Strategic Management

Week 3

DQ2. Manufacturers of inkjet printers (e.g. HP, Canon, and Lexmark) make most of their profits on the sales of ink cartridges. Why are cartridges more profitable than printers? If cartridges were manufactured by different organisations to those that make the printers, would the situation be different? Explain.

Because customers tend to focus on upfront cost without considering long-term cost. The seller are selling you a printer with cheaper price and make money on an ongoing basis by providing expensive printer ink. It’s been compared to the razor model — sell a razor cheaply and mark up the razor blades. Rather than making a one-time profit on the razor, razor seller continuing profit as the customer keeps buying razor blade replacements — or ink, in this case. Therefore, once the customers invested in a printer, the buyers bargaining power is reduced and in the same time the bargaining power of supplier will be reduced.

DQ4. Why is rivalry not a major force in the generic pharmaceuticals industry?

The Pharmaceutical industry develops, produces and markets drugs or pharmaceuticals licensed for use as medications. A generic drug is a medication created to the same as already marketed brand-name drug in dosage form, safety, strength, route of administration, quality, performance characteristics, and intended use.

Because the pharmaceutical industry is less attractiveness for new entrants.

1. Threats of entry posed by new or potential competitor (LOW)

High entry barriers due to costs associated with research & development of new drugs are high. Also, there are the stringent government regulations for approval of new drugs and patents of new drug.

1. Degree of rivalry among existing firms (HIGH)

There is high rivalry among main companies in the industry.

1. Bargaining power of buyers (MEDIUM)

In the market, buyers have many option to get the similar products. Consequently, buyers generally pressurize the pharma companies to keep the price of the drugs low. Consumers have very little bargaining power. Most of the medication is prescribed by the doctors. Consumers will have to buy the drug at any given price if they need it. Therefore, generic drug able to give patient or customers with low price.

1. Bargaining power of suppliers (LOW)

Suppliers generally have little room for negotiation. Large pharmaceutical companies generally enjoy significant buying power. They can dictate the price they want to buy or take their business elsewhere.

1. Threats of substitute products (HIGH)

The Demand for generic drug versus brand name drugs has increased because of the costs the reason behind is the generic drug companies do not have the high costs associated with the research & development of new drugs and that allows them to sell at cheaper prices. Therefore, this increase the threats of substitutes.

DQ5. What could interfere with the complementary force benefits of third-party generated applications for open architecture systems such as Windows and Nintendo games?

Week 4

DQ4. In 2009, Walt Disney acquired Marvel Entertainment (a company known for its comics and movie characters, such as Spider-Man, the Avengers and Captain America) for US$4 billion. What risks did Disney face in achieving the goals of this acquisition? How has Disney’s resources base changed as result of this acquisition?

The risks of this acquisition are related to the limitation of competition in the industry, and the difficulties of integration of Marvel into the Disney’s global entertaining network. There are also some risks that Marvel as part of the large corporation might lose its competitive urge and innovation.

Second, the value of Marvel’s assets and franchise are both influenced by intellectual-property protections, which are potentially at risk. For example, Marvel’s copyrights on some of its best known characters are being challenged by the estate of one of their co-creators. If these challenges re successful, and the protections expire, Marvel’s and franchise value will have to be revaluated.

Third, the earnings power of Marvel’s lesser known characters is unknown, and therefore risky. As an example of the risk this poses, consider Marvel’s 2007 movie on the lesser known character ‘‘Ghost Rider.’’ this movie significantly under-performed the other films listed except one. In short, while the earnings power of character-based blockbuster movies may appear logical in retrospect, it can be very difficult to predict prospectively, and thus must be planned and managed very carefully. This dynamic magnifies growth risk by adding pressure to the high reinvestment rate hurdle noted above

As result of this acquisition, the Disney’s resource base has been further extended by including new great characters, stories, and brand, as well as by getting access to new knowledge of these characters and how to leverage them. Adding Marvel to Disney’s portfolio of brands provides significant opportunities for long-term growth and value creation but in term of the resource based view changed as acquisition may reduce the originality of both parties.

DQ5. Which is more important in explaining the success and failure of companies in the rapidly changing environment: the ability to improvise or strategies? Why?