【正文】 on Cross Elasticity If a price increase in one product increases the demand for another, the two products are probably substitutes. Demand for Butter High elasticity Price of Margarine 30 Business Definition Perceptual Barriers Customer’s perceptions can be indicators of business definition。Gisele Garraway Susan Caraviello, Paul DiPaola, and Todd Senturia bc Business Definition March 1998 Author: Contributors: Todd Senturia Reviewer: Copyright169。 = Experience Curve RCP 10 Business Definition Complexity of Business Definition A simple catalog of logical arguments is not robust enough to delineate the petitive battlefields for our clients. Is it one business or not? One Business Separate Businesses ?Touring quality microphones and speakers ?Madonna and rappers use both ?Similar distribution channels ?Different manufacturers (Audio Technica vs. Bose) ?Little manufacturing process knowledge is transferable ?Limited direct cost sharing ?Cross pens and BIC pens ?Beer and distilled spirits ?Both used for same function, writing ?Similar raw materials ?Some manufacturing steps shared ?Brand name sharing opportunities ?Same distribution channels ?Sold by same salesforce ?High perceptual barriers to customers ?Limited customer base overlap ?Limited benefits of shared RD ?Key manufacturing processes are different ?Different raw materials 11 Business Definition Business Definition Matrix Bain uses the business definition matrix to delineate economic boundaries. Cost sharing and customer sharing are the primary determinants of defining a business. High Cost Sharing Low Low High Customer Sharing One business (charge cards and credit cards) One business with potential for differentiation or niche position (Cross pens and BIC pens) Separate businesses with potential for cost leadership (oil and refinery byproducts) Separate businesses (beer and distilled spirits) Separate businesses with potential for bundling (touring quality microphones and speakers) One business with potential for substitution (milk cartons and glass milk bottles) 12 Business Definition Dynamics of Business Definition Business definition is dynamic. Temporary barriers, such as price premiums and technology advantages, will erode unless they are consistently reinforced. Business Definition Technology Government regulation Input prices Product innovation Channel economics Customer needs 13 Business Definition Local vs. Regional vs. National vs. Global Businesses Global scale National scale Regional scale Local scale ?Professional online financial data ?Overnight package delivery ?Banking lending ?Hospital textile laundering ?Banking deposit gathering ?Residential laundromats ?Barber shops Clients often cite the need for national or global participation. However, in many businesses, local or regional scale drives profitability. Driver of Profitability Example 14 Business Definition Examples of Changes in Business Definition There are several examples of panies that have gained significant petitive advantage by changing the definition of a business. ?Federal Express revolutionized the package delivery business by introducing an overnight delivery service ?Charles Schwab dramatically altered the mutual funds business by introducing a nofee service whereby customers could purchase many panies’ mutual funds through Schwab ?Calyx Corolla transformed the flower distribution business by using information technology to cut out traditional distributors and ship flowers directly from growers to customers ?Starbucks redefined the coffee shop business from providing coffee to providing a social experience ?The Body Shop revolutionized the cosmetics business by merging the ideas of beauty, health, and environmental consciousness ?Staples, by adapting the business model of a different industry (grocery stores) and taking advantage of economies of scale in purchasing, changed the office supplies business from a local one to a national one 15 Business Definition Agenda ?The business definition concept ?Applications ?Business definition steps ?Client examples –Bunker Hill Door Systems –JJR Industrial Coatings ?Key takeaways 16 Business Definition Applications Financial Services Electrical and Electronics ?A large residential realty pany was considering entering the mercial real estate market and wanted to evaluate the attractiveness of the market ?An electronics pany had the opportunity to outsource its electronics testing service but was unsure if test outsourcing would define a viable new business Bain has used business definition in hundreds of cases and dozens of industries. Some examples of our work are: ?Bain developed a business definition for mercial real estate services which identified it as a separate business from residential real estate, requiring vastly different petencies and economics. Client accepted remendation to stay out of mercial business ?Bain determined that the test outsourcing business was not a single business with high cost and customer sharing, but rather six separate business which could be bundled, and defined the few specific entry strategies which might be successful. Client ultimately agreed that critical entry barriers were too high Situation: Result: Textiles ?A large . textile launderer with 23% ROS enters the . market and earns only 5% ?Bain found that the business definition is not national textile laundering there are three separate businesses: healthcare, industrial and linen. All three are regional, not natio