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Welcome back in the second session

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of the industry analysis

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While in the second session of the industry analysis,

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we are going to apply

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the industry structure framework

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to the real-world case

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And also, we are going to find out

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any unique market position in a given industry

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Finding market position in a given industry is also very important,

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and this session will be very helpful for you as an entrepreneur

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Michael Porter said it again

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He said

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strategy can be viewed as

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building defense against the competitive forces

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or

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as finding a position

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in an industry where the forces are weakest

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Again

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once the industry structure is established

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then the relationship

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is surprisingly sticky

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So as an individual company,

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it is almost impossible to change

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the given relationship in a given industry

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The only thing that you can do as a startup

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is to find out some kind of

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very unique position in a given industry

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where the forces are weakest

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Then you can gain competitive advantage

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Although you are in a declining or

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not profitable industry,

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if you are able to find out a unique position,

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then you can gain competitive advantage

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This is what we can do as a startup

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Let's look at the early personal computer industry together

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The personal computer industry

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was a dynamic and fast-growing business

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The personal computer industry just started from

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the late 1970s

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Then this industry grew dramatically

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This graph illustrates the personal computer market size from 1982 to 1998

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As you can see in the graph,

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you feel that the industry itself grew dramatically

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This yellow line represents the worldwide personal computer market

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and the personal computer industry

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The blue line illustrates

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the US alone personal computer industry

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But by the early 1980s,

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the personal computer industry was in chaos

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without any market standard

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There was no standard

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Different companies produced different types of personal computers

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There are a bunch of different types of

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personal computers out there in the market, in the industry

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Look at these pictures

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The first picture is Altea 8800

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Altea 8800 is the first personal computer

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developed and invented by Ed Roberts

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Ed Roberts can be considered

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the father of the personal computer

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He founded the company MITS

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MITS has nothing to do with MIT University

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But anyway, he established MITS as a company

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And then he produced some kind of DIY toolkit

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of the personal computer

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It looks like a machine

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Not too many people understand what it is,

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but only a few hobbyists understand

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And they were enthusiastic on the personal computer

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One of them is

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Bill Gates

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Bill Gates was passionate about personal computers

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So he tried to develop some

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running software for Altea 8800

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So when he saw the news of Altea 8800

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through the computer magazine at Harvard University,

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then he quit his study and

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went to Albuquerque, New Mexico,

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where MITS is located

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So he started his company, Microsoft

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to supply the software to Altea 8800

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So Ed Roberts, who is the founder of Altea 8800,

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later became a medical doctor

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It was a very interesting career path

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Anyway, look at the picture in the middle

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This is Apple II, which is the best-selling computer

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in the early personal computer industry

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You know who made Apple II?

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Yes, of course, Steve Jobs

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and Steve Wozniak made Apple I and Apple II

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Basically, they made the first Apple I personal computer

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in Steve Jobs' mom's garage

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And he asked his friends to assemble 50 of them

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And then they sold the first Apple I computer

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to the nearby computer stores

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Okay, this is the start of the Apple computers

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This is Apple II

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Later, they raised outside venture capital fund

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Then they assembled the Apple II

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So they sold a lot of Apple II computers

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And thanks to the success of Apple II,

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the Apple computer went to IPO

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within four or five years later

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Then the last picture is IBM 5150

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Well, traditionally, IBM was a computer company,

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but their computers were not personal usage computers

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Their computers were the workstation computers

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Workstation computer means

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it's a very big computer for

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not for the individual

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but for the company, but for the university

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So at that time

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each university has one or two workstation computers

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Okay, think about it

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Really big

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And IBM acquired

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tons of market share out of those types of industries

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So IBM was a computer company,

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but IBM did not consider

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personal usage computers

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But IBM felt that,

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wait a minute

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there are many personal computer companies out there

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And Apple, for example,

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already started the personal computer industry,

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and they dominated the market share

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So it's kind of late for us

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to jump in this market

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So we should be in a hurry

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So IBM, because they have technology,

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they have a team, they have money,

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they quickly made a team for the personal computer market

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So they developed new types of personal computers very quickly

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So this is IBM's first personal computer,

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which is IBM 5150

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So IBM 5150 adopted MS-DOS

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as an operating system

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and also adopted Intel microprocessor

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as a main chip

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Well, this IBM 5150 achieved huge success

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I will explain in more detail about it

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You know, this is IBM 5150

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IBM launched this personal computer in 1981,

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and it targeted 240,000 units

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sold within five years

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But the result was it sold out within one week

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It means that there are so many, so many consumers

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already waiting for the IBM 5150

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It was a jackpot, a huge success

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And then one year later,

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Time magazine covered this story

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And then they said that this is the machine of the year

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For the first time,

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Time magazine announced the machine

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on the cover story

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However, think about it

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PC makers come to suffer from low profitability

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Although the market was growing dramatically,

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the computer makers

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suffer from low profitability

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Isn't it interesting?

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So why is this happening?

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So the first reason was

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because of the huge success of IBM 5150,

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there is a huge demand for similar computers

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I need IBM types of computers

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Why?

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Why? Because of the compatibility

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What do you mean by compatibility?

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Have you heard the name of the compatibility, the term?

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Okay, compatibility means

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we are able to do the job

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on a certain computer

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Then later, we should be able to proceed this task on a different computer

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This is called compatibility

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In order to achieve the compatibility,

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both computers have the same

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kind of software

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And right now, we have compatible computers out there

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There's no problem for us to work on different computers

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But at that time, again,

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the different computers have different systems,

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different software,

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different structures

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So that's why not too many computers can have compatibility

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But after IBM 5150's success,

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consumers need compatibility

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So they need particular types of computers,

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which is IBM computers

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But again,

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IBM cannot make endless computers

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They have a fixed amount of capacity

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So in the market, there is a shortage of IBM computers

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Then again, so many other computer companies

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try to copy IBM computers

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We say it is IBM clones,

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which is copycat companies,

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copycat computers of IBM PCs

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They basically perform the same,

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but they run most of the same software,

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same programs as IBM models,

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but at far less cost

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Look at this picture

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This machine is kind of a first portable computer machine

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developed by Compaq

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So we say it is a Wintel standard

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Consumers need Wintel standards

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in order to achieve the compatibility

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Again, for the compatibility,

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computers have the same structure, same system

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The most important component

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that makes computers compatible,

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there are the Intel microprocessors

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and there are Microsoft operating systems

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So we need to have the same microprocessor

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and same operating system

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It is called the Wintel standard,

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Windows and Intel standard

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Due to the shortage of IBM PCs,

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consumers started purchasing IBM clones

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This graph illustrates the growth of IBM PCs

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and IBM clones

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Let's apply the Porter's 546 analysis

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into the PC industries

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What about the current competitors?

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Current competitors

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Consumers need compatibility,

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as I already mentioned that

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And then if they need the same computers,

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then there could be lack of differentiation

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If there's a lack of differentiation,

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no different computers out there,

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then computer makers

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can only fight in the prices

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We say it's a kind of a chicken game

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They engage in chicken game

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In other words, there is a fierce competition in price

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Right?

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So inside the competitors, among the competitors,

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they fight each other in price only

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And industry grows rapidly

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It means component prices,

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component prices decline very fast

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There are many chips,

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there are many components inside the computers

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But these chips are getting old,

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getting old very quickly

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So the price is going down

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Right?

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It means computers can be

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 perishable

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like a vegetable and fruit

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Think about it

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If you deal with the perishable products,

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such as vegetable, fruit,

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then

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then your strategy is to sell very quickly

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If you cannot sell your product,

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then you should raise down your prices

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You know what I mean?

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Because your product is a perishable product

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So in this case,

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there's a fierce competition in price

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because each PC maker raises down the prices

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in order to sell their product very quickly

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So overall,

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the competitors' power is really high

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Competitors are very threatful

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Fierce competition exists

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Another one

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What about the future competitors?

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Everybody can make computers

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Very easy

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So the capital cost of the manufacturing of the computers

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is very low

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Think about Dell

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Michael Dell

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We are going to talk about Dell case later today

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But, you know,

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Dell started assembling the computers in his dorm room

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So as long as you have relevant chips,

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relevant software,

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then you can make your own computers

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You know, in Korea in the 1980s,

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in the Yongsan area,

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there are tons of small computer makers

287
00:15:12.000 --> 00:15:15.000
And they assembled the components,

288
00:15:15.000 --> 00:15:18.000
over there by themselves very quickly

289
00:15:18.000 --> 00:15:20.000
Right?

290
00:15:20.000 --> 00:15:22.000
And also,

291
00:15:22.000 --> 00:15:26.000
so many computer makers tried to jump in this market

292
00:15:26.000 --> 00:15:28.000
And for example,

293
00:15:28.000 --> 00:15:31.000
the Chinese factory in Asia,

294
00:15:31.000 --> 00:15:35.000
Chinese factory tried to make their own computers

295
00:15:35.000 --> 00:15:36.500
Same thing happened in Korea

296
00:15:36.500 --> 00:15:39.000
There are many Korean computer makers

297
00:15:39.000 --> 00:15:40.000
Right?

298
00:15:40.250 --> 00:15:44.050
And most inputs are available

299
00:15:44.050 --> 00:15:47.000
Perfectly available

300
00:15:47.000 --> 00:15:48.000
So,

301
00:15:48.000 --> 00:15:49.000
the competitors,

302
00:15:49.000 --> 00:15:50.000
future competitors,

303
00:15:50.000 --> 00:15:52.000
future competitors

304
00:15:52.000 --> 00:15:56.000
can join this industry very easy

305
00:15:56.000 --> 00:15:57.000
So,

306
00:15:57.550 --> 00:16:00.000
look at the market share

307
00:16:00.000 --> 00:16:03.300
from 1980s to 1989

308
00:16:04.000 --> 00:16:06.000
Well, in the 1980s,

309
00:16:06.000 --> 00:16:10.000
before the IBM entered this industry,

310
00:16:10.000 --> 00:16:14.000
Apple gained around 30% of the market share

311
00:16:14.000 --> 00:16:16.350
And AST, Tandy,

312
00:16:16.800 --> 00:16:19.000
acquired around 40% of market share

313
00:16:19.000 --> 00:16:21.000
And other computer companies

314
00:16:21.000 --> 00:16:24.000
got around 30% of market share

315
00:16:24.000 --> 00:16:25.000
But three years later,

316
00:16:25.000 --> 00:16:26.000
what happened?

317
00:16:26.000 --> 00:16:29.000
After IBM jumped in this industry,

318
00:16:29.000 --> 00:16:32.450
IBM acquired around 40% of the market share

319
00:16:32.450 --> 00:16:35.900
And Apple's market share decreased to 20%

320
00:16:35.900 --> 00:16:39.450
And other companies' market share increased

321
00:16:39.450 --> 00:16:41.300
to 33%

322
00:16:41.850 --> 00:16:43.750
Then four years later,

323
00:16:43.750 --> 00:16:45.950
Apple's market share decreased again

324
00:16:45.950 --> 00:16:48.400
And IBM's market share also decreased

325
00:16:48.450 --> 00:16:49.450
On the other hand,

326
00:16:49.450 --> 00:16:51.150
other companies,

327
00:16:51.300 --> 00:16:52.750
which is new entrance,

328
00:16:52.750 --> 00:16:54.000
okay, new competitors,

329
00:16:54.000 --> 00:16:58.000
other market shares increased 48%

330
00:16:58.550 --> 00:16:59.900
Two years later,

331
00:16:59.900 --> 00:17:01.350
1989,

332
00:17:01.350 --> 00:17:06.000
then others' market share increased to 60%

333
00:17:06.650 --> 00:17:11.000
It's all because of the IBM clones

334
00:17:11.000 --> 00:17:14.400
and consumers' need of the compatibility

335
00:17:14.400 --> 00:17:18.250
and easy to jump in this market

336
00:17:18.850 --> 00:17:21.400
So, what about the threat of new entrance,

337
00:17:21.450 --> 00:17:23.500
threat of future competitors?

338
00:17:23.900 --> 00:17:27.000
I think it's kind of moderate or high

339
00:17:27.000 --> 00:17:29.000
Right?

340
00:17:30.000 --> 00:17:33.000
Well, what about the consumers?

341
00:17:33.000 --> 00:17:34.000
Consumers need what?

342
00:17:34.000 --> 00:17:37.100
Consumers need Wintel standard

343
00:17:37.900 --> 00:17:40.000
If they need particular functions,

344
00:17:40.000 --> 00:17:42.000
Wintel standard,

345
00:17:42.000 --> 00:17:44.350
then they don't have any,

346
00:17:44.850 --> 00:17:47.250
high level of switching cost over the particular brand

347
00:17:47.250 --> 00:17:49.000
Low switching cost

348
00:17:49.000 --> 00:17:51.000
Low switching cost means

349
00:17:51.000 --> 00:17:52.000
they are always,

350
00:17:52.000 --> 00:17:54.000
they are always,

351
00:17:54.450 --> 00:17:56.500
able to change their brand

352
00:17:57.800 --> 00:18:01.000
As long as the particular computer

353
00:18:01.000 --> 00:18:03.000
follows the Wintel standard,

354
00:18:03.000 --> 00:18:05.000
they can choose these computers

355
00:18:05.000 --> 00:18:06.000
For them,

356
00:18:06.000 --> 00:18:08.000
PCs are the same

357
00:18:08.750 --> 00:18:10.000
So, again,

358
00:18:10.000 --> 00:18:11.000
the low switching cost

359
00:18:11.000 --> 00:18:12.000
For them,

360
00:18:12.000 --> 00:18:15.300
PCs are also very expensive

361
00:18:15.750 --> 00:18:17.000
It's very expensive

362
00:18:17.000 --> 00:18:18.650
And it,

363
00:18:19.000 --> 00:18:22.000
it accounts for a huge portion

364
00:18:22.000 --> 00:18:25.000
from their incomes

365
00:18:25.000 --> 00:18:26.000
So,

366
00:18:26.000 --> 00:18:28.000
we say this type of product

367
00:18:28.000 --> 00:18:30.850
is a high involvement product

368
00:18:31.000 --> 00:18:33.300
high involvement product

369
00:18:33.900 --> 00:18:35.900
If you deal with the consumer

370
00:18:36.000 --> 00:18:38.350
who can purchase a high involvement product,

371
00:18:38.350 --> 00:18:40.000
then you should be very careful

372
00:18:40.000 --> 00:18:42.000
because consumers are very sensitive

373
00:18:42.000 --> 00:18:43.000
Right?

374
00:18:43.550 --> 00:18:46.000
So, the consumer's threat

375
00:18:46.000 --> 00:18:48.000
is probably higher over you

376
00:18:48.000 --> 00:18:49.000
Right?

377
00:18:49.000 --> 00:18:50.000
They have more power over you

378
00:18:50.000 --> 00:18:52.000
because they don't have any

379
00:18:52.000 --> 00:18:53.000
sticky brand

380
00:18:53.300 --> 00:18:56.650
and they are really careful with their prices

381
00:18:56.650 --> 00:18:59.000
because it is very expensive,

382
00:18:59.000 --> 00:19:02.000
which is a high involvement product

383
00:19:02.000 --> 00:19:03.000
Right?

384
00:19:03.000 --> 00:19:04.000
And they are

385
00:19:04.000 --> 00:19:07.000
all well-educated consumers

386
00:19:07.000 --> 00:19:09.000
in terms of the computers

387
00:19:09.800 --> 00:19:13.000
So, dealing with those types of consumers,

388
00:19:13.000 --> 00:19:15.300
it is not easy

389
00:19:15.300 --> 00:19:16.400
Right?

390
00:19:17.000 --> 00:19:17.700
Let's move on

391
00:19:17.700 --> 00:19:18.750
Suppliers

392
00:19:18.750 --> 00:19:20.000
Well,

393
00:19:20.000 --> 00:19:22.000
consumers need for the compatibility,

394
00:19:22.000 --> 00:19:23.700
which is the Intel standard

395
00:19:23.900 --> 00:19:27.550
So, they particularly need

396
00:19:27.550 --> 00:19:30.000
Intel microprocessor

397
00:19:30.000 --> 00:19:34.000
and the Microsoft Windows operating system

398
00:19:34.200 --> 00:19:37.000
So, who are major suppliers

399
00:19:37.000 --> 00:19:38.000
for the PC makers?

400
00:19:38.450 --> 00:19:40.000
Yes, of course,

401
00:19:40.000 --> 00:19:41.000
Intel

402
00:19:41.000 --> 00:19:43.000
and Microsoft

403
00:19:43.000 --> 00:19:44.000
Right?

404
00:19:44.000 --> 00:19:45.800
And,

405
00:19:46.000 --> 00:19:49.000
for the PC makers' point of view,

406
00:19:49.000 --> 00:19:51.000
it is not easy

407
00:19:51.000 --> 00:19:53.000
to switch the suppliers,

408
00:19:53.000 --> 00:19:55.250
to switch the,

409
00:19:55.700 --> 00:19:57.000
to switch Intel,

410
00:19:57.000 --> 00:19:59.000
to switch Microsoft

411
00:19:59.000 --> 00:20:00.000
Why?

412
00:20:00.000 --> 00:20:01.840
Because consumers need

413
00:20:01.840 --> 00:20:03.240
And there's only one company

414
00:20:03.240 --> 00:20:06.480
to produce Intel microprocessor, only Intel

415
00:20:06.480 --> 00:20:08.440
There's only one company to produce

416
00:20:09.440 --> 00:20:10.760
the window operating system

417
00:20:10.760 --> 00:20:12.240
It's Microsoft

418
00:20:12.240 --> 00:20:13.080
Okay

419
00:20:14.240 --> 00:20:17.480
So the major suppliers such as Intel and Microsoft

420
00:20:17.480 --> 00:20:18.639
dominate this market

421
00:20:20.240 --> 00:20:22.290
So we say

422
00:20:22.290 --> 00:20:25.240
the power of suppliers is very high, very high

423
00:20:25.240 --> 00:20:27.639
It's very high, very high

424
00:20:27.639 --> 00:20:30.360
In particular, those two suppliers

425
00:20:32.000 --> 00:20:33.759
So look at this graph

426
00:20:33.759 --> 00:20:37.860
The blue bar represents Intel's profit margin

427
00:20:37.860 --> 00:20:41.799
and the red bar represent Microsoft's profit margin

428
00:20:41.799 --> 00:20:43.549
In 1999,

429
00:20:43.549 --> 00:20:47.299
Microsoft enjoyed around 40% of the market share

430
00:20:47.480 --> 00:20:49.279
and Intel at the same time,

431
00:20:49.279 --> 00:20:51.880
around more than 25% market share

432
00:20:51.880 --> 00:20:54.959
So they enjoyed above normal profit

433
00:20:55.040 --> 00:20:58.880
given such a poor performing industries,

434
00:20:58.880 --> 00:21:00.919
which is the PC industry

435
00:21:00.919 --> 00:21:02.279
Although the other PC makers

436
00:21:02.279 --> 00:21:04.480
suffer from lack of the profitability,

437
00:21:04.480 --> 00:21:07.480
but the suppliers, Intel and Microsoft

438
00:21:07.480 --> 00:21:10.360
enjoyed above normal profits

439
00:21:10.360 --> 00:21:13.940
because of their power

440
00:21:15.400 --> 00:21:16.760
Substitute

441
00:21:16.760 --> 00:21:18.239
This is the last one

442
00:21:18.239 --> 00:21:21.919
At that time, the network PC is rising

443
00:21:21.919 --> 00:21:24.680
and there's a workstation PCs,

444
00:21:25.360 --> 00:21:29.279
but substitute power is not very high

445
00:21:29.279 --> 00:21:31.160
It's kind of a middle, right?

446
00:21:32.040 --> 00:21:34.959
So we can analyze,

447
00:21:34.959 --> 00:21:39.959
we can analyze the early PC market,

448
00:21:40.080 --> 00:21:44.040
PC industry based on Porter's 546 analysis

449
00:21:44.040 --> 00:21:46.639
So let's evaluate again

450
00:21:46.639 --> 00:21:49.040
Current rivals, very high

451
00:21:49.040 --> 00:21:50.320
What about future rivals?

452
00:21:50.320 --> 00:21:52.839
Future rivals is middle or high

453
00:21:52.839 --> 00:21:55.599
Consumers, consumers power, yes, high

454
00:21:55.599 --> 00:21:58.040
Suppliers power, very high

455
00:21:58.040 --> 00:22:00.720
Substitute power is kind of middle

456
00:22:00.720 --> 00:22:03.320
Then we can make it this sentence,

457
00:22:03.320 --> 00:22:04.570
this word

458
00:22:04.570 --> 00:22:08.920
to the numbers from one to five

459
00:22:09.080 --> 00:22:12.160
and the current rivals, yes, mark five

460
00:22:12.160 --> 00:22:15.720
and future rivals mark around the 3.5

461
00:22:15.720 --> 00:22:18.759
and the consumers, consumers mark four

462
00:22:18.759 --> 00:22:21.839
and suppliers mark, yes, of course, mark five

463
00:22:21.839 --> 00:22:23.800
and substitute mark, it's kind of a middle,

464
00:22:23.800 --> 00:22:26.320
so plus three

465
00:22:26.320 --> 00:22:28.160
So put together how much?

466
00:22:28.160 --> 00:22:32.679
Okay, 9, 12, 17

467
00:22:32.679 --> 00:22:35.399
Wow, 20.5 out of 25

468
00:22:36.399 --> 00:22:37.559
20.5

469
00:22:37.559 --> 00:22:38.919
You know what I mean by that?

470
00:22:38.919 --> 00:22:40.600
Outside the five forces

471
00:22:40.600 --> 00:22:44.279
they have a 20.5 score out of 25

472
00:22:44.279 --> 00:22:48.119
Again, the more powerful the forces,

473
00:22:48.119 --> 00:22:51.790
the less attractive for you

474
00:22:53.240 --> 00:22:54.720
It's the big number or small number,

475
00:22:54.720 --> 00:22:58.120
20.5 score out of 25

476
00:22:58.120 --> 00:23:00.520
which is huge numbers

477
00:23:00.759 --> 00:23:03.559
It means, five forces

478
00:23:03.559 --> 00:23:05.000
in the computer industry,

479
00:23:05.000 --> 00:23:10.000
five forces have big numbers

480
00:23:10.000 --> 00:23:14.919
It means this industry is not attractive to you, right?

481
00:23:14.919 --> 00:23:20.119
So we can confirm that why the PC makers

482
00:23:20.119 --> 00:23:23.119
suffer from the lack of the profitability

483
00:23:23.119 --> 00:23:26.320
It is all because of powerful forces

484
00:23:28.960 --> 00:23:32.960
I want to introduce Michael Dell

485
00:23:32.960 --> 00:23:33.960
Okay, Dell

486
00:23:33.960 --> 00:23:36.199
Have you heard about the Dell computer?

487
00:23:36.199 --> 00:23:37.039
Right?

488
00:23:37.039 --> 00:23:39.679
Dell computer started as a computer company,

489
00:23:39.679 --> 00:23:42.240
in 1980s

490
00:23:42.240 --> 00:23:45.320
As a freshman, I mean, college dropout,

491
00:23:45.320 --> 00:23:47.520
he started this company,

492
00:23:47.559 --> 00:23:50.880
well, actually the nearby University of Texas

493
00:23:50.880 --> 00:23:53.199
Well, before then, he was a pre-med student

494
00:23:53.199 --> 00:23:55.160
in the University of Texas, Austin,

495
00:23:55.160 --> 00:23:58.199
and he lived in the dormitory, Dobby Hall

496
00:23:58.199 --> 00:24:00.960
And over there, right, over there,

497
00:24:00.960 --> 00:24:02.720
he didn't study at all

498
00:24:02.720 --> 00:24:05.839
Instead, he assembled a computer

499
00:24:05.839 --> 00:24:09.559
And basically he took order from his friend

500
00:24:09.559 --> 00:24:14.559
and he personalized his friend's computers

501
00:24:15.199 --> 00:24:16.040
Right?

502
00:24:16.040 --> 00:24:17.920
So he made a lot of money

503
00:24:17.920 --> 00:24:20.079
So he started his businesses

504
00:24:21.320 --> 00:24:23.160
Well, Dell was very successful

505
00:24:23.160 --> 00:24:28.160
because Dell has grown at over 55% or 60% every year

506
00:24:28.200 --> 00:24:30.119
in revenue and net income,

507
00:24:30.119 --> 00:24:34.040
respectively from 1987 to 1997

508
00:24:34.040 --> 00:24:38.239
Think about the blue bar represent the gross ratio,

509
00:24:38.239 --> 00:24:40.119
gross ratio of the Dell

510
00:24:40.119 --> 00:24:44.959
Dell achieved at least 50%, at least 50% every year

511
00:24:44.959 --> 00:24:47.839
They increased, they grew 50% every year

512
00:24:47.839 --> 00:24:49.799
But what about the other computer company?

513
00:24:49.799 --> 00:24:54.799
Well, the yellow, I mean, the orange bar represent Apple

514
00:24:54.959 --> 00:24:59.480
You know, 1996, 1997, Apple shrinked, Apple declined

515
00:25:00.600 --> 00:25:02.959
Not too many people believe that

516
00:25:02.959 --> 00:25:04.720
But around that time

517
00:25:04.720 --> 00:25:07.559
we are worried about the Apple's bankruptcy, right?

518
00:25:07.559 --> 00:25:10.119
1996, 1997

519
00:25:10.119 --> 00:25:11.799
And what about the other computers?

520
00:25:11.799 --> 00:25:15.239
IBM, 1993, IBM did not grow

521
00:25:15.239 --> 00:25:17.679
1994, IBM grew a little bit

522
00:25:17.679 --> 00:25:20.720
So think about the other computer makers

523
00:25:20.720 --> 00:25:23.039
Computer makers suffer from

524
00:25:23.039 --> 00:25:26.100
lack of the profitability and they don't grow

525
00:25:27.359 --> 00:25:31.079
Only Dell grew dramatically, only Dell

526
00:25:32.079 --> 00:25:35.440
So we need to find out the key secret,

527
00:25:35.440 --> 00:25:38.559
how it is happening for the Dell computer

528
00:25:38.559 --> 00:25:42.480
Dell became later the world's largest PC makers,

529
00:25:42.480 --> 00:25:43.679
PC producers

530
00:25:45.440 --> 00:25:47.760
Dell thrived in the PC industry again

531
00:25:47.760 --> 00:25:51.079
And this is a stock market prices of the Dell computer

532
00:25:51.079 --> 00:25:55.839
And when Dell went to IPO,

533
00:25:55.839 --> 00:25:59.760
then the Dell stock prices increased,

534
00:25:59.760 --> 00:26:01.600
increased sharp, okay?

535
00:26:04.279 --> 00:26:06.640
Well, I prepared for the short video clip

536
00:26:06.640 --> 00:26:08.920
to explain the Dell's history

537
00:26:08.920 --> 00:26:11.679
Please take a look at the video together

538
00:26:11.679 --> 00:26:14.480
before we proceed the lecture

539
00:26:14.480 --> 00:26:16.690
Let's take a look at the video together

540
00:26:22.000 --> 00:26:25.239
What do you think of the Dell's history?

541
00:26:25.239 --> 00:26:26.399
Isn't it interesting?

542
00:26:26.399 --> 00:26:29.720
So you understand how Dell

543
00:26:29.720 --> 00:26:31.679
run his own businesses

544
00:26:31.679 --> 00:26:34.559
and how did position the computer company,

545
00:26:34.600 --> 00:26:39.279
position the company in a given industry?

546
00:26:39.279 --> 00:26:42.160
I want to summarize

547
00:26:42.160 --> 00:26:44.239
Dell's history and Dell's approach

548
00:26:44.239 --> 00:26:48.600
and Dell's strategy in a given poor performing industry,

549
00:26:48.600 --> 00:26:50.320
which is the PC industry

550
00:26:51.440 --> 00:26:55.040
Right, okay, so Michael Dell said,

551
00:26:55.040 --> 00:27:00.000
the idea was to sell computers directly to the end users

552
00:27:00.000 --> 00:27:02.119
without the markup of dealers

553
00:27:02.119 --> 00:27:04.119
So it means we don't have dealers

554
00:27:04.519 --> 00:27:06.239
Dealer means big stores

555
00:27:06.239 --> 00:27:07.959
We don't have big stores

556
00:27:07.959 --> 00:27:11.760
We do not contract with the big stores, okay?

557
00:27:11.760 --> 00:27:14.720
And also we don't have a high level of inventory

558
00:27:14.720 --> 00:27:18.519
We keep very low level of inventory

559
00:27:18.519 --> 00:27:23.359
and also we provide high level of service

560
00:27:24.399 --> 00:27:27.519
These are differentiators, okay?

561
00:27:27.519 --> 00:27:29.980
These are differentiators of the Dell computer

562
00:27:30.880 --> 00:27:34.239
Look at the traditional computer purchasing,

563
00:27:34.239 --> 00:27:36.540
experience, think about it

564
00:27:36.920 --> 00:27:38.600
Personal computer,

565
00:27:38.600 --> 00:27:40.949
when we think about the personal computer,

566
00:27:40.949 --> 00:27:45.949
we think about the computers at home, right?

567
00:27:45.959 --> 00:27:48.279
We need a personal computer at home

568
00:27:48.279 --> 00:27:52.959
My house, we have one or two personal computers, okay?

569
00:27:52.959 --> 00:27:54.440
This is the picture

570
00:27:54.440 --> 00:27:56.239
This is a typical picture

571
00:27:56.239 --> 00:27:59.040
The people use the computer at home, right?

572
00:27:59.279 --> 00:28:02.079
So when we need a personal computer,

573
00:28:02.079 --> 00:28:05.679
then where do you go to purchase personal computer?

574
00:28:05.679 --> 00:28:10.679
Yes, of course, you should stop by the specialized stores

575
00:28:10.679 --> 00:28:13.880
or big discount stores such as Costco

576
00:28:13.880 --> 00:28:18.119
or such as Best Buy or such as Walmart

577
00:28:18.119 --> 00:28:20.640
You stop by Walmart or Best Buy,

578
00:28:20.640 --> 00:28:22.119
to purchase computer

579
00:28:22.119 --> 00:28:25.679
And of course, over there, there are a lot of computers

580
00:28:25.679 --> 00:28:28.399
and the employees,

581
00:28:28.399 --> 00:28:30.600
probably employees will explain,

582
00:28:30.600 --> 00:28:35.119
the very detail about each computers, okay?

583
00:28:35.119 --> 00:28:37.239
Then where these big box retailers

584
00:28:37.239 --> 00:28:41.280
or Best Buy or Walmart get the computers?

585
00:28:41.280 --> 00:28:43.479
Yes, of course, computer makers

586
00:28:43.479 --> 00:28:45.640
Computer makers have a factory

587
00:28:45.640 --> 00:28:48.039
and computer makers have employees

588
00:28:48.039 --> 00:28:51.200
and they have raw materials

589
00:28:51.200 --> 00:28:54.640
So they assemble the computer in their factory

590
00:28:54.640 --> 00:28:57.599
Then later, they ship their finished good,

591
00:28:57.599 --> 00:29:01.719
finished computer to the Best Buy or Walmart

592
00:29:01.719 --> 00:29:04.200
as the, you know, dealers

593
00:29:04.200 --> 00:29:06.679
We say it's the dealers

594
00:29:06.679 --> 00:29:11.359
So the computer makers just contact with the dealers

595
00:29:11.359 --> 00:29:16.000
or stores, and then they just shake hands

596
00:29:16.000 --> 00:29:18.039
Then they don't care the end users

597
00:29:18.039 --> 00:29:20.280
End users like us just meet

598
00:29:20.280 --> 00:29:22.599
employees of the stores, right?

599
00:29:22.599 --> 00:29:26.559
Because the stores take care of everything

600
00:29:26.559 --> 00:29:29.719
Take care of selling, service, something like that

601
00:29:29.719 --> 00:29:33.640
So the Best Buy will sell the computer to the end users,

602
00:29:33.640 --> 00:29:34.479
right?

603
00:29:34.479 --> 00:29:37.520
This is the typical process of computer purchasing

604
00:29:37.520 --> 00:29:41.760
But Michael Dell thought differently

605
00:29:41.760 --> 00:29:43.520
Okay, wait a minute

606
00:29:43.520 --> 00:29:46.670
This is the personal computer

607
00:29:46.670 --> 00:29:49.520
for just a home

608
00:29:49.620 --> 00:29:52.960
It is a home personal computer

609
00:29:53.960 --> 00:29:57.440
Yes, it is a home market, okay?

610
00:29:57.440 --> 00:30:00.559
So far, we just focused on home personal computer market

611
00:30:01.599 --> 00:30:04.479
But in a PC industry,

612
00:30:04.479 --> 00:30:09.029
there are kind of additional market can exist

613
00:30:10.039 --> 00:30:13.080
Additional place that need the personal computer,

614
00:30:13.080 --> 00:30:15.760
additional place beyond the home

615
00:30:16.760 --> 00:30:18.679
Think about where it is

616
00:30:18.679 --> 00:30:20.159
Where it is?

617
00:30:20.159 --> 00:30:22.119
Where we need the personal computer?

618
00:30:22.119 --> 00:30:23.509
Beyond the home

619
00:30:24.239 --> 00:30:27.200
Yes, of course, the companies

620
00:30:27.200 --> 00:30:28.239
Yes, right?

621
00:30:28.239 --> 00:30:30.000
Inside the companies,

622
00:30:30.000 --> 00:30:32.640
there are tons of the personal computers

623
00:30:32.640 --> 00:30:35.599
We work at the personal computers, right?

624
00:30:35.599 --> 00:30:37.320
Each, every single household

625
00:30:37.320 --> 00:30:39.200
need just one or two computers,

626
00:30:39.200 --> 00:30:44.200
but each company need 5,000, 10,000 computers,

627
00:30:45.200 --> 00:30:49.200
They need 5,000, 10,000 PCs, right?

628
00:30:49.200 --> 00:30:50.440
This is additional market

629
00:30:50.440 --> 00:30:51.320
This is another market,

630
00:30:51.320 --> 00:30:54.719
which is enterprise market

631
00:30:54.719 --> 00:30:59.400
And also, what other places need personal computer?

632
00:30:59.400 --> 00:31:01.119
What other places?

633
00:31:01.119 --> 00:31:03.960
Yes, of course, university, right?

634
00:31:03.960 --> 00:31:06.719
Inside the university, how many computer we need?

635
00:31:06.719 --> 00:31:07.960
In Hanyang University,

636
00:31:07.960 --> 00:31:10.559
how many computers do we have?

637
00:31:10.559 --> 00:31:12.039
We have a lot of departments

638
00:31:12.039 --> 00:31:13.280
We have a lot of professors

639
00:31:13.599 --> 00:31:16.400
We have a lot of students

640
00:31:16.400 --> 00:31:18.400
And also, we have a computer lab

641
00:31:18.400 --> 00:31:21.559
and the computer classes, right?

642
00:31:21.559 --> 00:31:25.159
And we have a classroom with many computers

643
00:31:25.159 --> 00:31:29.200
So, how many computers we need in each university?

644
00:31:29.200 --> 00:31:32.200
This is the university market, right?

645
00:31:32.200 --> 00:31:34.760
There are different market

646
00:31:34.760 --> 00:31:37.679
in a given personal computer industry

647
00:31:37.679 --> 00:31:38.719
And what else?

648
00:31:38.719 --> 00:31:41.799
What kind of other place

649
00:31:41.840 --> 00:31:44.200
that need personal computer?

650
00:31:44.200 --> 00:31:46.159
Yes, government, right?

651
00:31:46.159 --> 00:31:50.239
The Department of Labor or Pentagon in America

652
00:31:50.239 --> 00:31:52.359
So many people work there

653
00:31:52.359 --> 00:31:55.159
In other words, so many computer we need, right?

654
00:31:55.159 --> 00:31:57.760
This computer would be the personal computers

655
00:31:57.760 --> 00:32:00.359
So, this is a government market

656
00:32:00.359 --> 00:32:05.000
So, Michael Dell did not focus on home PC market

657
00:32:05.050 --> 00:32:08.150
Instead, he identified

658
00:32:08.150 --> 00:32:11.400
three big consumer segments

659
00:32:11.840 --> 00:32:13.880
The first one, enterprise consumer segment

660
00:32:13.880 --> 00:32:16.080
Second one, university consumer segment

661
00:32:16.080 --> 00:32:20.039
Third one is government consumer segment

662
00:32:20.039 --> 00:32:25.039
So, Michael Dell tried to send out his salesperson

663
00:32:25.159 --> 00:32:27.039
to each segment

664
00:32:27.039 --> 00:32:29.400
For example, enterprise market

665
00:32:29.400 --> 00:32:34.159
Dell sent out his salesperson to GE

666
00:32:34.159 --> 00:32:35.320
GE Manhattan

667
00:32:35.320 --> 00:32:38.080
Hey GE, you need computers

668
00:32:38.080 --> 00:32:39.520
How many computers do you need?

669
00:32:39.520 --> 00:32:41.489
What kind of functions do you need?

670
00:32:43.039 --> 00:32:46.559
How many, I mean,

671
00:32:47.799 --> 00:32:49.899
what about your

672
00:32:49.899 --> 00:32:53.899
the kind of sound or graphic important for you?

673
00:32:54.039 --> 00:32:56.919
Then we can provide some kind of relevant chip,

674
00:32:56.919 --> 00:33:01.119
relevant types of the computer for you

675
00:33:01.119 --> 00:33:04.200
Do you need wide screen?

676
00:33:04.200 --> 00:33:08.880
Yes, we can provide wide screen for you, right?

677
00:33:08.880 --> 00:33:13.119
So, okay, let's make a contract with us

678
00:33:13.119 --> 00:33:17.200
Then GE orders 10,000,

679
00:33:17.200 --> 00:33:20.159
10,000 PCs to Dell computers

680
00:33:20.159 --> 00:33:22.640
So, the Dell computer, once they received the order

681
00:33:22.640 --> 00:33:25.880
from the GE, then they started making the computer

682
00:33:25.880 --> 00:33:27.559
for only GE

683
00:33:27.559 --> 00:33:30.840
It is a personalized computer for GE

684
00:33:30.840 --> 00:33:32.640
And then what about university?

685
00:33:32.640 --> 00:33:34.880
Dell sent out the salesperson

686
00:33:34.880 --> 00:33:36.440
to the Harvard University

687
00:33:36.440 --> 00:33:39.239
Hey, Harvard University, you have many department

688
00:33:39.239 --> 00:33:40.679
and what kind of a computer you need?

689
00:33:40.679 --> 00:33:43.320
Yes, of course, you are kind of a scientific,

690
00:33:43.320 --> 00:33:45.200
the university

691
00:33:45.200 --> 00:33:49.479
So, probably you need to have a high level of capacity

692
00:33:49.479 --> 00:33:51.239
to analyze your data

693
00:33:51.239 --> 00:33:54.039
So, we can provide those types of computer for you

694
00:33:54.880 --> 00:33:56.919
How many computers you need?

695
00:33:56.919 --> 00:33:58.640
Well, Harvard University said,

696
00:33:58.640 --> 00:34:02.159
well, we need at least 8,000 of them

697
00:34:02.159 --> 00:34:05.559
So, yes, we can make 8,000 computers for you

698
00:34:05.559 --> 00:34:09.880
So, once Dell computer received the order from the GE,

699
00:34:09.880 --> 00:34:12.400
they started making, no, I'm sorry,

700
00:34:12.400 --> 00:34:14.960
taking orders from the Harvard University,

701
00:34:14.960 --> 00:34:17.210
they started making

702
00:34:17.210 --> 00:34:19.919
the Harvard University types computer,

703
00:34:19.919 --> 00:34:21.760
highly personalized

704
00:34:21.760 --> 00:34:23.520
computer for the Harvard University

705
00:34:23.520 --> 00:34:25.799
Same thing happened to the government, right?

706
00:34:25.799 --> 00:34:27.749
So, in this case,

707
00:34:27.749 --> 00:34:31.799
Dell doesn't need dealers

708
00:34:31.799 --> 00:34:35.940
because they can deliver the computer

709
00:34:35.940 --> 00:34:38.359
directly from factory to the company,

710
00:34:38.359 --> 00:34:40.599
to the university, to the government side

711
00:34:40.599 --> 00:34:45.400
So, they eliminated the middleman

712
00:34:45.450 --> 00:34:50.230
Instead, they deliver the computer from the factory

713
00:34:50.230 --> 00:34:54.400
directly to the end users

714
00:34:54.400 --> 00:34:56.679
which is the three big segment

715
00:34:57.000 --> 00:34:58.400
Then later,

716
00:34:58.400 --> 00:35:01.359
Dell established the website

717
00:35:01.359 --> 00:35:05.960
and started taking order from the home PC markets

718
00:35:05.960 --> 00:35:10.119
Then they tried to deliver the computers

719
00:35:10.119 --> 00:35:14.719
from the factory to each household

720
00:35:14.719 --> 00:35:17.440
This is a key secret

721
00:35:17.440 --> 00:35:19.599
how Dell was successful

722
00:35:19.599 --> 00:35:21.589
given poor performing industry

723
00:35:23.440 --> 00:35:25.440
So, key idea to the Dell computer

724
00:35:25.440 --> 00:35:27.559
was to approach different market

725
00:35:27.559 --> 00:35:31.200
among the same PC industry

726
00:35:31.200 --> 00:35:34.000
Dell identified that there are two different types

727
00:35:34.000 --> 00:35:36.320
of industry, I mean

728
00:35:36.320 --> 00:35:39.080
two different types of market, I'm sorry

729
00:35:39.080 --> 00:35:41.919
So far, we discussed about the industry

730
00:35:41.919 --> 00:35:44.880
Again, industry refers to the group of company,

731
00:35:45.719 --> 00:35:47.280
producing similar

732
00:35:47.280 --> 00:35:50.359
or substituted product and services

733
00:35:50.359 --> 00:35:51.599
But what about market?

734
00:35:51.599 --> 00:35:56.559
Market, market is a kind of the group of consumers

735
00:35:56.559 --> 00:35:58.880
In a single and same industry,

736
00:35:58.880 --> 00:36:01.320
there are different types of

737
00:36:01.320 --> 00:36:04.200
the market exist, like a home PC market,

738
00:36:04.200 --> 00:36:07.320
enterprise PC market, university PC market,

739
00:36:07.320 --> 00:36:10.039
and the government PC market, like this

740
00:36:11.039 --> 00:36:13.440
So, Dell identified there are two different types

741
00:36:13.440 --> 00:36:16.919
of PC market exist, okay, simplify

742
00:36:16.919 --> 00:36:20.400
He simplified two different types of the PC market

743
00:36:20.400 --> 00:36:22.880
The first one is PC markets for enterprises,

744
00:36:22.880 --> 00:36:26.960
PC market for university, PC market for the government

745
00:36:26.960 --> 00:36:30.200
And on the other side was a traditional PC market

746
00:36:30.200 --> 00:36:32.000
for home, right?

747
00:36:32.000 --> 00:36:35.050
And then PC market for enterprises,

748
00:36:35.050 --> 00:36:36.959
there are IBM

749
00:36:37.559 --> 00:36:40.029
PC market for home, there are Apple

750
00:36:40.679 --> 00:36:43.440
And then compact in the middle

751
00:36:43.440 --> 00:36:46.290
And then Dell position itself

752
00:36:46.290 --> 00:36:49.340
as a PC for enterprises,

753
00:36:49.440 --> 00:36:52.520
like this, very similar to the IBM

754
00:36:52.520 --> 00:36:55.599
And then what is the difference between Dell and IBM?

755
00:36:55.599 --> 00:36:59.200
So we can draw the y-axis

756
00:36:59.200 --> 00:37:04.199
Y-axis, we say it is a personalization

757
00:37:04.920 --> 00:37:09.040
There are high personalized PCs and low personalized PC

758
00:37:09.040 --> 00:37:12.640
Dell focused on high personalized PC

759
00:37:12.640 --> 00:37:17.400
So the Harvard University specific PC, GE specific PC,

760
00:37:17.560 --> 00:37:20.520
and the Department of Labor specific PC

761
00:37:20.520 --> 00:37:24.079
And Dell tried to make their own personalized PC

762
00:37:24.079 --> 00:37:26.959
IBM, IBM just provide the standard PC,

763
00:37:26.959 --> 00:37:30.640
regardless of their need, regardless of their types

764
00:37:30.640 --> 00:37:33.400
of company, their types of organization

765
00:37:33.400 --> 00:37:37.680
So we can position these companies again,

766
00:37:37.680 --> 00:37:39.959
based on the graph

767
00:37:39.959 --> 00:37:43.800
So the Apple positioned itself

768
00:37:43.800 --> 00:37:47.560
PC for home and highly personalized area

769
00:37:47.560 --> 00:37:50.680
On the other hand, IBM positioned itself

770
00:37:50.680 --> 00:37:54.700
as a PC for enterprise and standardized

771
00:37:55.280 --> 00:37:57.359
On the other hand, Dell

772
00:37:57.359 --> 00:38:00.959
located itself in the PC for enterprise area

773
00:38:00.959 --> 00:38:03.520
and highly personalized

774
00:38:03.520 --> 00:38:07.400
So that's why Dell has, Dell achieved very unique position

775
00:38:07.400 --> 00:38:09.800
in a given PC industry

776
00:38:09.800 --> 00:38:11.040
So why is this important?

777
00:38:11.040 --> 00:38:15.359
This unique position heavily shaped

778
00:38:15.359 --> 00:38:17.439
the existing industry structure

779
00:38:17.439 --> 00:38:18.520
I will show you

780
00:38:18.520 --> 00:38:21.280
This is the traditional industry structure

781
00:38:21.280 --> 00:38:22.800
for PC makers

782
00:38:22.800 --> 00:38:25.199
Of course, most of the forces

783
00:38:25.199 --> 00:38:29.040
have more power over PC makers,

784
00:38:29.040 --> 00:38:33.359
but the Dell's unique position changed this relationship

785
00:38:33.359 --> 00:38:34.559
For example,

786
00:38:34.559 --> 00:38:38.359
Dell, we can assess the relationship

787
00:38:38.560 --> 00:38:40.880
between Dell and current competitors

788
00:38:41.760 --> 00:38:43.880
Current competitors just focused

789
00:38:43.880 --> 00:38:47.280
on home PC market, but Dell started focusing

790
00:38:47.280 --> 00:38:48.599
on different market

791
00:38:48.599 --> 00:38:51.599
So in a different market, in an enterprise market

792
00:38:51.599 --> 00:38:54.640
and in a university market and in a government market,

793
00:38:54.640 --> 00:38:57.119
and there are not too many PC makers over there

794
00:38:57.119 --> 00:39:00.719
So the current competitors' power

795
00:39:00.719 --> 00:39:03.119
is relatively low, right?

796
00:39:03.119 --> 00:39:05.000
It's relatively low, middle or low

797
00:39:05.000 --> 00:39:07.079
What about future competitors?

798
00:39:07.119 --> 00:39:10.439
In a traditional PC market for home,

799
00:39:10.439 --> 00:39:13.280
the future competitors easily join this market,

800
00:39:13.280 --> 00:39:17.119
but this is not the PC market for home

801
00:39:17.119 --> 00:39:19.920
This is a PC market for enterprise,

802
00:39:19.920 --> 00:39:21.400
PC market for university

803
00:39:21.400 --> 00:39:23.319
So Dell started this market

804
00:39:23.319 --> 00:39:25.520
and Dell initiated this market

805
00:39:25.520 --> 00:39:28.920
So by making strong relationship between Dell

806
00:39:28.920 --> 00:39:33.520
and the enterprise consumers and university consumers

807
00:39:33.520 --> 00:39:37.680
So, penetrating the already existing,

808
00:39:37.680 --> 00:39:40.760
network, already existing relationship,

809
00:39:40.760 --> 00:39:41.760
it's not easy

810
00:39:41.760 --> 00:39:45.000
So it is kind of Dell's strong relationship

811
00:39:45.000 --> 00:39:48.719
between the consumers,

812
00:39:48.719 --> 00:39:50.520
so there's entry barrier

813
00:39:50.520 --> 00:39:54.439
So not too many, the future competitors

814
00:39:54.439 --> 00:39:57.280
can join this market easily

815
00:39:57.280 --> 00:40:02.280
So we say future rival's power will be low

816
00:40:02.400 --> 00:40:04.319
What about consumers, right?

817
00:40:04.319 --> 00:40:08.479
So Dell provides a personalized PC for each consumers

818
00:40:08.479 --> 00:40:11.040
So in this case, the situation changes

819
00:40:11.040 --> 00:40:12.479
In a normal market,

820
00:40:12.479 --> 00:40:17.079
consumer has power over the PC makers

821
00:40:17.079 --> 00:40:19.599
because consumer don't have any switching cost

822
00:40:19.599 --> 00:40:20.880
of a particular brand

823
00:40:20.880 --> 00:40:22.630
But right now,

824
00:40:22.630 --> 00:40:25.079
in GE and in Harvard University,

825
00:40:25.079 --> 00:40:27.079
the situation changed, right?

826
00:40:27.079 --> 00:40:29.520
Because only Dell can provide

827
00:40:29.520 --> 00:40:31.640
the personalized computer for us

828
00:40:31.640 --> 00:40:34.040
So in this case, who has a power?

829
00:40:34.040 --> 00:40:37.280
Yes, of course, Dell has a power

830
00:40:37.280 --> 00:40:38.479
over the consumer

831
00:40:38.479 --> 00:40:42.359
So the consumer's power relatively low, right?

832
00:40:42.359 --> 00:40:44.560
So from high to middle

833
00:40:44.560 --> 00:40:45.800
What about suppliers?

834
00:40:45.800 --> 00:40:48.500
Yes, probably Dell should get

835
00:40:48.500 --> 00:40:50.800
the Intel microprocessor

836
00:40:50.839 --> 00:40:54.520
and also Dell should adopt the

837
00:40:54.520 --> 00:40:58.160
Microsoft Window program as operating system

838
00:40:58.160 --> 00:41:00.079
Yes, the situation same,

839
00:41:00.079 --> 00:41:03.779
but Dell's consumers

840
00:41:03.779 --> 00:41:06.029
are not just individual home market

841
00:41:06.199 --> 00:41:08.149
Dell's consumers are

842
00:41:08.149 --> 00:41:10.719
big company or big university

843
00:41:10.719 --> 00:41:13.599
So that has a bargaining power

844
00:41:13.599 --> 00:41:15.839
Bargaining power over suppliers

845
00:41:15.839 --> 00:41:18.680
Hey, Microsoft, we have a lot of consumers

846
00:41:18.680 --> 00:41:20.199
We have big consumers

847
00:41:20.199 --> 00:41:24.560
We cannot make consumers disappointed

848
00:41:24.560 --> 00:41:26.239
And also we have bargaining power

849
00:41:26.239 --> 00:41:30.599
So please cut the prices and please deliver fast

850
00:41:30.599 --> 00:41:33.239
So please make our order priority

851
00:41:33.239 --> 00:41:34.560
So in this case

852
00:41:34.560 --> 00:41:38.239
supplier power is kind of decreased dramatically

853
00:41:38.239 --> 00:41:42.239
So the supplier power can be middle or kind of high

854
00:41:42.239 --> 00:41:43.079
And substitute,

855
00:41:43.079 --> 00:41:45.000
and there is not too many substitute over there

856
00:41:45.000 --> 00:41:47.280
So substitute power would be middle

857
00:41:47.280 --> 00:41:49.719
So we can make those

858
00:41:49.719 --> 00:41:52.760
those words to the numbers

859
00:41:52.760 --> 00:41:54.239
So we can make a number

860
00:41:54.239 --> 00:41:57.160
Do you remember the traditional

861
00:41:57.160 --> 00:41:59.960
PC market, PC industries

862
00:41:59.960 --> 00:42:01.439
546 number?

863
00:42:01.439 --> 00:42:04.400
There was a 20.5 out of 25

864
00:42:04.400 --> 00:42:07.479
Let's calculate Dell's 546 numbers

865
00:42:07.479 --> 00:42:10.529
What about 5.5 and

866
00:42:10.529 --> 00:42:12.479
8.5, 10.5?

867
00:42:13.000 --> 00:42:14.719
Yes, around 14, right?

868
00:42:14.719 --> 00:42:17.319
Think about it, 14 out of 25

869
00:42:17.319 --> 00:42:18.760
Less than half

870
00:42:18.760 --> 00:42:22.319
A little bit half, a little bit half

871
00:42:22.319 --> 00:42:24.520
And compared to the traditional 546,

872
00:42:24.520 --> 00:42:27.319
traditional 546 have 20.5

873
00:42:27.319 --> 00:42:30.330
And we have, we have how much?

874
00:42:30.380 --> 00:42:32.160
14, right?

875
00:42:32.160 --> 00:42:35.520
14 out of 25, 14, 20.5

876
00:42:35.520 --> 00:42:37.959
So Dell has

877
00:42:37.959 --> 00:42:40.880
Dell's 546 has less numbers

878
00:42:40.880 --> 00:42:42.160
Less powerful

879
00:42:42.160 --> 00:42:46.160
The rule of thumb is the more powerful the forces,

880
00:42:46.160 --> 00:42:48.160
the less attractive to you

881
00:42:48.160 --> 00:42:50.599
In other words, the less powerful forces,

882
00:42:50.599 --> 00:42:51.959
the more attractive to you

883
00:42:52.599 --> 00:42:56.680
So in this case, Dell's 546 has less powerful, right?

884
00:42:56.680 --> 00:42:59.079
It is all because of Dell's unique position

885
00:42:59.959 --> 00:43:03.800
So as a startup

886
00:43:03.800 --> 00:43:08.760
when you decide to enter a certain kind of industry,

887
00:43:08.760 --> 00:43:10.280
then first thing to do,

888
00:43:10.280 --> 00:43:13.880
you need to analyze the industry's attractiveness

889
00:43:13.880 --> 00:43:16.119
based on Porter's 546

890
00:43:16.119 --> 00:43:19.760
You can easily assess the relationship, right?

891
00:43:19.760 --> 00:43:23.079
Then later, you need to find out the unique position

892
00:43:23.079 --> 00:43:24.680
in a given industry

893
00:43:24.680 --> 00:43:27.079
Although you assess your industry

894
00:43:27.079 --> 00:43:29.520
and you got huge number,

895
00:43:29.520 --> 00:43:33.640
then, do not be panic

896
00:43:33.640 --> 00:43:35.239
Do not be panic

897
00:43:35.239 --> 00:43:39.160
Then you need to find out any unique position

898
00:43:39.160 --> 00:43:42.479
available out there like Dell

899
00:43:42.479 --> 00:43:44.079
Then once you,

900
00:43:44.079 --> 00:43:45.959
if you find out unique position,

901
00:43:45.959 --> 00:43:48.959
then you have incentive to join the market

902
00:43:48.959 --> 00:43:52.359
and you can have competitive advantage

903
00:43:52.359 --> 00:43:55.239
in a given poor performing industry, okay?

904
00:43:55.239 --> 00:43:59.239
This is what the startup founders should do,

905
00:43:59.239 --> 00:44:01.680
in terms of the industry analysis

906
00:44:01.680 --> 00:44:03.719
and market analysis

907
00:44:03.719 --> 00:44:04.920
Thank you for listening