Industry analysis is used to understand the competitive dynamics of an industry. It examines factors like demand, competition, and future prospects considering technology. Conducting industry analysis allows businesses to retain customers, attract new ones, ensure sustainability, align strategy, attract and retain talent, and create a holistic view of the business environment. Common tools for industry analysis include Porter's 5 Forces, PEST analysis, and SWOT analysis, which examine political, economic, social, and technological factors both internally and externally.

1. UNDERSTANDING BUSINESS IN
A COMPETITIVE CONTEXT –
INDUSTRY ANALYSIS
Dr. Shriram Purankar
Jaypee Business School

2. What is Industry Analysis ?
• Industry analysis is a market assessment tool used by
businesses to understand the competitive dynamics of an
industry.
• Make sense of what is happening in an industry
• demand-supply statistics
• degree of competition within the industry
• future prospects of the industry taking into account technological
changes, credit system within the industry

3. Why carry out Industry Analysis?
• Able to retain valuable and existing
customers
• understand the competitors
• Understand the offerings in the market.
• Understand how business can enhance its value
creation and
• Understand how company can provide more value to
existing customers

4. • Attracting new customers
• Understand the customers needs
• how many prospective customers are out there for their competitors
to serve ?
• If offering is not what customers the want then…
• Value proposition needs to be changed
• Industry Analysis not only about competitors but also about
customers
Why carry out Industry Analysis?

5. • Ensuring sustainability of business :
• IA will let business know what the competitor is launching next
• How to grasp business from competitors ?
• How to create barriers for competitors to enter ?
• How to become a threat for competitors?
• How to keep business sustainable for next 20 to 30 years ?
Why carry out Industry Analysis?

6. • Aligning organizational strategy in culture
• IA gives you framework for strategy
• Without making a change in corporate culture you will not be able
to create competitive advantage.
• industry analysis will help a business align its strategy with the
organizational culture.
Why carry out Industry Analysis?

7. • Attracting new and retaining existing star performers
• Industry analysis will help you understand what skills you should
look for
• in your existing and new recruits so that they can help you grow the
business.
• it’s critical to hire someone who has the required skills industry
supports.
• Without which you’ll not be able to generate competitive advantage for
your organization
Why carry out Industry Analysis?

8. • Understanding the business and creating a
big picture
• helps create a helicopter view for the business
• helps a business to see the big picture and create pixel
view
• goals and short terms objectives to work upon.
Why carry out Industry Analysis?

9. Why carry out Industry Analysis?
Quick Summary
Able to retain valuable, existing customers
Attracting new customers
Ensuring sustainability of business
Aligning organizational strategy in culture
Attracting new and retaining existing star
performers
Understanding the business and creating a big
picture

10. Types of Industry Analysis
• Porter’s 5 Forces
• Broad Factors Analysis (PEST Analysis)
• SWOT Analysis

11. Porter’s 5 Forces
• Introduced by Michael Porter in his 1980 book
“Competitive Strategy: Techniques for Analyzing
Industries and Competitors.”
• According to Porter, analysis of the five forces gives an
accurate impression of the industry and makes analysis
easier.

12. Porter’s 5 Forces

13. Intensity of industry rivalry
• The number of participants in the industry and their
respective market shares are a direct representation of
the competitiveness of the industry.
• Lack of differentiation in products tends to add to the
intensity of competition.
• High exit costs like high fixed assets, government
restrictions, labor unions, etc. also make the competitors
fight the battle a little harder.
Porter’s 5 Forces

14. Intensity of industry rivalry
• Rivalry Determinants:
• Industry Growth
• Fixed/storage costs
• Product Differences
• Brand Identity
• Exit Barriers
• Diversity of competitors
• Switching costs
Porter’s 5 Forces

15. Threat of potential entrants
• This indicates the ease with which new firms can enter the
market of a particular industry.
• If it is easy to enter an industry, companies face the constant
risk of new competitors.
• If the entry is difficult, whichever company enjoys little
competitive advantage reaps the benefits for a longer period.
• Also, under difficult entry circumstances, companies face a
constant set of competitors.
Porter’s 5 Forces

16. Threat of potential entrants
• To avoid new entrants, and to keep the industry profitable,
the industry needs several entry barriers in place.
• Entry Barriers:
• Economies of Scale
• Capital Requirements
• Proprietary Product differences
• Switching Costs
• Government Policy
• Access to Distribution
Porter’s 5 Forces

17. Bargaining power of suppliers
• If the industry relies on a small number of suppliers, they
enjoy a considerable amount of bargaining power.
• This can affect small businesses because it directly
influences the quality and the price of the final product.
• E.g. What if Parachute Coconut Oil’s supplier Union says
they want to increase prices of raw materials by 20% ?
• What will happen ?
Porter’s 5 Forces

18. Porter’s 5 Forces
Bargaining power of buyers
• The complete opposite happens when the bargaining
power lies with the customers.
• If consumers/buyers enjoy market power, they are in a
position to negotiate lower prices, better quality, or
additional services and discounts.
• This is the case in an industry with more competitors but
with a single buyer constituting a large share of the
industry’s sales.

19. Porter’s 5 Forces
Bargaining power of buyers
• Do you know why modern retail is taking away the
business from small retail outlets?
• It is because these modern retail companies have huge bargaining
power due to bulk buying.
• Hence they are crushing the small retailers.
• modern retailers will have huge bargaining power due to which a
small retailer can consider them as a huge problem when
establishing his own business.

20. Porter’s 5 Forces
Threat of substitute goods/services
• The industry is always competing with another industry in
producing a similar substitute product.
• all firms in an industry have potential competitors from
other industries.
• This takes a toll on their profitability because they are
unable to charge exorbitant prices.
• Substitutes can take two forms –
• products with the same function/quality but lesser price, or
• products of the same price but of better quality or providing more
utility.

21. Porters 5 Force Analysis of Automobile
Industry
• Exercise

22. Broad Factors Analysis
(PEST Analysis)
• Broad Factors Analysis, also commonly called the PEST
Analysis stands for Political, Economic, Social and
Technological. PEST analysis is a useful framework for
analyzing the external environment.

23. To use PEST as a form of industry analysis, an analyst will analyze each of the 4
components of the model. These components include:
Political
• Political factors that impact an industry include specific policies and regulations
related to things like taxes, environmental regulation, tariffs, trade policies, labor
laws, ease of doing business, and the overall political stability.
Economic
• The economic forces that have an impact include inflation, exchange rates (FX),
interest rates, GDP growth rates, conditions in the capital markets (ability to
access capital), etc.
Social
• The social impact on an industry refers to trends among people and includes
things such as population growth, demographics (age, gender, etc), and trends in
behavior such as health, fashion, and social movements.
Technological
• The technological aspect of PEST analysis incorporates factors such as
advancements and developments that change the way a business operates and
the ways in which people live their lives (i.e. advent of the internet).
Broad Factors Analysis
(PEST Analysis)

24. SWOT Analysis
SWOT Analysis
stands for Strengths,
Weaknesses,
Opportunities, and
Threats.
It can be a great
way of summarizing
various industry
analysis methods
and determining
their implications for
the business in
question.

25. SWOT Analysis
Internal
• Internal factors that already exist and have contributed to
the current position and may continue to exist.
External
• External factors which are contingent events. Assess their
importance based on the likelihood of them happening
and their impact on the company. Also, consider whether
management has the intention and ability to take
advantage of the opportunity/avoid the threat.