Systematic strategy analysis

The Five CompetitiveForces That Shape Strategy is really beneficial to me because it provides a systematic way of analyzing an industry.

I took Lean Entrepreneurship from Tepper School of Business last mini-semester. In that course, the only thing we need to consider when trying to establish a business is : will customer like and pay for our product? There's no industry structure analysis and the five force there. It seems that as long as your idea and team is good enough, you'll succeed.

Now that I read the article, I realized that things might not be as easy as I imagined. To enter an industry and establish your own startup, you should consider all the aspects of it. Blindly throw yourself into an industry may leads to a huge loss. The framework may need some modifications though, since in software solution startups, you literally have no suppliers.

A very interesting point that catches my attention is that

Eliminating rivals is a risky strategy, however. The five competitive forces tell us that a profit windfall from removing today’s competitors often attracts new competitors and backlash from customers and suppliers.

I thought that if two big companies merge with each other, eliminating rivals, then it will be the biggest company in that industry. thus there's no way others can compete with it. However, according to the article, it might actually be a chance for new companies to come in since rivals are eliminated. I think about some examples, and the article seems to be right. In China, Youku was the largest video website, just like Youtube, and Tudou was the third. These video websites fight against each other by buying more TV series and movies from content producers. In order to eliminate the rival, Youku and Tudou decided to merge, creating a company that has more than 60% of the market share. All the people thought that the fight is over. But then comes iQiyi, a company backed by the largest search engine in China , Baidu. The new comer catch the right time to advertise itself, and is now the biggest video website in China. The similar thing happend to Didi, the company that merged Uber China, getting over 80% of the ride sharing industry in China. Seeing its service become worse and worse without competition, Meituan, which is Chinse Yelp, just announced that it will go into the ride sharing industry last month.

Getting such a nice framework, I hope I can learn more in the following class.

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