This document discusses industry analysis and its importance for strategy formulation. Industry analysis reveals the attractiveness of an industry based on growth potential and profitability. It also assesses a firm's strengths relative to competitors by providing details on number of players, their market shares, capacities, and strengths. Overall, industry analysis helps a firm understand its competitive position and determine strategies for different types of industries like fragmented, emerging, maturing, declining, or global industries. Key factors that determine industry attractiveness and competitive position include growth rate, profitability, barriers to entry, economies of scale, product differentiation, technology, and distribution channels.

1. Industry
Analysis
» Farah Sulaimani Madam

2. Industry Analysis
• Industry analysis is prelude to strategy formulation.it helps
the firm assess industry attractiveness.
• It also helps the firm to assess its strengths relative to other
players in the industry.
• Industry analysis reveals industry attractiveness and the
firm’s competitive position in the industry.
• This analysis will provide details such as number of
players in the industry, their distribution,their market
shares.capacities and their relative strengths within the
industry.
• Overall industry analysis helps the firm to know its
competitive position within the industry.

3. Industry Settings
Classification of industries based on their environment
• Fragmented industry: It is an industry in which no firm has
significant market share and can strongly influence the industry
outcome.this type of industries are populated by a large number
of small and medium sized companies.
• Strategy to this type is economies of scale or experience curve.
• Emerging industries: These are newly formed or re-formed
industries that have been created by technological
innovations,emergence of new customer needs or other
sociological or economical changes like video games,personal
computers, geysers etc.
• Important characteristic of emerging industry is that there are no
rules of the game which implies that it is a risk as wells as an
opportunity.
• Strategy to this type is try to gain standardization with respect
to customers,suppliers etc.

4. Industry Settings
• Transition to maturity : Many industries pass from periods of rapid growth
to maturity.This period is nearly always a critical period for companies
because of fundamental changes often taking place in the competitive
environment and which may also extend to changes in organisational structure
and leadership roles. Overall it implies more competition for market share.
• Strategy to this type is to focus on GOOD BUYERS I.e still who are more
loyal to the company and its product). Next pricing accordingly will also
help.
• Declining industries:The ones which have experienced an absolute decline in
uniit sales over a sustained period meaning shrinking margins ,pruning
product lines, falling R&D and advertising
• Strategy is to harvest I.e eliminating investment and generating cashflow
from business followed by divestment.
• Global industries: these require to compete on worldwide coordinated basis,
which also include foreign competitors.
• Strategy is to introduce standardization in products, identifying market
segments,design changes or customization of products.

5. Industry attractiveness
• The growth potential and the profitability are the two
major determinants of industry attractiveness.
• The firm has to assess the industry attractiveness and make
up its mind on industries in which it should enter and the
ones it should avoid. The firm needs to find out :
Is it a growing industry?
Or is it a stagnant industry?
• If growing then the pace of growth;limits to growth
Whether it is profitable?- highly profitable?or medium ?or
low?

6. Barriers in the Industry
• A firm has to either build such barriers or
break them, depending on wheather it is
already a player in the industry trying to
prevent the entry of others or is a new
entrant.

7. Sources of Entry Barriers
• Economies of Scale
• Product Differentiation
• Technology
• Access to distribution channels

8. Firm’s competitive position
Knowing One’s competitors and one’s own position relative
to competition is critical to effective strategy.
The task of strategy is to find a favorable and profitable
competitive position within the industry,a position that the
firm can defend best,a position the firm can sustain,against
the forces that shape competition in the industry.
By analyzing the competition the can identify areas of
advantage and disadvantage
It can launch more precise attacks on competitors and also
prepare stronger defences against the attack.
To sum up the stronger competitive position of the firm
within the industry, more is the profitability.