Strategy, Innovation and Global Competition

Assignment #1: Understanding & Applying the Five Forces Framework
Purpose:The primary goals of this assignment are: (a) to perform a thoughtful of Five Forces analysis, (b) to link the analysis to

recent historical Industry profitability data, and (c) to explain your analysis and conclusions in a concise 1-page memo. Please

complete the analyses by drawing on your understanding Porter’s Five Forces framework. Feel free to use bullet points on the slides,

but be sure to write your memo carefully in professional business English, and to check grammar& word usage!
Content:To complete the assignment, please complete the following steps:
(1) Choose a public company and think carefully about how to define its industry.
a. Defining your firm’s industry requires careful consideration. For example, both the US Air Force and Southwest fly people in

airplanes. But we would not consider them as competitors in the same industry. The best heuristic to use to define an industry is to

define it based on firms that sell similar products and are exposed to similar buyers and suppliers. (This will ensure that the Five

Forces acts in fairly similar ways across firms in the industry.) There is no perfect definition for each industry, but take care in

thinking over your definition and be sure not to simply accept “off-the-shelf” solutions like those in Hoovers or Yahoo Finance.
b. Choose a company that has at least 3 rivals that are for-profit companies with public financial data.
(2) Perform a Five Forces analysis for your firm’s industry, using Exhibit A of the PowerPoint slides. Be sure to highlight the

factors and logic that explain why a force does (or does not) pose a threat to industry average profitability. I have attached a

“template& cheat sheet” that list some of the key factors for each force. Feel free to use bullet points, but be sure that a random

reader of the slide could understand the intuition behind each of the points that you make.
(3) Next, perform background research on your firm and its industry.
a. Gather data that summarize the recent historical profitability of your firm and 3-5 of its rivals. Compute the profitability

of these firms over the last 3-5 years. In order to do this, you will need to decide which measure of profitability is most

appropriate for your industry (use either ROA, ROS, ROE, as these are the most easily available).
b. Report these data on the left side of Exhibit B (the second of the two assignment slides).
c. Next, draw a graph that compares the average industry profitability with the average for the economy overall over the past 3-5

years. (For the purposes of the assignment, please assume that the economy-wide average ROA = 4%, ROS = 4%, & ROE = 10%).
 Note that Finance are good places to start looking for financial data.
 Note, also, that the Pardee library has great sources of industry information that should be the first place you start your

background research. Click here first.Then click on “Industry Survey Locator.”
(4) Suppose that you are a junior consultant and that your manager asked you to complete this assignment by writing no more than

one page memo that achieves the following:
a. Explains the purpose of the memo in the subject heading and very first sentence of the memo
b. Defines your industry precisely (clearly applying the si422 approach to industry definition – i.e., taking care to identify the

similar product, buyers, & suppliers)
c. Summarizes your Five Forces analysis, taking care to identify which key forces are the ones that have the strongest influence

on profitability in your firm’s industry and the key factors that most strongly influence the strength of these forces.
d. Explain whether you believe that your firm is in an industry whose conditions are, on average, very favorable, somewhat

favorable, ambiguous, somewhat unfavorable, or very unfavorable. Be sure to note whether the Five Forces analysis match with the data

you report in Exhibit B and to offer an explanation for their not matching if they do not match.
Feel free to structure your memo around issues (4a)-(4d) above, treating each issue as a separate mini-section

Administrative Details:
o Please use 1.5 or double-spacing on the memo, along with 12 point font & 1 inch margins on top/bottom/sides
o Please follow the specific instructions of your section’s instructor for delivery details and deadlines.

* NOTE: This is an individual assignment. All analysis and writing should be yours alone. If you use any outside sources

(beside the Porter article or our class discussions), please cite them.


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