Industry analysis 4

INDUSTRY ANALYSIS IV

Toolkit
Determinants of industry attractiveness
#1. Scope of Competition
#2. Economic Traits
#3. Competitive Forces
#4. Key Success Factors
#5. Likely Moves by Rivals

#1. Scope of Competition
Market Size
Scope of Competition
- Local Regional
- National Global
Industry Growth Cycle
- Early Takeoff
- Mature Stagnant
- Decline

Scope
Prevalence of Backward and Forward Linkage
Pace of Technological Change
Learning Curve Effect
Capital Requirement
Profitability (above/below par)

#2. Dominant Economic Traits
Market Size
Scope of Competition (Local, Regional, National, Global)
Industry Growth Cycle (Early, Takeoff, Mature, Stagnant, Decline)
Number of Rivals and their relative sizes
Number of Buyers and their relative sizes
Prevalence of Backward and Forward Linkage
Ease of Entry and Exit
Pace of Technological Change
Learning Curve Effect
Capital Requirement
Profitability (above/below par)

#2 Porter’s Five Forces Substitute Products (of firms in other industries) Suppliers of Key Inputs Buyers Potential New Entrants Rivalry Among Competing Sellers

Bargaining Power of Buyers
- Many small companies and few buyers, Large buyers
- Buyers can switch orders between suppliers enabling them to play one supplier against another
- Vertical integration is a feasible option

Suppliers
- Product has few substitutes and are important to the buyers
- Products are differentiated to the extent that buyers cannot easily switch
- Threat of vertical integration
- Buying companies cannot threaten with backward integration

Rivalry
- Demand conditions : growing/declining
- Exit barriers : high/low
- Competitive structure : fragmented, consolidated

Substitutes
- Products serving similar consumer needs
sugar vs artificial sweetener
taxi vs bus
private vs public university

Threat of Entry
- Brand loyalty
- Economies of scale
- Entry barriers
- Govt. regulation

#4. Key Success Factors
Technology:
Product Innovation Capability
Production Process Innovation Capability
Expertise in given technology
Manufacturing :
Scale economy
Experience curve effect
High Labour Productivity
Flexibility to manufacture a range of products

KSF
Distribution:
Low distribution cost
Company-owned retail outlets
Fast delivery
Marketing:
Well-trained sales force
Dependable service and technical assistance
Attractive styling/packaging

KSF
Skills:
Quality control know how
Design expertise
Expertise in particular technology
Organization:
Superior Information System
Managerial know-how
Ability for quicker response to market

KSF
Others:
Convenient Location
Courteous Employees
Patent Protection

#5. Likely Strategic Moves by Rivals
Strategic Intent:
Be dominant leader
Move into top 5
Maintain position
Market Objective:
Getting stronger, on the move
Well-entrenched, able to maintain position
All things to everybody

Moves by Rivals
Strategic Posture:
Mostly offensive
Mostly defensive
Aggressive risk taker
Competitive Strategy:
Striving for low cost leadership
Mostly focusing on market niche
Pursuing differentiation

Industry analysis 4

by igchowdhury on Sep 23, 2010

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Industry analysis 4 Presentation Transcript