Commercialization of Photochromic Dyes and Products
Background
While most people, including this author, hold quite optimistic views of the photochromic industry, very little commercial success has been realized. In Professor Giacomo Ciamician’s famous paper on photochemistry of the future, he predicted that photochromic clothing would be popular. It turns out that he was right. His paper was written in 1912 and photochromic clothing was not commercially successful until the early 1990’s. These optimistic projections are commonplace. Unfortunately, the commercial successes have not been rapid or frequent.
This paper is intended to address some of the critical success factors in achieving photochromic related profitability. The major ingredients of commercial success are an attractive industry and mastery of the specific critical business elements that lead to profitability in that industry.
Industry Model
A well accepted industry model was developed by Professor Michael E. Porter of the Harvard Business School and is presented in his book Competitive Strategy as shown below. The general analysis of this model will be left to anyone who cares to read his excellent work. The specifics of this model as they apply to a dye producer in the photochromic industry will be described.
The most attractive industry would have large barriers to entry, low bargaining power of buyers, no threat of substitutes, low bargaining power of suppliers, and little rivalry among existing firms. Such an industry should lead to extremely high rates of return.
Industry Competitors
Industry competition between the existing dye suppliers would be classified as relatively polite for the following reasons.
1. few, diverse suppliers – litt...
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...ng this market, six key capabilities need to be mastered.
Research and Development
1. dye synthesis
2. dye stabilization (in a matrix)
3. dye application (in new matrices)
Sales and Marketing
1. market identification
2. create market awareness
3. establish product distribution
By performing a self assessment, any areas of weaknesses will identified. This then highlights the required expertise that needs to be established, either developed in-house or through some outside business arrangement. If each of these critical areas is well represented, the chances of commercial success are dramatically improved.
1 Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: The Free Press, 1980.
2 Ibid.
PhilipKottler, Marketing Management, analysis, planning, and control. New Jersey, Prentice-Hall, Inc., 1984
According to Parnell, Porter’s generic strategy typology consist of a “basic economic assumptions about cost versus differentiation, and the whole notion of focus and market orientation but this strategy has some limitation” (2014). This strategy typology helps to simplify a complex industry by identifying and emphasizing the key strategic factors. These factors are low-cost with focus, low-cost without focus, differentiation without focus and differentiation with focus.
To conclude, these issues are holding back the firm from being able to sustain profitability to a great extent. If these are resolved, then it can help the firm to form an overall profitability as each of its subsidiaries will contribute to be profitable by functioning only in the packaging sector or exploring new markets.
This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.
Price competition among rivals is close to nil, industry participants are very competitive when it comes to product differentiation. Product offerings to satisfy consumer demands include a variety of coffee, juices, muffins, bagels, cookies, cream cheese sandwiches, soups and other miscellaneous items.
Managers and strategists are often faced with a dilemma while trying to understand the determinants of profitability of industries they compete in as well as potential industries they may wish to compete. To this effect, several analytical frameworks are employed; the most widely used being the Porter’s Six Forces model. This paper seeks to bring to light the shortcomings of using the Porter’s Six Forces model as an analytical framework to determine which industries are profitable or not.
Thompson, A.A., Strickland, A.J., & Gamble, J. E. (2010). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York: McGraw-Hill-Irwin
3. Analyze BP using the five forces of competition model to determine the industries current attractiveness in terms of profits potential
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
Both Porter and Miles and Snow’s strategy typologies are based on the concept of strategic equifinality, or the ability for firms to be successful via differing managerial strategies (Hambrick, 2003, p. 116). Porter 's strategy is more generic while Miles and Snow’s is more specific in nature. Porter’s generic strategy typology is based on economic factors centering on the source of a firm’s competitive advantage and the scope of a firm’s target market (González-Benito & Suárez-González, 2010). Porter’s typology emphasizes a firm’s cost, product differentiation or non-differentiation and market focus. When utilizing Porter’s strategy typology, a firm must first decide to target its products toward the mass market versus a market niche or focus. Secondly, a firm will determine if it wishes to minimize costs or differentiate its products with differentiation meaning that firms will most likely forego lower costs (Parnell, 2014, p. 184). This can lead a firm to develop a myriad of strategies between these options. Strategies which may have or not have focus, may or not be differentiated, may or not be low cost or any combination of strategies. In contrast to Porter, Miles and Snow’s typology is more specific in nature.
Application of Porter’s Five Forces Model yields some very interesting discoveries when applied to the pulp and paper industries. The model, as discussed in our textbook, attempts to evaluate how well an industry can generate profits by examination of intensity of rivalry, treat of new entrants into the industry, threat of substitutes, bargaining power of buyers and bargaining power of suppliers (Parnell, 2014). While I know from personal experience that it is not easy to be profitable in the paper business, applying the model does provide some insight into the reasons why those difficulties exist.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 25-40.
Because the subject matter of strategic management is so inherently complex and because each one of us brings his own personal biases to the analysis, it was suggested early on that virtually all case material in the field be analyzed from the perspective of more than one methodology. Profit theory and industrial chains were selected as the first of a number of viable approaches to the analytical process. It would have been equally correct to select the Five Competitive Forces analysis refined by Michael Porter, one of the major figures in the field of strategic management. This methodology addresses the same issues but differs only in the language that they use to describe corporate behavior. The five forces are:
If competitors offer equally attractive products and services, then one will most likely have little power in the situation, because suppliers and buyers will...
Porter, M. E., 1999. The Five Forces that Shape Competitive Strategy. Harvard business review, p. 80.
By using this structured analysis, firms can more easily evaluate the attractiveness of an industry and gain a complete overview of all relevant competitive factors that have to be considered in the process of establishment. It helps to better understand the present market structure and to evaluate as a consequence of that external threats and opportunities. Unfortunately, the analysis established by Porter is not a guarantee for success and above that, it is often accused for limitations, lack of considerations and inoperative outcomes. The non-observance of a collaborative economic behaviour and of governmental influence, the inflexibility of the model and furthermore lack of application to rapidly changing market conditions are major limitations that have to be considered.