emerging Canadian Cannabis Industry to practice related to potential bases for competitive advantage
Assignment #2 – Fall 2019
In this assignment we will be using the emerging Canadian Cannabis Industry to practice related to potential bases for competitive advantage. Since this industry is relatively new and clearly not yet fully formed, we will be looking at its current and potential future status when we apply the course concepts.
You should type your entries into this document and submit it via Questrom Tools.
Background
The only necessary reading for this assignment is the PwC Canada’s Cannabis Series, Chapter 1-8. Two bits of additional information about licensing are helpful (they are not made clear in the reading).
Production: The Canadian National Government requires “producers” in the Cannabis Industry to be Licensed Producers (LPs). National regulations recognize several classes of LP:
Cultivation (including micro and standard cultivation or nursery)
Processing (including micro or standard processing)
Sale for medical purposes
Analytical testing
Research
Retail Recreational Sale: Licensing for sale for recreational purposes is done at the level of the Provinces, not nationally. Typically, there are limitations on the extent to which LPs can participate in retail sales. Details of retail licensing are not needed for this assignment.
Part 1 – Industry Structure
It should be clear that there are several potential sub-industries between the cultivation of cannabis plants and the final retail customer. Assume a single path value chain starting with Cultivation and ending with Retail Sale, identify at least 3 intermediate sub-industries.
Step 1: Fill in at least 3 sub-industries, based on the reading.
Cultivation -> [ sub-industry 1] -> [ sub-industry 2 ] -> [ sub-industry 3 ]
->[ sub-industry 4 ] -> Retail Sale
Step 2: Select ONE of the sub-industries (can be Cultivation, Retail Sales or any of the ones you added, and then do a Five Forces analysis, focusing on Supplier Power, Rivalry and Buyer Power. You do not need to write your analysis here, only your conclusions about each of these three forces. Fill in below, trying to keep this all on one page.
Supplier Power Summary
Rivalry Summary
Buyer Power Summary
Part 2 – Generic Strategies/Positioning
For two of the industries in the overall value chain, identify the Competitive Positioning quadrant you think might be the most attractive and explain your reasoning. Your explanation need not be highly detailed, but it should be based on specific insight into the sub-industry and the general characteristics of the Strategy/Positioning you think is attractive.
[Remember, the Competitive Positioning grid is Cost Leadership or Differentiation on one axis, and Broad or Narrow market on the other axis.]
Sub-Industry 1:
Sub-Industry 2:
Part 3 – Resource-Based View
LPs will certainly need to develop a set of Resources to be able to compete. In this section, apply the VRIO framework to 4 resources and conclude whether or not (and why) they might be a basis for Sustainable Advantage. The resources are: Agricultural Capacity, Intellectual Property (proprietary strains), ERP Systems (see reading), Product Branding.
Resource: Agricultural Capacity
Valuable:
Rare:
Costly to imitate:
Organized to capture value:
Resource: Intellectual Property (proprietary strains)
Valuable:
Rare:
Costly to imitate:
Organized to capture value:
Resource: ERP Systems
Valuable:
Rare:
Costly to imitate:
Organized to capture value:
Resource: Product Branding
Valuable:
Rare:
Costly to imitate:
Organized to capture value:
Part 4 – Leadership Advantage
Choose ONE sub-industry and for each of the 8 potential sources of Leadership Advantage, explain why/why not you think they might apply to that part of the Cannabis Industry.
Sub-Industry:
Size Leadership
Scale Economics:
Scope Economics:
Network Effects:
Learning Effects:
Timing Leadership
Pre-emption (please address at least 2 types of pre-emption, but it is your choice)
Reputation Effects
Buyer Switching Costs
Patents or Institutional Barriers
For the same sub-industry, identify potential risks of being a first/early mover and indicate which (could be all) are most likely to be important to the early LPs.
Timing Leadership Risks
Pioneering costs:
Demand uncertainty:
Technological uncertainty:
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