1 00:00:00,320 --> 00:00:04,400 The Better Business Analysis Institute Presence the Better 2 00:00:04,400 --> 00:00:07,760 Business Analysis Podcast with Hindman Walsh. 3 00:00:13,480 --> 00:00:17,160 Hi everybody and welcome back to the Better Business Analysis 4 00:00:17,160 --> 00:00:21,000 podcast with Benjamin Walsh. Now this week we're going to 5 00:00:21,000 --> 00:00:25,480 dive into take two of our BA Unleashed series. 6 00:00:25,880 --> 00:00:30,280 This is where we dive into topics, tools that you can apply 7 00:00:30,640 --> 00:00:34,520 practically to any company that you know or the organization you 8 00:00:34,520 --> 00:00:37,240 work for. Now last week, kicking off the 9 00:00:37,240 --> 00:00:42,320 series, we talked about SWOT analysis and we're starting at 10 00:00:42,320 --> 00:00:45,360 the beginning of the delivery journey, the Better Business 11 00:00:45,360 --> 00:00:49,470 analysis, delivery journey in the strategic and enterprise 12 00:00:49,630 --> 00:00:53,150 analysis space. So today, we're going to be 13 00:00:53,150 --> 00:00:58,950 talking about what's called the Porters 5 forces and how they 14 00:00:58,950 --> 00:01:04,190 work this model, this technique works with a SWOT analysis. 15 00:01:05,110 --> 00:01:08,910 So they're both strategic management tools used to analyze 16 00:01:09,470 --> 00:01:12,430 the company organizations competitive advantage in the 17 00:01:12,430 --> 00:01:16,990 world and in the market and they can complement each other. 18 00:01:17,410 --> 00:01:21,770 So whereas the spot analysis focuses on focuses on the 19 00:01:21,770 --> 00:01:25,890 strength, weaknesses and opportunities and threats you 20 00:01:25,890 --> 00:01:30,810 know both internal and external, the Five forces model is 21 00:01:31,170 --> 00:01:35,250 specifically talking about the competitive forces within the 22 00:01:35,250 --> 00:01:38,690 industry. So it focuses on the external 23 00:01:38,690 --> 00:01:43,970 environment and helps us assess the attractiveness and 24 00:01:43,970 --> 00:01:47,640 profitability of a specific industry and whether or not we 25 00:01:47,640 --> 00:01:52,600 want to dip our toes into it or just having a bit of a baseline 26 00:01:52,600 --> 00:01:56,600 about where we think we're at in the industry that we operate in. 27 00:01:57,640 --> 00:02:03,360 So if we start with what is the Porters 5 Forces model and then 28 00:02:03,360 --> 00:02:06,760 we'll get into our practical example and we're going to be 29 00:02:06,760 --> 00:02:11,800 doing the Porters 5 Forces model applied to ChatGPT. 30 00:02:14,730 --> 00:02:15,850 OK. So where do we start? 31 00:02:15,850 --> 00:02:18,130 What is the Porters 5 Forces model? 32 00:02:18,530 --> 00:02:23,210 It's a framework developed by a guy called Michael Porter, hence 33 00:02:23,210 --> 00:02:27,970 the the name at the front. And the whole point was this 34 00:02:27,970 --> 00:02:31,890 model was used to analyze the competitive forces within an 35 00:02:31,890 --> 00:02:35,250 industry. So again, I think I just touched 36 00:02:35,250 --> 00:02:38,050 on the fact that it helps us assess whether or not this 37 00:02:38,050 --> 00:02:40,670 industry is attractive and profitable. 38 00:02:41,110 --> 00:02:46,030 So and he used five factors, five factors or forces if you 39 00:02:46,030 --> 00:02:50,550 like, that would allow us to determine that before we entered 40 00:02:50,550 --> 00:02:54,190 into it or even to give us a bit of an idea about where we're at 41 00:02:54,190 --> 00:02:56,030 now. So I'm going to list through 42 00:02:56,030 --> 00:03:00,030 what those five areas are. I'm going to give a little bit 43 00:03:00,030 --> 00:03:03,410 of a description about those five areas and then we'll move 44 00:03:03,410 --> 00:03:07,930 on to how do we actually carry out one of these models and 45 00:03:07,930 --> 00:03:12,970 apply it to our case study, which will be chat, GB T OK. 46 00:03:12,970 --> 00:03:18,410 So number one, we talk about the threat of new entrants into the 47 00:03:18,410 --> 00:03:19,890 market. OK. 48 00:03:19,890 --> 00:03:24,610 So this force evaluates what are the barriers to entry for 49 00:03:24,810 --> 00:03:28,530 competitors. So if you're already in the 50 00:03:28,530 --> 00:03:34,170 industry, what is the threat of other people entering into that 51 00:03:34,170 --> 00:03:37,090 industry? Or from the flip side, if you're 52 00:03:37,090 --> 00:03:41,170 looking to enter the industry, how hard is it? 53 00:03:41,330 --> 00:03:44,770 What are the barriers? So it considers factors such as 54 00:03:45,850 --> 00:03:48,850 economies of scale. And if you don't know what 55 00:03:48,850 --> 00:03:52,650 economies of scale are, it means that as you get bigger, your 56 00:03:52,650 --> 00:03:56,770 buying power becomes a superior. When you're bigger, you can 57 00:03:56,770 --> 00:04:00,080 usually make more things more effective, and so bigger 58 00:04:00,080 --> 00:04:03,640 companies have a an advantage over small companies that don't 59 00:04:03,640 --> 00:04:06,080 have as much money and can't buy in bulk. 60 00:04:07,360 --> 00:04:11,360 It talks about brand loyalty, capital requirements, how much 61 00:04:11,360 --> 00:04:15,480 does it cost to even set up and government regulations. 62 00:04:16,120 --> 00:04:20,720 A high threat of new entrants can reduce profitability for 63 00:04:20,720 --> 00:04:24,120 existing players. OK. 64 00:04:24,560 --> 00:04:28,840 So what that means is that if it's easy to enter that market 65 00:04:28,840 --> 00:04:33,800 or that area and then it provides what, what that means 66 00:04:33,800 --> 00:04:37,160 is in the long term, those people that are playing in that 67 00:04:37,160 --> 00:04:42,800 industry are going to have more competition and it will reduce 68 00:04:42,800 --> 00:04:46,320 their profitability over time unless they, you know, they do 69 00:04:46,320 --> 00:04:48,800 something different or they expand into other markets. 70 00:04:49,560 --> 00:04:54,970 So that's number one threat of new entrants, very important #2. 71 00:04:55,450 --> 00:05:00,850 The this is the bargaining power of buyers and this needs a bit 72 00:05:00,850 --> 00:05:05,330 of explaining. So this force examines the power 73 00:05:05,570 --> 00:05:09,770 of customers. So the people buying from your 74 00:05:09,770 --> 00:05:14,330 company or from this company we're focusing on, it's the 75 00:05:14,330 --> 00:05:18,290 power of customers to negotiate prices and terms. 76 00:05:20,550 --> 00:05:24,470 So if you have factors like the concentration of buyers, their 77 00:05:24,470 --> 00:05:29,550 price sensitivity, the available of availability, sorry of 78 00:05:29,550 --> 00:05:34,470 substitute products that can influence buyers power. 79 00:05:34,950 --> 00:05:38,950 So strong buyers power, so the buyers power being the consumer 80 00:05:39,430 --> 00:05:42,830 can limit the profitability of industry participants. 81 00:05:42,830 --> 00:05:46,700 So those companies that operate within this industry that you're 82 00:05:46,700 --> 00:05:49,140 focusing on. So if you think about that in a 83 00:05:49,140 --> 00:05:53,940 housing market, it might be the fact that the bargaining power 84 00:05:53,940 --> 00:05:58,860 of buyers might be high when there's lots of options, lots of 85 00:05:58,860 --> 00:06:02,540 houses that are all priced the same or in the same area. 86 00:06:02,540 --> 00:06:06,500 So, and the bank maybe for example, we have low interest 87 00:06:06,500 --> 00:06:09,930 rates, could be an example at some time it could allow the 88 00:06:09,930 --> 00:06:14,050 buyer to have more power. So bar the number two being the 89 00:06:14,050 --> 00:06:18,810 bargaining power of buyers is how much of A say does consumers 90 00:06:18,810 --> 00:06:24,210 have or buyers, because it could be a business, another business, 91 00:06:24,730 --> 00:06:30,850 how much power do they hold in this relationship #3 is the flip 92 00:06:30,850 --> 00:06:34,690 side of that. So what is the bargaining power 93 00:06:34,770 --> 00:06:40,280 of suppliers? So this force assesses the power 94 00:06:40,280 --> 00:06:44,520 of suppliers to influence power in sorry prices. 95 00:06:44,520 --> 00:06:50,280 In terms factors like supplier concentration, availability of 96 00:06:50,280 --> 00:06:55,920 substituted inputs to your product and the importance of 97 00:06:56,320 --> 00:07:00,520 supplies products to the industry affects supplier power. 98 00:07:00,920 --> 00:07:05,950 Strong supplier power can reduce the profitability for industry 99 00:07:05,950 --> 00:07:10,070 players, OK. So you're selling a good that 100 00:07:10,070 --> 00:07:13,350 you put together and involves different parts or components, 101 00:07:13,750 --> 00:07:16,950 OK. If those parts and components 102 00:07:16,990 --> 00:07:21,470 are rare or if you are limited in terms of how you can source 103 00:07:21,470 --> 00:07:25,230 those components, then your supplier, the supplier of that 104 00:07:25,230 --> 00:07:28,390 industry has power, OK. They have. 105 00:07:28,790 --> 00:07:32,640 If they have strong power in this relationship then that can 106 00:07:32,640 --> 00:07:36,240 reduce profitability for you. So if you can only source your 107 00:07:36,240 --> 00:07:40,480 product from you know you you you've got a unique component, 108 00:07:40,480 --> 00:07:46,640 maybe it's a a unique metal or you're reselling a good that's 109 00:07:46,680 --> 00:07:51,520 only from you know one supplier. They have power in that 110 00:07:51,520 --> 00:07:54,360 relationship and you have less power, okay. 111 00:07:54,360 --> 00:07:57,320 And so they can increase. They know that they've got a 112 00:07:57,320 --> 00:08:01,560 scarce product or scarce component, and in order to 113 00:08:01,560 --> 00:08:03,960 produce your product, they hold the power in that relationship. 114 00:08:04,400 --> 00:08:11,280 There's #3 that's the bargaining power of the supplier, #4 is the 115 00:08:11,280 --> 00:08:15,760 threat of substitutes. OK, so this is different to the 116 00:08:15,760 --> 00:08:18,600 threat of new entrants and people can get confused about 117 00:08:18,600 --> 00:08:20,840 this. So I'll explain what number four 118 00:08:20,840 --> 00:08:23,000 is. Threat of substitute. 119 00:08:24,200 --> 00:08:28,550 This force considers the availability of alternative 120 00:08:28,630 --> 00:08:33,789 products or services that can fulfill the same customer needs. 121 00:08:35,070 --> 00:08:40,350 This is not necessarily a direct copy of what you're providing, 122 00:08:41,070 --> 00:08:43,429 right? So you could say in the example 123 00:08:43,429 --> 00:08:48,870 where we have cash sharing, so for example, Uber, you could 124 00:08:48,870 --> 00:08:51,910 say, well, Ola is a is a threat of substitute. 125 00:08:51,910 --> 00:08:53,390 Definitely. There's competition there. 126 00:08:53,760 --> 00:08:57,000 So all I could definitely be a a threat because it's providing 127 00:08:57,000 --> 00:09:00,720 the same service and that you know, that has an influence, 128 00:09:00,800 --> 00:09:03,040 that's a that's a threat, that's a substitute. 129 00:09:03,240 --> 00:09:07,520 But they're also a competitor. Now it's not just the rideshare. 130 00:09:07,560 --> 00:09:12,760 A taxi service for example, or people's own vehicles and 131 00:09:12,760 --> 00:09:15,480 driving their own vehicles and taking public transport are 132 00:09:15,480 --> 00:09:17,800 substitutes in the greatest sense of the word. 133 00:09:17,800 --> 00:09:21,200 They're not just direct, you know, it's it's still fulfilling 134 00:09:21,200 --> 00:09:23,600 the need of getting from A to B, OK. 135 00:09:24,080 --> 00:09:27,520 So factors such as price performance, trade-offs, 136 00:09:27,760 --> 00:09:32,840 switching costs and the customers loyalty impact, the 137 00:09:32,840 --> 00:09:37,560 threat of substitutes and a high threat of substitutes can limit 138 00:09:37,840 --> 00:09:39,920 industry profitability. OK. 139 00:09:40,360 --> 00:09:43,240 So if there are a lot of options for a consumer, then your 140 00:09:43,240 --> 00:09:46,560 consumer could be price conscience conscious that if you 141 00:09:46,560 --> 00:09:49,640 put your prices up to a certain point then they'll start using 142 00:09:49,640 --> 00:09:55,140 alternatives. So petrol prices, Sorry, if the 143 00:09:55,140 --> 00:09:58,460 price to catch the train goes up quite a lot, then people might 144 00:09:58,460 --> 00:10:01,180 start driving their own automobile to get to work 145 00:10:01,540 --> 00:10:03,820 because you've now priced yourself out of the market and 146 00:10:03,820 --> 00:10:06,580 the substitute which is completely different, service 147 00:10:06,580 --> 00:10:09,300 driving yourself becomes more attractive. 148 00:10:10,500 --> 00:10:12,980 Also. For example in New Zealand, 149 00:10:12,980 --> 00:10:18,060 anyway the electricity industry is quite quite competitive. 150 00:10:18,060 --> 00:10:21,040 There are a lot of options if you want to switch providers. 151 00:10:21,240 --> 00:10:24,400 So it's it's quite easy for you to switch. 152 00:10:24,720 --> 00:10:29,360 And so those companies focus on loyalty by providing, I don't 153 00:10:29,360 --> 00:10:33,200 know air points or fuel vouchers or what it or some money to stay 154 00:10:33,200 --> 00:10:35,600 with them for a while. Try and sign you up for a longer 155 00:10:35,600 --> 00:10:37,840 period. Because the threat of substitute 156 00:10:37,840 --> 00:10:41,960 is actually quite high and that reduces the overall margins for 157 00:10:41,960 --> 00:10:46,800 the players in the market. And #5 not to be confused with 158 00:10:46,800 --> 00:10:50,080 what we've just covered off, which was the number four threat 159 00:10:50,080 --> 00:10:56,440 of substitutes. #5 is around the rivalry of competitive of 160 00:10:56,440 --> 00:10:59,040 competitors. So another way of saying that #5 161 00:10:59,240 --> 00:11:05,080 is competitive rivalry. This force examines the 162 00:11:05,280 --> 00:11:10,320 intensity of competition among existing players. 163 00:11:10,800 --> 00:11:13,280 OK, and every industry is quite different. 164 00:11:13,640 --> 00:11:17,540 I just read an article, for example on LinkedIn around the 165 00:11:17,540 --> 00:11:22,420 fact that Microsoft is now going to be the kind of back end for a 166 00:11:22,420 --> 00:11:25,140 lot of Oracle services. And a few years ago there was 167 00:11:25,140 --> 00:11:28,500 quite a heated number of years ago, there was quite a heated 168 00:11:28,700 --> 00:11:32,260 battle between Oracle and and Microsoft and the database 169 00:11:32,260 --> 00:11:34,540 space. And now that competition, even 170 00:11:34,540 --> 00:11:37,860 though they are competitors is less so because they're starting 171 00:11:37,860 --> 00:11:39,860 to like, you know, have partnerships. 172 00:11:40,100 --> 00:11:43,340 So you can look at each industry and see how do the how do the 173 00:11:43,340 --> 00:11:45,620 players within the industry model play together? 174 00:11:46,100 --> 00:11:49,140 Are they allowing that person to have that market share and that 175 00:11:49,140 --> 00:11:52,060 person to have that market share or are they at each other's 176 00:11:52,100 --> 00:11:57,300 throats? So to write competitive rivalry 177 00:11:57,500 --> 00:12:01,620 factors like the number of competitors in the market, high 178 00:12:01,620 --> 00:12:05,380 in electricity in New Zealand, what is the industry growth 179 00:12:05,380 --> 00:12:09,220 rate, How many, how many new players dropped into the 180 00:12:09,220 --> 00:12:14,620 industry over the last year? Is there much difference between 181 00:12:14,620 --> 00:12:18,900 the product itself or are we talking about what we call a 182 00:12:18,900 --> 00:12:23,140 commodity product where everyone's producing basically 183 00:12:23,140 --> 00:12:26,500 the same thing? Again, electricity being a 184 00:12:26,500 --> 00:12:29,500 commodity, there's not much difference between the product 185 00:12:29,780 --> 00:12:32,740 differentiation. However, if you have electricity 186 00:12:32,740 --> 00:12:37,860 and you provide, I don't know, Internet services and smart 187 00:12:37,860 --> 00:12:41,100 charges for cars, you can make your product a little bit 188 00:12:41,100 --> 00:12:45,040 different. And what is the exit barriers 189 00:12:46,240 --> 00:12:48,880 that influence competitive rivalry? 190 00:12:49,200 --> 00:12:51,680 Okay. So are there any barriers for 191 00:12:52,520 --> 00:12:54,920 exiting? You know, are they low, are they 192 00:12:54,920 --> 00:12:57,720 low barriers for for just dropping out and so people will 193 00:12:57,720 --> 00:13:02,960 drop out and if there's high rivalry within the industry or 194 00:13:02,960 --> 00:13:06,900 there's going to be then that can lead to price wars and 195 00:13:06,900 --> 00:13:09,620 reduce profitability. So as I said, if there's lots of 196 00:13:09,620 --> 00:13:13,620 competition and it and you don't have much difference of of 197 00:13:13,620 --> 00:13:18,140 product, your product is pretty much the same, then you will 198 00:13:18,140 --> 00:13:21,620 have price wars. And then for example, unless 199 00:13:21,620 --> 00:13:24,940 there's some dodgy goings and like price fixing going on, when 200 00:13:24,940 --> 00:13:28,780 you're selling a commodity good like petrol and electricity, 201 00:13:29,060 --> 00:13:32,060 then you end up having price wars in certain regions and that 202 00:13:32,060 --> 00:13:34,020 reduces your overall profitability. 203 00:13:34,680 --> 00:13:37,000 OK. So just just to recap, those 204 00:13:37,000 --> 00:13:41,160 five forces are one threat of new entrants, 2 bargaining power 205 00:13:41,200 --> 00:13:45,680 of buyers, 3 bargaining power of suppliers, 4 threat of 206 00:13:45,680 --> 00:13:48,280 substitutes and five, competitive rivalry. 207 00:13:48,880 --> 00:13:52,840 They are the five forces. So the Porters 5 Forces model is 208 00:13:52,840 --> 00:13:56,560 used to analyze the competitive dynamics of an industry and 209 00:13:56,560 --> 00:14:00,960 identify the key factors that impact profitability and helps 210 00:14:00,960 --> 00:14:04,040 businesses understand the industry's attractiveness, 211 00:14:04,280 --> 00:14:08,600 assess competitive threats and develop strategies to develop a 212 00:14:08,600 --> 00:14:12,440 competitive advantage. It is a, it is commonly used in 213 00:14:12,440 --> 00:14:16,200 strategic planning, market analysis and decision making. 214 00:14:16,520 --> 00:14:19,200 OK. So hopefully you know not now 215 00:14:19,200 --> 00:14:23,240 know what Porter 5 Forces is all about. 216 00:14:23,440 --> 00:14:27,520 And as a business, unless you can help carry out the five 217 00:14:27,520 --> 00:14:30,520 forces to kind of give your business an idea of the 218 00:14:30,520 --> 00:14:33,690 competitive landscape of where they're in and informed 219 00:14:33,690 --> 00:14:37,570 decisions Okay. And so this five forces as well 220 00:14:37,570 --> 00:14:40,450 as the SWOT analysis, SWOT analysis probably would come 221 00:14:40,570 --> 00:14:44,290 after this in sequence. If you're doing both, then you 222 00:14:44,290 --> 00:14:46,930 could then lead onto a SWOT analysis that you know and and 223 00:14:46,930 --> 00:14:49,970 this information, these insights could feed into there and look 224 00:14:49,970 --> 00:14:52,890 at different areas that you might want to focus on. 225 00:14:53,730 --> 00:14:59,490 Sometimes investors will perform 5 port of five forces to work 226 00:14:59,490 --> 00:15:01,890 out whether or not they want to invest in your company. 227 00:15:02,520 --> 00:15:07,040 Obviously consultants do that, but market researchers also look 228 00:15:07,040 --> 00:15:12,040 at this, and government and regulatory bodies could, for 229 00:15:12,040 --> 00:15:14,880 example, figure out whether or not an industry is competitive 230 00:15:14,880 --> 00:15:17,680 enough. If there's a monopoly or some 231 00:15:17,680 --> 00:15:22,280 antitrust issues within a market, then they might perform 232 00:15:22,280 --> 00:15:26,680 a 5 Forces to suggest that they need to regulate or allow other 233 00:15:26,680 --> 00:15:32,230 players into the market. So the porters 5 Forces model 234 00:15:32,230 --> 00:15:36,670 and analysis is fantastic for any BA to do. 235 00:15:36,990 --> 00:15:39,910 And the good thing about it is that again, you can apply it to 236 00:15:39,990 --> 00:15:43,750 any company you know, the company you work for, a company 237 00:15:43,750 --> 00:15:48,350 that's on the news, a friend's company, and you could start to 238 00:15:48,350 --> 00:15:54,250 do this model quite easily. All you need again is an A3 or a 239 00:15:54,250 --> 00:15:58,170 four piece of paper and you're drawing in this case just five 240 00:15:58,250 --> 00:16:00,810 different lines. You they, they they're not like 241 00:16:00,810 --> 00:16:02,890 quadrants, like the SWOT analysis. 242 00:16:03,170 --> 00:16:06,370 They're definitely just five bullet points and you can write 243 00:16:06,370 --> 00:16:09,050 down these headers as I've talked about and then you can 244 00:16:09,330 --> 00:16:12,850 put at the top of your piece of paper the company name and you 245 00:16:12,850 --> 00:16:16,970 could start going through this model, right. 246 00:16:17,330 --> 00:16:21,450 So I'm going to take a breather for 30 for you know 30 seconds 247 00:16:21,710 --> 00:16:27,030 and I'm going to and we're going to jump onto 5 porters, 5 forces 248 00:16:27,350 --> 00:16:34,270 applied to ChatGPT. If you don't know what ChatGPT 249 00:16:34,270 --> 00:16:40,310 is, ChatGPT is, it's actually a product, but it's a quite a big 250 00:16:40,670 --> 00:16:44,110 product that people sometimes talk about as a company. 251 00:16:44,790 --> 00:16:50,710 It is owned by Open AI and it is what you know has really pushed 252 00:16:50,710 --> 00:16:57,700 or been the the label for the AI large language model revolution 253 00:16:57,700 --> 00:17:02,020 that we've seen. So I would suggest to pause the 254 00:17:02,020 --> 00:17:06,060 podcast right now and Google ChatGPT if you do not know what 255 00:17:06,060 --> 00:17:13,540 it is, but if you do, let's get started #1 and you can play 256 00:17:13,540 --> 00:17:16,980 along at home as well by maybe having a go. 257 00:17:16,980 --> 00:17:20,339 And I'll give you some time to maybe think about what you think 258 00:17:20,339 --> 00:17:24,980 in terms of some of these categories as we go through. 259 00:17:25,900 --> 00:17:29,580 So number one is threat of new entrants. 260 00:17:29,580 --> 00:17:33,460 So it's kind of the entry barriers for new players. 261 00:17:35,740 --> 00:17:40,700 For me, the threat of new entrants for ChatGPT is 262 00:17:40,700 --> 00:17:44,460 relatively high. The AI industry is kind of 263 00:17:44,460 --> 00:17:47,780 booming and growing and there are many tech companies who are 264 00:17:47,780 --> 00:17:53,720 investing in AI research and development creating a large 265 00:17:53,720 --> 00:17:56,480 language model which sits behind ChatGPT. 266 00:17:56,480 --> 00:18:03,920 It's kind of the mechanics of ChatGPT requires significant 267 00:18:04,000 --> 00:18:09,200 resources and expertise and access to large information. 268 00:18:09,880 --> 00:18:15,240 So in even though there are large investments going on in in 269 00:18:15,320 --> 00:18:19,730 AI, I think that the threat of new entrants to the level of 270 00:18:19,730 --> 00:18:25,930 chat GB T is kind of low to moderate Chat GB T has a 271 00:18:25,930 --> 00:18:29,890 significant advantage as the early mover in the market. 272 00:18:30,730 --> 00:18:35,130 So it was able to scrape and access a lot of information 273 00:18:35,410 --> 00:18:38,650 before other companies called onto it that were in the open 274 00:18:38,810 --> 00:18:41,610 public domain. And now they're starting, for 275 00:18:41,610 --> 00:18:45,640 example, Twitter. And now those sources are 276 00:18:45,640 --> 00:18:48,440 starting to realize that they are, they've got a lot more 277 00:18:48,440 --> 00:18:51,720 information that they could use to create their own models and 278 00:18:51,720 --> 00:18:53,240 they're starting to turn off access. 279 00:18:53,400 --> 00:18:57,880 So ChatGPT has already trained its model on that. 280 00:18:58,040 --> 00:19:00,640 So it's got an advantage that might not be there in the 281 00:19:00,640 --> 00:19:03,000 future. What I will say is some of the 282 00:19:03,000 --> 00:19:08,060 bigger companies like the Microsoft Googles and probably X 283 00:19:08,060 --> 00:19:11,740 or Twitter X in the in the future we'll start to catch up 284 00:19:11,740 --> 00:19:18,460 to chat DBT and you will find that in the future that we may 285 00:19:18,460 --> 00:19:21,660 have more competition, but right now I would say probably 286 00:19:21,660 --> 00:19:29,220 moderate when it comes to chat. DBT #2 is the bargaining power 287 00:19:29,220 --> 00:19:32,820 of supplies. And this is a good, good example 288 00:19:32,820 --> 00:19:35,850 because we're applying this to, as opposed to a product that you 289 00:19:35,850 --> 00:19:38,370 put together, a physical product, we're applying it to 290 00:19:38,370 --> 00:19:41,810 kind of an IT product. So it makes us think, you know 291 00:19:41,810 --> 00:19:46,410 really carefully about this. So in the context of ChatGPT 292 00:19:46,690 --> 00:19:50,570 supplies could be considered the data providers or the 293 00:19:50,570 --> 00:19:54,530 researchers and engineers who contributed to its development. 294 00:19:55,170 --> 00:19:59,380 Their bargaining power is moderate where while there are 295 00:19:59,380 --> 00:20:03,020 many sources for data, the quality and the diversity of 296 00:20:03,020 --> 00:20:08,300 data are critical for CHAT DBT. So as I said before, chat DBT 297 00:20:08,300 --> 00:20:11,780 scraped or accessed like Twitter, like anything on 298 00:20:11,780 --> 00:20:13,860 Twitter that was posted publicly for example. 299 00:20:14,450 --> 00:20:19,170 Free online Wikipedia for example, other data sources and 300 00:20:19,170 --> 00:20:22,330 and these AI models get better as they trend on new information 301 00:20:22,530 --> 00:20:25,690 in different context. But you you, you know if you've 302 00:20:25,690 --> 00:20:29,170 already got one context down kind of pat and a lot of 303 00:20:29,170 --> 00:20:32,130 different variables in that area, you need to kind of expose 304 00:20:32,130 --> 00:20:35,890 it to other different types of information for it to grow. 305 00:20:37,290 --> 00:20:40,970 So I guess there was in some ways the supplies were those 306 00:20:40,970 --> 00:20:42,930 data providers and they started to be locked down a bit. 307 00:20:43,290 --> 00:20:47,090 So even though and and and a I models need to continue to 308 00:20:47,090 --> 00:20:48,570 learn. So even though they've got an 309 00:20:48,570 --> 00:20:54,730 advantage here I think that they kind of those data providers 310 00:20:54,730 --> 00:20:57,370 kind of have limited bargaining power here. 311 00:20:58,130 --> 00:21:03,050 A open A I who owns J GB T may now use their competitive 312 00:21:03,050 --> 00:21:08,690 advantage to even pay for access to public information or build 313 00:21:08,690 --> 00:21:14,510 strong partnerships saying, look, if we could take your 314 00:21:14,510 --> 00:21:18,710 information, Twitter or in the future keep taking your 315 00:21:18,710 --> 00:21:22,710 information, I know Elon Musk has stopped that, then maybe we 316 00:21:22,710 --> 00:21:25,910 could give you a kickback or pay you for that or give them a 317 00:21:25,910 --> 00:21:29,710 kickback or, you know, a percentage of of profits or 318 00:21:29,710 --> 00:21:31,230 something. So I think the bargaining power 319 00:21:31,230 --> 00:21:33,790 of supplies in this case has been low and I think it may 320 00:21:33,790 --> 00:21:36,470 change in the future. But I think Chad Deputy is well 321 00:21:36,470 --> 00:21:39,190 aware that there's a big risk for them in terms of their 322 00:21:39,190 --> 00:21:44,650 growth and they're starting to build partnerships in terms of 323 00:21:44,690 --> 00:21:48,210 the bargaining power of buyers. So these are the people that use 324 00:21:48,210 --> 00:21:51,450 chat BGBT, which is generally businesses and consumers. 325 00:21:52,290 --> 00:21:56,450 I would say that buyers have a high bargaining power here 326 00:21:56,730 --> 00:22:00,250 because I think that there are several other AI models and chat 327 00:22:00,250 --> 00:22:04,450 box available in the market. Bing has just put out Microsoft 328 00:22:04,450 --> 00:22:07,370 Bing have put out their own chat product. 329 00:22:07,680 --> 00:22:10,560 They actually source their information. 330 00:22:10,560 --> 00:22:13,680 They've got a strategic partnership with Chat GB T, 331 00:22:13,840 --> 00:22:16,440 which is actually the model that they use behind the scenes, and 332 00:22:16,440 --> 00:22:18,600 I'm sure there's some commercials behind that. 333 00:22:19,080 --> 00:22:23,520 However, there are a lot of models who are built either on 334 00:22:23,520 --> 00:22:27,960 top of Chat GB T, so Chat GB C not being the interface, but the 335 00:22:27,960 --> 00:22:30,000 engine behind the scene they use. 336 00:22:30,000 --> 00:22:32,280 They've got an API that you can use. 337 00:22:32,280 --> 00:22:35,200 So you know you're not directly going on to the chat GB T 338 00:22:35,200 --> 00:22:39,810 product or they are just other ones that are just free and so 339 00:22:39,810 --> 00:22:44,690 therefore paying for the Chat GB C service may not feel like 340 00:22:44,690 --> 00:22:46,130 something that people want to do. 341 00:22:46,610 --> 00:22:49,010 So I would say overall in terms of the bargaining power of 342 00:22:49,010 --> 00:22:52,210 buyers, that's that's ours. And with the fact that 343 00:22:52,210 --> 00:22:56,410 everyone's gone mental and crazy about a I development, I do 344 00:22:56,410 --> 00:23:02,050 think that it's about moderate in terms of how much bargaining 345 00:23:02,050 --> 00:23:05,730 power we have as a consumer. And that's probably because 346 00:23:06,430 --> 00:23:11,950 ChatGPT had these advanced capabilities and and the kind 347 00:23:11,950 --> 00:23:14,550 of, you know, ahead of the curve, if you like, right now. 348 00:23:14,790 --> 00:23:17,430 So as of today, I'd say moderate, but in the future, 349 00:23:17,430 --> 00:23:23,470 buyers may have more power #4, the threat of substitutes or 350 00:23:23,470 --> 00:23:26,190 services. I think the threat of 351 00:23:26,190 --> 00:23:31,630 substitutes and services is high, even though ChatGPT had a 352 00:23:31,950 --> 00:23:34,150 competitive advantage to start off with. 353 00:23:34,770 --> 00:23:40,770 I think that the reason why it's getting moderate to high right 354 00:23:40,770 --> 00:23:45,890 now is that chat bot services are definitely where people have 355 00:23:46,090 --> 00:23:51,530 spent their time and energy and chat GB T actually has an 356 00:23:51,530 --> 00:23:54,130 advanced natural language processing machine learning 357 00:23:54,130 --> 00:23:58,570 capabilities. However, a lot of the new 358 00:23:58,570 --> 00:24:02,730 entrants aren't looking to have a hugely wide, hugely smart 359 00:24:02,730 --> 00:24:04,720 model, they're looking at a specific model. 360 00:24:04,720 --> 00:24:09,960 So for example asking for a chatbot that's really good at 361 00:24:09,960 --> 00:24:13,120 answering IT support questions is quite limited. 362 00:24:13,320 --> 00:24:16,320 So therefore in order to provide that product, which is generally 363 00:24:16,320 --> 00:24:20,080 what consumers are looking for, a very point pointed solution to 364 00:24:20,080 --> 00:24:24,160 fix a problem. The the amount of information 365 00:24:24,160 --> 00:24:27,520 and the amount of data that that chat model needs. 366 00:24:27,520 --> 00:24:30,760 The very cut down one I'm talking about it doesn't need as 367 00:24:30,760 --> 00:24:33,200 much information. So it can be trained on an open 368 00:24:33,200 --> 00:24:37,280 source model and you can and you can feed it IT requests from 369 00:24:37,280 --> 00:24:39,360 people's companies. And so there are a lot of like 370 00:24:39,560 --> 00:24:43,560 many alternatives if you like many chat GB T's out there And 371 00:24:43,560 --> 00:24:47,680 so I think that those new entrants are able to come in 372 00:24:47,680 --> 00:24:52,840 quite cheaply and provide more competition for chat GB T So I 373 00:24:52,840 --> 00:24:56,360 think that the I think moderate to high and there is quite a 374 00:24:56,360 --> 00:25:01,390 threat of substitutes right now. And again the fact is I can use 375 00:25:01,390 --> 00:25:04,630 if I'm just a consumer who's asking a few questions I can use 376 00:25:04,630 --> 00:25:07,990 Bing for free or the Google alternative. 377 00:25:09,390 --> 00:25:13,070 But I can use those two for free to give me some quick answers 378 00:25:13,070 --> 00:25:16,230 that are kind of built into Google Now and built into 379 00:25:16,230 --> 00:25:19,270 Microsoft so I don't have to click away to ChatGPT. 380 00:25:19,680 --> 00:25:23,200 I'm going to use those unless I need some advanced capability. 381 00:25:23,400 --> 00:25:25,840 So now Chap. GBT as being the only player 382 00:25:26,000 --> 00:25:29,840 starts becoming the kind of second second tier advanced 383 00:25:29,840 --> 00:25:34,240 model at the moment and finally the rival among competitors. 384 00:25:34,960 --> 00:25:38,720 I would say that the rivalry amount among competitors in the 385 00:25:38,720 --> 00:25:42,280 AI space is high. I think major tech companies 386 00:25:42,280 --> 00:25:47,900 like Google, Amazon, Microsoft all have their own AI models and 387 00:25:47,900 --> 00:25:50,580 they're looking at consistent ways of improving them. 388 00:25:50,860 --> 00:25:55,340 And unlike Open A I and Chat GB T, those other companies make 389 00:25:55,340 --> 00:25:59,060 their money through data centers and through productivity apps. 390 00:25:59,460 --> 00:26:06,540 And so therefore they can almost sell a I products at a loss to 391 00:26:06,540 --> 00:26:10,580 get you on their core product which is hosting services or you 392 00:26:10,580 --> 00:26:12,940 know, buying more data or buying one of their products. 393 00:26:13,370 --> 00:26:15,490 So they're all, you know, selling advertising to you. 394 00:26:15,650 --> 00:26:18,810 Whereas Chet GBT doesn't have that model, Open AI doesn't have 395 00:26:18,810 --> 00:26:21,730 that model. It is purely providing you with 396 00:26:21,770 --> 00:26:24,930 an AI brand if you like, quite an advanced one, but these other 397 00:26:24,930 --> 00:26:27,980 products could probably come in and lower their prices and just 398 00:26:27,980 --> 00:26:30,820 to just to kind of get ahead and then start to get their market. 399 00:26:31,260 --> 00:26:33,980 Also, most people when you use a computer, you're using a 400 00:26:33,980 --> 00:26:36,460 Microsoft product or a Google product or maybe an Apple 401 00:26:36,460 --> 00:26:38,660 product and Apple isn't in this market. 402 00:26:38,900 --> 00:26:42,460 However, if you're loading up a spreadsheet on Apple, you're 403 00:26:42,460 --> 00:26:46,660 using probably Microsoft Office and that's got AI built into it 404 00:26:46,660 --> 00:26:48,900 now. So naturally you're using their 405 00:26:48,900 --> 00:26:53,620 interface. I also think the chat bot market 406 00:26:53,620 --> 00:26:58,160 is competitive, offering several services in that area And now 407 00:26:58,160 --> 00:27:00,880 you see that like everyone's putting out like whatever their 408 00:27:00,880 --> 00:27:05,320 core product is and pay extra for AI credits or pay extra for 409 00:27:05,600 --> 00:27:09,280 this AI bits and pieces. It's continuous. 410 00:27:09,280 --> 00:27:13,600 There's continuous innovation in the space and I have seen right 411 00:27:13,600 --> 00:27:19,370 now some talk about what happens if people just compete and then 412 00:27:19,370 --> 00:27:23,210 we start to do something that could almost harm humanity. 413 00:27:23,450 --> 00:27:27,090 So we've given away a I tools that can allow a terrorist to, 414 00:27:27,450 --> 00:27:30,330 you know, a potential terrorist to learn how to make a bomb or 415 00:27:30,330 --> 00:27:33,730 find out where you know a person of interest is at. 416 00:27:33,930 --> 00:27:38,730 And so there has been a meeting yesterday as I speak at Congress 417 00:27:38,730 --> 00:27:43,730 in America where a lot of A I leaders in the Microsoft, 418 00:27:44,280 --> 00:27:47,960 Amazon, Google space, Bill Gates, Elon Musk. 419 00:27:48,080 --> 00:27:54,200 We're there to kind of suggest that America starts to produce 420 00:27:54,200 --> 00:27:59,840 some regulatory wrappers around the A I industry so it doesn't 421 00:28:00,680 --> 00:28:04,080 fall into the wrong hands and that may have an effect on 422 00:28:04,080 --> 00:28:06,280 competition. So I think that's important to 423 00:28:06,360 --> 00:28:08,920 play out. That would probably come up in 424 00:28:08,920 --> 00:28:13,980 our slot analysis in terms of threats, not threats from 425 00:28:13,980 --> 00:28:17,060 competitors necessary, but threats from regulation in terms 426 00:28:17,060 --> 00:28:22,340 of not being what that not sure what that looks like, but yes, 427 00:28:22,340 --> 00:28:25,300 but in terms of rivalry around competitions, it still remains 428 00:28:25,580 --> 00:28:27,900 very high. And even though these players 429 00:28:27,900 --> 00:28:31,140 have gone to Congress together, they're all competing with one 430 00:28:31,140 --> 00:28:35,900 another, not all friends. Right. 431 00:28:36,100 --> 00:28:38,900 So what did you get? We just applied the five forces 432 00:28:38,900 --> 00:28:44,780 model to Chat GB T and I'll just remind you just what those areas 433 00:28:44,780 --> 00:28:50,500 were and where I thought chat GB T landed and then you can tell 434 00:28:50,500 --> 00:28:54,020 me or you can write in if you like or you can think about 435 00:28:54,020 --> 00:28:55,540 whether or not you got different things. 436 00:28:56,260 --> 00:28:59,620 So in terms of the threat of new entrants, I would say that it's 437 00:28:59,820 --> 00:29:03,700 low to moderate when it comes to Chat GB T in terms of its core 438 00:29:03,700 --> 00:29:08,780 business, in terms of its the size of Chat GB T, the fact that 439 00:29:08,780 --> 00:29:14,020 it had its early, kind of early advantage by getting into the 440 00:29:14,020 --> 00:29:17,380 market early and has also got a huge amount of information and 441 00:29:17,380 --> 00:29:19,580 that takes time to collect and process. 442 00:29:20,300 --> 00:29:25,140 In terms of bargaining power of supplies #2, I think that the 443 00:29:25,140 --> 00:29:27,180 supplies of Chip GB T is kind of low. 444 00:29:27,540 --> 00:29:30,660 A Chip GB T is basically deciding what sources it wants 445 00:29:30,660 --> 00:29:34,580 to connect to and it might create partnerships with them. 446 00:29:35,340 --> 00:29:38,020 In terms of the bargaining power of buyers, I think it's probably 447 00:29:38,020 --> 00:29:42,830 moderate to high as in the consumer, the businesses and and 448 00:29:42,830 --> 00:29:45,110 ourselves. I think there are plenty of 449 00:29:45,110 --> 00:29:48,710 other models that you could use that are specific to a use case 450 00:29:48,710 --> 00:29:51,510 that you're trying to solve. And so Chat GB T isn't 451 00:29:51,510 --> 00:29:57,030 necessarily where you would want to go as your preference right 452 00:29:57,030 --> 00:29:59,710 now that these competitors have come to the market. 453 00:29:59,910 --> 00:30:04,230 Unless you wanted advanced capabilities in terms of threat 454 00:30:04,310 --> 00:30:08,470 of substitutes, I think the threat is moderate to high. 455 00:30:08,880 --> 00:30:12,360 I think again I think there are alternatives you could use and 456 00:30:13,360 --> 00:30:16,840 in this space and this is this is going to, it's moderate now 457 00:30:16,840 --> 00:30:20,800 and it's going to get higher as people start to generate more 458 00:30:20,800 --> 00:30:23,920 advancement And because people are investing in anything with 459 00:30:23,920 --> 00:30:26,880 the word AI on the moment ChatGPT is going to see their 460 00:30:26,880 --> 00:30:32,590 market share diminish #5. The rivalry among competitors 461 00:30:32,590 --> 00:30:35,910 I'd say is high, it's not just medium, it is high or super 462 00:30:35,910 --> 00:30:39,990 high. And the Microsoft Google space, 463 00:30:40,190 --> 00:30:44,870 Chet GBT, Amazon are all competing to have the best large 464 00:30:44,870 --> 00:30:48,030 language model and to have the best advanced language model. 465 00:30:48,870 --> 00:30:53,310 So Chet GBT has a bit of a problem in regards to that. 466 00:30:53,590 --> 00:30:56,830 The other thing that there has been some suggestions that 467 00:30:56,830 --> 00:31:01,650 Microsoft, Google, Amazon can for example sell II at its cost 468 00:31:01,650 --> 00:31:07,490 price, whereas ChatGPT it's that's its only source of income 469 00:31:07,730 --> 00:31:12,610 and it needs to potentially needs more money than it's 470 00:31:12,610 --> 00:31:15,090 getting at the moment and it's not really in a profitable 471 00:31:15,090 --> 00:31:19,450 position. So that's my 5 Forces porters 5 472 00:31:19,450 --> 00:31:22,570 force model for Jet GBT. I hope you learned something 473 00:31:22,570 --> 00:31:24,490 today. I hope you've learned how SWOT 474 00:31:24,490 --> 00:31:27,450 analysis and five forces can work together. 475 00:31:27,890 --> 00:31:31,730 We're gonna be covering off a couple more strategic and 476 00:31:31,730 --> 00:31:35,250 enterprise business analysis techniques in the coming weeks 477 00:31:35,490 --> 00:31:37,850 and then we'll move on to the next step. 478 00:31:38,330 --> 00:31:39,610 I will see you next time.