INDUSTRY ANALYSIS Narender Bansal MBA 3 rd Semester Maharaja Agrasen Institute of Technology Delhi-110086

Narender Bansal

MBA 3 rd Semester

Maharaja Agrasen Institute of Technology

Delhi-110086

Industry Analysis After economic analysis, we ask the question “which industries will benefit most from the upcoming economic environment?” This will lead to several industries, and our analysis will lead us to choose the one that we find to be best positioned.

After economic analysis, we ask the question “which industries will benefit most from the upcoming economic environment?”

This will lead to several industries, and our analysis will lead us to choose the one that we find to be best positioned.

What is an Industry?

INDUSTRY GROUPS AGRICULTURE STEEL HEALTH CARE RETAIL AUTOMOBILES PHARMACEUTICAL FINANCIAL SERVICES HOTEL & TOURISM IT TELECOM UTILITIES PAPER & PRINTING BANKING FMCG INFRASTRUCTURE TEXTILE OIL AND GAS EXPLORATION

AGRICULTURE

STEEL

HEALTH CARE

RETAIL

AUTOMOBILES

PHARMACEUTICAL

FINANCIAL SERVICES

HOTEL & TOURISM

IT

TELECOM

UTILITIES

PAPER & PRINTING

BANKING

FMCG

INFRASTRUCTURE

TEXTILE

OIL AND GAS EXPLORATION

SIC Code ECONOMIC SECTOR Manufacturing Distribution Services PRODUCT AND SERVICES List of what is offered by the industry GEOGRAPHIC SCOPE Local ,Regional, National, International

ECONOMIC SECTOR

Manufacturing

Distribution

Services

PRODUCT AND SERVICES

List of what is offered by the industry

GEOGRAPHIC SCOPE

Local ,Regional, National, International

Computer industry Different Market Segments Personal Computer Micro Computer Mini Computer Mainframe Computer

Different Market Segments

Personal Computer

Micro Computer

Mini Computer

Mainframe Computer

Furniture industry Home Furniture Office Furniture Wooden Hosehold Metal Household

Industry Analysis tries to find out following answer Difference between return for alternate industries Future performance of currently performing companyin one period Consistent performance over time Risk difference between different industries Risk variability over period of time

Difference between return for alternate industries

Future performance of currently performing companyin one period

Consistent performance over time

Risk difference between different industries

Risk variability over period of time

ECONOMY AND INDUSTRIAL SECTORS The economic performance of a country,to a large extent,determine Favourable and unfavourablable climate for its industrial participation

Reasons of industrial analysis Provide an awareness of market performance Identify investment opportunities Important part of company’s business plan Financial institutions

Provide an awareness of market performance

Identify investment opportunities

Important part of company’s business plan

Financial institutions

Data Requirement Product Line Complementry Product Product Growth Product Pattern (Seasonal,Cyclical) Econimies of Scales Suppliers Labour Market Buyer and their Behaviour Substitute Product Prices Marketing and Selling Cost Structure Logistic Department of Economic Analysis , Business Publication

Product Line

Complementry Product

Product Growth

Product Pattern (Seasonal,Cyclical)

Econimies of Scales

Suppliers

Labour Market

Buyer and their Behaviour

Substitute Product

Prices

Marketing and Selling

Cost Structure

Logistic

Department of Economic Analysis , Business Publication

Industrial Life Cycle It is Rise and Fall in Customer Interest

Industrial Life Cycle Rise and Fall of Customer Interest Depend on extent of technology and innovation Each phase passes from four stages Introduction Stage Growth Stage Maturity Stage Stability/Decline Stage

Rise and Fall of Customer Interest

Depend on extent of technology and innovation

Each phase passes from four stages

Introduction Stage

Growth Stage

Maturity Stage

Stability/Decline Stage

Feature of Industrial Life Cycle Marketing Manufacturing Competion Risk Margin Strategy High Advertising Skimming Pricing Under Capacity High Production Cost Low High High but low profit Increase Market Share High Advertising Under Capacity Shift to High Production Many Competitor Groth Vs Risk High and High Profit High Prices Change Quality &Price Image Market Segmentation Services Optimum Capacity Price Competition Low Low due to price war Marketing Effectiveness Low Advertising Overcapacity, Mass Production Exit,Fewer Very High Risk Low Profit Cost Control Introduction Growth Maturity Decline

Marketing

Manufacturing

Competion

Risk

Margin

Strategy

TOOLS FOR INDUSTRY ANALYSIS Qualitative Cross sectional industry performance Industry performnce overtime Difference in industry risk SWOT analysis Competition over industry life cycle Quantitative Analysing employment data Analysis of emolument data Input output analysis Earning data analysis

Qualitative

Cross sectional industry performance

Industry performnce overtime

Difference in industry risk

SWOT analysis

Competition over industry life cycle

Quantitative

Analysing employment data

Analysis of emolument data

Input output analysis

Earning data analysis

Cross sectional industry performance Aimed at finding out variability in Rate of return among various industries in given time period compare performance in term of Sale profit market capitalisation dividend

Aimed at finding out variability in Rate of return among various industries in given time period

compare performance

in term of

Sale

profit

market capitalisation

dividend

Example Stock market growth=10% Industrial growth rates = 5% to 8% Stock market growth=50% Industrial growth rates = 80% to - 20%

Stock market growth=10%

Industrial growth rates

= 5% to 8%

Stock market growth=50%

Industrial growth rates

= 80% to - 20%

Industry performance over time To identify stage of product life cycle Time duration 3 to 5 year Difficult to forecast future performance due to compositional change in industry technological change innovation

To identify stage of product life cycle

Time duration 3 to 5 year

Difficult to forecast future performance due to

compositional change

in industry

technological change

innovation

Differences in industry risk Besides focussing on return also consider risk Specifically investigate two question Does risk differ across industries in given time period Are industry risk stable over time Measured in term of variability in return/productive value Risk pattern also depend on economic situation

Besides focussing on return also consider risk

Specifically investigate two question

Does risk differ across industries in given time period

Are industry risk stable over time

Measured in term of variability in return/productive value

Risk pattern also depend on economic situation

SWOT ANALYSIS Strenth & weakness Assess strenth and weakness Internal capability of industry Competitive advantage or defensive against weakness Opportunity & threat Evaluate opportunity and threat Environmental trend External situation Competitive forces Technology Government regulation

Strenth & weakness

Assess strenth and weakness

Internal capability of industry

Competitive advantage or defensive against weakness

Opportunity & threat

Evaluate opportunity and threat

Environmental trend

External situation

Competitive forces

Technology

Government regulation

SWOT analysis STRENTH Capicity Competitive advantage Good custermor service High quality product Customer loyality Financial resources WEAKNESS Limitation default defect Competitor has exploitable advantage Example: Small scale industry hs poor financial resources Industry that cater domestic market, would have weakness of catering to global market

STRENTH

Capicity

Competitive advantage

Good custermor service

High quality product

Customer loyality

Financial resources

WEAKNESS

Limitation default defect

Competitor has exploitable advantage

Example:

Small scale industry hs poor financial resources

Industry that cater domestic market, would have weakness of catering to global market

SWOT analysis Opportunity Favourable condition in environment May be trend or need Growing market of industry product Shrinking competition Identification of new market Threat Unfavourable situation May be barrior or constraint Slowing domestic economy Competition New entrant New technology

Opportunity

Favourable condition in environment

May be trend or need

Growing market of industry product

Shrinking competition

Identification of new market

Threat

Unfavourable situation

May be barrior or constraint

Slowing domestic economy

Competition

New entrant

New technology

SWOT analysis Threat Opprtunity Strenth Weakness Internal environment External environment Confront Avoid Exploit Search

Analysing Employment data Life cycle can be predicted by Product life cycle Help in identify key industries Identify growth and decline Evaluate importance of industry to economy DetermineCompetitiveness among industries

Life cycle can be predicted by Product life cycle

Help in identify key industries

Identify growth and decline

Evaluate importance of industry to economy

DetermineCompetitiveness among industries

Data Requrement Industry wise total employment in current as well earlier years Industry wise total emolument data in current as well earlier years Employes: Who receive wge and hold clerical superwisery post Duration of analysis Short : Changing environment Long : Predictive purpose Base year

Industry wise total employment in current as well earlier years

Industry wise total emolument data in current as well earlier years

Employment share of sub industry = Employment in sub industry *100 Total employment in industry Employment in wools=2000 Total in textile =11500 % Share =2000/11500*100 ie 17.39% Change in employment Current yr no. Of employes _1 *100 Base yr no. Of employes Current employes:1500 Base yr employes:1200 % change : [(1500/1200)-1]*100 ie 25 %

Employment share of sub industry

= Employment in sub industry *100

Total employment in industry

Employment in wools=2000

Total in textile =11500

% Share =2000/11500*100 ie 17.39%

Change in employment

Current yr no. Of employes _1 *100

Base yr no. Of employes

Current employes:1500

Base yr employes:1200

% change : [(1500/1200)-1]*100 ie 25 %

Location quotient: Measure concentration of industry’s concentratio in an area relative to rest of nation Industry location quotient Industry share of regional employment Industry share of national employment or Industry’s regional employment Total national employment Industry national employment Total national employment % change in location quotient [ (Current yer LQ/Base yr LQ)1 ] *100 LQ = location quotient

Location quotient:

Measure concentration of industry’s concentratio in an area relative to rest of nation

Industry location quotient

Industry share of regional employment

Industry share of national employment

or

Industry’s regional employment

Total national employment

Industry national employment

Total national employment

% change in location quotient

[ (Current yer LQ/Base yr LQ)1 ] *100

LQ = location quotient

Employment shift analysis Current yr total national employment - 1 Base yr total national employment Base yr total national employment National avarage growth rate Industry avarage growth rate Regional industry base year employment * national avg growth rate

Emolument Data Sum of wages and salaries,employer’s contribution to provident fund And other fund and workmen and staff welfare expenses Emolument per employ= Industry regional emolument Industry regional emolument

Sum of wages and salaries,employer’s contribution to provident fund

And other fund and workmen and staff welfare expenses

Emolument per employ=

Industry regional emolument

Industry regional emolument

Change in emolument per employe by industry Current yr emolument per employe Base yr emolument per employe -1 * 100

Change in emolument per employe by industry

Current yr emolument per employe

Base yr emolument per employe -1 * 100

Input output analysis Total input Include value of fuel,material consumed,expenditure,repair costtaxes,,postage,banking charges Total output value of product byproduct

Total input

Include value of fuel,material consumed,expenditure,repair costtaxes,,postage,banking charges

Total output

value of product

byproduct