2. Industry Definition/ Structure Competitors Suppliers Customers © Sunil Mehrotra The Firm T he term industry is sometimes used to define a very precise business activity (eg: semiconductors) or a more generic activity (eg:consumer goods). Substitutes Industry New entrant

3. Raw material to finished goods- the industry supply chain Raw material Supplier Customer Manufacturer Distributor/Wholesaler Retailer

4. Industry Supply/Value Chain © Sunil Mehrotra Suppliers Manufacturers Distributors Retailers Consumers

6. Overview of Industry Value Chain: Consumer Health Products Cotton, Plastics, Chemicals, etc. Retailers: Pharmacies, Drug Stores, Supermarkets Wholesalers Consumers Incumbent Firms engage in R&D and Mfg to produce consumer health products and OTC pharmaceuticals NOTE: Incumbent firms compete fiercely for retailer shelf space! Market size: $480B Breanne Hayes, April 2008 MBA, Graziadio School of Business and Management Pepperdine University

7. Industry Analysis Industry Supply Chain Biotech Companies Hospitals / Pharmacies (39%)‏ Patients (Consumers)‏ Drug Wholesalers (61%)‏ $52 billion market $67 billion market Raw materials, Lab equipment, Chemicals FDA Payers (Insurance)‏ Physicians (Customers)‏ Legend Value = Product Value = Knowledge Regulators/Gatekeepers Elizabeth Passeretti April 2008 MBA Candidate Graziadio School of Business and Management,Pepperdine University

8. The industry supply chain- what is the value added by each player in the chain Raw material Supplier Customer Manufacturer Distributor/Wholesaler Retailer

9. Value Creation process: Value added by each member in the chain © Sunil Mehrotra

10. Value created and captured by each member in the value chain Adapted from: http://faculty.msb.edu/homak/HomaHelpSite/WebHelp/HomaHelp.htm Suppliers Manufacturers Distributors Retailers Consumers ROI Asset Intensity Profitability Value Added

11. The concept of PIE- Potential Industry Earnings Manufacturer has the biggest “pie” Retailer has the biggest “pie”

12. Oil & Gas Industry: Historical gas prices at the pump

13. Gasoline Value Chain: who gets what $1.34 $1.19

14. How big is the industry “PIE” and how is it split? Small pie Big pie Why ?

16. Nappies 11-13? Industry Supply Chain -raw material to customer How much Value is added by each member of the supply chain Concept of Industry PIE -How is the PIE split -How big is the PIE-- what determines the size?

17. Mnemonic 5: Value added by each member in the chain © Sunil Mehrotra