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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Sam Johnson who wrote (12038)	12/5/1999 4:42:00 AM
From: Bruce Brown	Read Replies (1) \| Respond to of 54805

Sam, you are welcome to stick your foot in your esophagus here any time you like. However, I thing we could stomach such an act more than once every two months. <ggg> BB

To: Sam Johnson who wrote (12038)	12/5/1999 7:59:00 AM
From: 100cfm	Read Replies (2) \| Respond to of 54805

<The power of the gorilla is based on its control over a value chain.> Sam, just my 2 cents based on my understanding of the GG and lack of understanding of jdsu's products, i would ask the following questions 1. Is jdsu doing the designing out of other components and incorporating them directly into their components. Or is lu, nortel and etc. doing the designing out of jdsu's components in their fianl products. if the former is the case then jdsu is exerting control of the value chain, if the latter be the case then jdsu is not in control of the chain and therefore cannot be a gorilla. 2. are jdsu's products a commodity type item, or do they command premium margins due to their superior design and performance. if so thats a strong gorilla indication. 3. is there a continuing need for increased performance/capacity for jdsu's products. whereby jdsu can stay one step ahead of it's competition. part of intel's problem of late has been the lack of need for super fast/super powerful processors in the everyday home/work pc. who really needs a p111 @700mhz. when the killer app comes along that requires that as a minimum then intel will resume its complete dominance and remove any doubt of it's gorillahood. the need for ever better performing components increases the control over the value chain, whereas the opposite is true and allows weaker competition to catch up. this is a must requirement for them to be considered a gorrilla. i would base a decision on king vs gorilla according to the answers to the above questions. unfortunately i do not have the skill and product understanding necessary to answer those questions. but thats why we joined SI, to get help in areas where we lack. i would very much like to be sure whether i am investing in a gorilla or a king going in. it determines how much torque i put into my grip. regards 100

To: Sam Johnson who wrote (12038)	12/5/1999 9:04:00 AM
From: Apollo	Read Replies (2) \| Respond to of 54805

Terrific post Sam...... in fact in some instances the line between gorilla and king is nebulous? I'm thinking of Intel, but also of JDSU. What if head start, great execution and sheer prowess could create a king (JDSU) that has the same attributes as a gorilla, just achieved via different means? With my still-limited understanding of JDSU's competitive advantage, it seems they've come close to creating a sort-of 'virtual gorilla game'. That's what I've been hinting at, as earlier this week, when I pondered that JDSU might be some sort of hybrid King-gorilla. stan

To: Sam Johnson who wrote (12038)	12/5/1999 10:43:00 AM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Sam, Terrific post! You pushed my brain cells into high gear. When you question the "matter of degree," my take on it is in two sentences you skipped over which, for me, might be the key. I'll run them by you to see what you think. Go back to your quote at the very top of the page (75 in the FM or page 82 in the RFM.) It sez: "The market position of Intel's architecture ensures that the competitive advantage within category is long-lived. This frees Intel from the pressures of chimp [my emphasis] competition. It does not free it, however from the pressure of monkey competition." That context might explain why the authors call it a matter of degree. The gorilla is free of competition from the chimps but not the monkeys. The power of the gorilla is based on its control over a value chain. GULP. I was the one who wrote Friday night that the gorilla doesn't control the chain, that that is not how gorilla games are played. OUCH! I couldn't find that. What page is it on, please? I'd like to review it in context. I did find this: "The companies that gain ascendency within these value chains, however, not only have power over the value chain, they have the power of the value chain. That is, they can compete using the chain itself as a weapon, not just their own company's offers." (Italics were in the manuals. Page 45 of the FM and page 44 of the RFM.) In that context, the importance of the value chain for me is that the value chain supports the gorilla because it must to survive. Members of the value chain hate the gorilla because they would prefer to be the gorilla and because any link of the chain that decides to compete with the gorilla is immediately thrown off balance by a subtle or not so subtle change in the gorilla's strategy. Yet I still submit that the essence of the value chain is that it adds value, and the fact that it is subject to the whims of the gorilla is less important. That's what I think at least until I read the stuff about control you found in greater context. --Mike Buckley

To: Sam Johnson who wrote (12038)	12/5/1999 1:50:00 PM
From: jerryriti	Read Replies (1) \| Respond to of 54805

>The power of the gorilla is based on its control over a value chain. The authors go on to describe how this comes about - proprietary open architecture along with high switching costs.(see p.52. revised edition) But what if there is another means to the same end of control over the value chain? If a company controls the value chain, no matter how they achieve that end, would that qualify them for gorilla status? IMO you raise an excellent point! I found my way to the G&K thread after having been taken to task for indicating on the AFFX thread that AFFX had gorilla-like characteristics and being challenged vis a vis its proprietary technology(I expect they may have such a position but not being a molecular biologist, it is far from easy to make that determination. May be decided in the courts but that is another matter)! I recanted my description of AFFX having gorilla characteristics upon my re-reading of Moore's work and his noting, "The whole combo-a proprietary open architecture with high switching costs-is the formula for gorilla power, assuming the company is successful in assembling the partners needed for a working value chain around this architecture, and the market for that value chain goes into hypergrowth(p.52, revised edition)." It was through the brief discussion on the AFFX thread that I found my way to the G&K thread where the posters maintain stringent criteria for inclusiveness but I have found myself wondering whether those criteria should be considered a bit more elastic when viewing a company that seems destined to have a very large degree of control over a value chain which seems poised for hypergrowth.Perhaps, the title, "Probable King" should suffice and that would conclude the discussion! Or, this may be a valid theoretical issue based on the belief that there may be more than one way to achieve control over the value chain than via Moore's "whole combo." IMO an excellent question that has been raised and I hope it prompts some discussion!

To: Sam Johnson who wrote (12038)	12/6/1999 2:23:00 PM
From: Tom Ardnij	Read Replies (1) \| Respond to of 54805

Sam, I believe that you have hit it on the head. In Intel's formative years, it successfully fought off efforts for control of the enabling technology. JDSU seems to control the optical component enabling technology for the moment, but as several have pointed out, it has yet to be tested effectively for control of the value chain. It's the control of the enabling technology that is very gorilla like. However, is it possible that its customers enjoy such market power that real value chain control lies in their laps? I suspect that time will determine the answer to this question, as well as to how high the barriers to entry are in this market. I like your descriptor "virtual gorilla game." Thanks for the fine post, Tom