-finance expenditures, such as up-front advertising or research and development While major corporations have the financial resources to invade almost any industry, the huge capital requirements in certain fields limit the pool of likely entrants Conversely, in such fields as tax preparation services or short-haul trucking, capital requirements are minimal and potential entrants plentiful It is important not to overstate the degree to which capital requirements alone deter entry If industry returns are attractive and are expected to remain so, and if capital markets are efficient, investors will provide entrants with the funds they need For aspiring air carriers, for instance, financing is available to purchase expensive aircraft because of their high resale value, one reason why there have been numerous new airlines in almost every region
In The Five Competitive Forces That Shape Strategy, what is the unequal access to distribution channels incumbent advantage?
The new entrant must, of course, secure distribution of its product or service A new food item, for example, must displace others from the supermarket shelf via price breaks, promotions, intense selling efforts, or some other means The more limited the wholesale or retail channels are and the more that existing competitors have tied them up, the tougher entry into an industry will be Sometimes access to distribution is so high a barrier that new entrants must bypass distribution channels altogether or create their own Thus, upstart low-cost airlines have avoided distribution through travel agents (who tend to favor established higher-fare carriers) and have encouraged passengers to book their own flights on the internet
In The Five Competitive Forces That Shape Strategy, what is the demand side benefits of scale incumbent advantage?
These benefits, also known as network effects, arise in industries where a buyer's willingness to pay for a company's product increases with the number of other buyers who also patronize the company Buyers may trust larger companies more for a crucial product: Recall the old adage that no one ever got fired for buying from IBM (when it was the dominant computer maker) Buyers may also value being in a "network" with a larger number of fellow customers For instance, online auction participants are attracted to eBay because it offers the most potential trading partners Demand side benefits of scale discourage entry by limiting the willingness of customers to buy from a newcomer and by reducing the price the newcomer can command until it builds up a large base of customers
In The Five Competitive Forces That Shape Strategy, what is the supply side economies of scale incumbent advantage?
These economies arise when firms that produce at larger volumes enjoy lower costs per unit because they can spread fixed costs over more units, employ more efficient technology, or command better terms from suppliers Supply side scale economies deter entry by forcing the aspiring entrant either to come into the industry on a large scale, which requires dislodging entrenched competitors, or to accept a cost disadvantage
In Blowing the Pfizer Whistle, what is the problem with generic manufacturers?
They decrease the industry's incentive to research new drugs, because after 20 years the originating company will have to compete with the generic companies Originating company has to lower price on drug to compete, losing the high margin that the patent ensured monopoly had offered
In Blowing the Pfizer Whistle, what was the controversial marketing tactic used by Pfizer?
They took doctors on resort vacations disguised as seminars to encourage off label prescriptions, offering free massages and kickbacks for off label prescriptions Doctors who went on these dinner outings prescribed Neurontin 70% more often than doctors who did not go on these dinners
In Blowing the Pfizer Whistle, because of the unrealistic but sometimes unenforced limitation placed on the drug industry by the FDA, all companies must have done what?
Ventured past the stipulated boundaries of off label marketing to maintain a feasible profit in an environment where all other competitors were cutting corners
In The Five Competitive Forces That Shape Strategy, what the threat of substitutes?
When the threat of substitutes is high, industry profitability suffers Substitute products or services limit an industry's profit potential by placing a ceiling on prices If an industry does not distance itself from substitutes through product performance, marketing, or other means, it will suffer in terms of profitability— and often growth potential
