INDUSTRY ANALYSIS One of the major competences that strategic managers need is the ability to define their business, conduct an effective industry analysis, and identify the "key success factors" for firms competing in their industry. This brief note discusses the steps most often found in a solid analysis of an industry. A.DEFINE THE INDUSTRY. The boundaries for an industry analysis are determined by the markets and products that best describe the domain of the industry. Once you fully understand the business segment that is to be analyzed, you are in a position to identify the capabilities required to participate successfully in that industry, and the competitors that are likewise able to effectively target the same business segments. These elements set the parameters for understanding and analyzing the industry. As industries converge and shift, business definitions become more difficult. In virtually all industries, consumers are becoming more demanding for customized products and services. These demands encourage the development of innovations, products, and competitors. B. DESCRIBE THE INDUSTRY STRUCTURE. For each product-market segment, an industry analysis will describe the "five-forces" of competition. The five forces discussed briefly below predict the long run profitability of an industry and are an important first step in analyzing the industry once it has been identified. 1. Bargaining Power of Buyers: This primary force comes from the customer segments that make up the markets in which firms compete. The size and importance of customers influences their power to negotiate prices and terms that reduce the overall profitability of the industry. The sizes and types of buyers present in an industry determine their potential influence on product development and influence the level of competition to be found in the industry. 2. Intensity of Rivalry: A second force comes from the competitors and the ways they compete. Each competitor offers a set of products and services that attempts to provide higher value to the product-market segments they address. Strategies can be designed to provide combinations of higher performance, more fashion and features, higher quality, or lower price. Increased rivalry always leads to price or service competition that reduces the profitability of the industry. 3. Bargaining Power of Suppliers: A third influence on the profitability of an industry comes from its suppliers. In some industries, suppliers might control critical inputs that can affect all firms’ ability to compete. Analogous to Bargaining power of Buyers, whenever suppliers are large or few, their leverage tends to be high. Limited access to critical factors of production, equipment, materials, or components can increase prices and accordingly limit profit potential. 4. Threat of New Entrants; a fourth force represents the ease with which a new competitor can compete for exi ...

1. INDUSTRY ANALYSIS
One of the major competences that strategic managers need is
the ability to define their business, conduct an effective
industry analysis,
and identify the "key success factors" for firms competing in
their industry. This brief note discusses the steps most often
found in a
solid analysis of an industry.
A.DEFINE THE INDUSTRY.
The boundaries for an industry analysis are determined by the
markets and products that best describe the domain of the
industry. Once
you fully understand the business segment that is to be
analyzed, you are in a position to identify the capabilities
required to participate
successfully in that industry, and the competitors that are
likewise able to effectively target the same business segments.
These
elements set the parameters for understanding and analyzing the
industry. As industries converge and shift, business definitions
become

2. more difficult. In virtually all industries, consumers are
becoming more demanding for customized products and
services. These
demands encourage the development of innovations, products,
and competitors.
B. DESCRIBE THE INDUSTRY STRUCTURE.
For each product-market segment, an industry analysis will
describe the "five-forces" of competition. The five forces
discussed briefly
below predict the long run profitability of an industry and are
an important first step in analyzing the industry once it has been
identified.
1. Bargaining Power of Buyers: This primary force comes from
the customer segments that make up the markets in which firms
compete. The size and importance of customers influences their
power to negotiate prices and terms that reduce the overall
profitability of the industry. The sizes and types of buyers
present in an industry determine their potential influence on
product
development and influence the level of competition to be found
in the industry.
2. Intensity of Rivalry: A second force comes from the
competitors and the ways they compete. Each competitor offers

3. a set of
products and services that attempts to provide higher value to
the product-market segments they address. Strategies can be
designed to provide combinations of higher performance, more
fashion and features, higher quality, or lower price. Increased
rivalry always leads to price or service competition that reduces
the profitability of the industry.
3. Bargaining Power of Suppliers: A third influence on the
profitability of an industry comes from its suppliers. In some
industries,
suppliers might control critical inputs that can affect all firms’
ability to compete. Analogous to Bargaining power of Buyers,
whenever suppliers are large or few, their leverage tends to be
high. Limited access to critical factors of production,
equipment,
materials, or components can increase prices and accordingly
limit profit potential.
4. Threat of New Entrants; a fourth force represents the ease
with which a new competitor can compete for existing business
in the
Industry. When entry is relatively easy, profits fall rapidly as
many competitors enter. Barriers to such entry often include
heavy investments in capital, equipment, and market
development. Such barriers tend to bolster profits. Barriers to
change in
industry structure, either from new competitors entering the

4. industry or current competitors exiting the industry tends to
stabilize prices and thus, profits.
5. Availability of Substitutes: The fifth force represents the
potential for change in product-market structure of an industry
through
the substitution of products or services with alternative
approaches to satisfying the customers’ needs. This can readily
be seen
in the case of cell phones displacing traditional telephone
services in satisfying the needs of consumers. The identification
of
potential substitutes and the characteristics that would cause
rapid substitution will form a part of a careful industry analysis.
Price too is often a driver for substitutes, such as the use of
plastics for metals in cars and in plumbing supplies. Today, the
Internet is becoming a substitute for mail service and,
eventually, telephone service.
6. Prediction of the long run profitability of the industry
C. IDENTIFY KEY SUCCESS FACTORS.
Key Success Factors (KSFs) are the benchmarks that any firm in
the industry must possess to stay in the game. Identification of
KSFs

5. should come at the conclusion of your industry analysis. Please
be sure to note that not all factors involved in competition in an
industry
are success factors. You should consider using the KSFs you
identify as a key topic in your presentation. This section should
be at the
end of the industry analysis.
An industry's key success factors (KSFs) are those things that
most affect industry members' ability to prosper in the
marketplace-the
particular strategy elements, product attributes, resources,
competencies, competitive capabilities, and business outcomes
that spell the
difference between profit and loss and, ultimately, between
competitive success or failure. The answers to three questions
help identify
an industry's key success factors:
• On what basis do customers choose between the competing
brands of sellers? What product attributes are crucial?
• What resources and competitive capabilities does a seller need
to have to be competitively successful?
• What does it take for sellers to achieve a sustainable
competitive advantage?
In the brewing industry for example, the KSFs for any major

6. player include full utilization of brewing capacity, a strong
network of
wholesale distributors (to gain access to as many retail outlets
as possible); and clever advertising (to induce beer drinkers to
buy a
particular brand and thereby pull beer sales through the
established wholesale/retail channels).
In apparel manufacturing, the KSFs are appealing designs and
color combinations (to create buyer interest) and low-cost
manufacturing efficiency (to permit attractive retail pricing and
ample profit margins).
Misdiagnosing the industry factors critical to long-term
competitive success greatly raises the risk of a misdirected
strategy. In
contrast, a company with perceptive understanding of industry
KSFs can gain sustainable competitive advantage by training its
strategy
on industry KSFs and devoting its energies to being
distinctively better than rivals on one or more of these factors.
Key success factors vary from industry to industry and even
from time to time within the same industry as driving forces and
competitive
conditions change. Only rarely does an industry have more than
three or four key success factors at anyone time. Moreover,
even among

7. these three or four, one or two usually outrank the others in
importance. To compile a list of every factor that matters even
a little bit
defeats the purpose of concentrating management attention on
the factors truly critical to long-term competitive success.
These factors encompass (1) customer requirements, (2)
competitive factors that must be met, (3) regulations/industry
standards in the
business, (4) the resource requirements to implement
competitive strategy, and other (5) technical requirements to
build competitive
position.
1. Customers are looking for products that provide satisfactory
value for the price they pay. Each buyer segment has
requirements
that shape its key success factors. These requirements can
include standards for performance, durability, and ease of use.
Other
requirements might relate to special features, fashion, or rapid
availability.
2. Competing firms often use similar product-market strategies.
Competition might be based on price, quality, or delivery.
Depending on its strategic focus, each firm must develop a set
of skills (competences) that allow it to perform better than their
competitors on some competitive dimension.

8. 3. Industry regulations or standards often prescribe the
minimum requirements for participation in a competitive arena.
Government
regulations often address issues related to the environment or
consumers. Industry standards often determine technical
compatibility or process performance. Such standards can be
like the Industry Standards Organization (ISO), or become ad
hoc
standards set by leading competitors, such as Intel and
Microsoft.
4. Resource requirements are becoming increasingly critical.
The costs of doing business are higher as markets become
global and
economies of scale become critical for research and
development, manufacturing, and marketing. Minimum
investments to
achieve minimum efficient scale can now exceed $1 billion for
facilities in semiconductors, papermaking, and steel production.
In certain high technology areas, human resources are becoming
critical. In information technology for example, shortages of
qualified personnel are forcing firms to outsource many of their
activities.
5. Technical requirements too, are key to today's competitive
environment. Without access certain technologies, firms are not
able

9. to participate in many industries. This is especially important
for suppliers for large firms. Some examples are component
suppliers for electronics or automobiles. As firms demand more
of their suppliers, suppliers must increasingly add research and
development capabilities to remain competitive.
Company 1Company #1Income StatementBalance SheetAll
numbers in thousandsAll numbers in
thousandsRevenue20182017Period Ending20182017Total
Revenue14,134,73212,866,757Current AssetsCost of
Revenue9,510,2388,668,505Cash And Cash
Equivalents1,290,2941,111,599Gross
Profit4,624,4944,198,252Short Term Investments512-Operating
ExpensesNet Receivables87,86875,154Selling General and
Administrative2,576,0982,395,608Inventory1,641,7351,512,886
Total Operating Expenses12,086,33611,064,113Other Current
Assets11,84713,642Operating Income or
Loss2,048,3961,802,644Total Current
Assets3,151,1572,813,049Income from Continuing
OperationsLong Term Investments7121,288Total Other
Income/Expenses Net-7,676-16,488Property Plant and
Equipment2,382,4642,328,048Earnings Before Interest and
Taxes2,048,3961,802,644Other Assets187,718166,966Interest
Expense-18,847-19,569Deferred Long Term Asset Charges--
Income Before Tax2,040,7201,786,156Total
Assets5,722,0515,309,351Income Tax
Expense677,967668,502Current LiabilitiesNet
Income1,362,7531,117,654Accounts
Payable1,059,8441,021,735Short/Current Long Term
Debt84,973-Other Current Liabilities9,90224,559Total Current
Liabilities1,926,4021,752,506Long Term
Debt311,994396,493Other Liabilities434,347412,335Total
Liabilities2,672,7432,561,334Stockholders' EquityPreferred

10. Stock--Common Stock3,7963,919Retained
Earnings2,071,4001,801,138Treasury Stock-318,252-
272,755Capital Surplus1,292,3911,215,806Total Stockholder
Equity3,049,3082,748,017Net Tangible
Assets3,049,3082,748,017
Company 2Company #2Income StatementBalance SheetAll
numbers in thousandsAll numbers in
thousandsRevenue20182017Period Ending20182017Total
Revenue38,972,93435,864,664Current AssetsCost of
Revenue27,831,17725,502,167Cash And Cash
Equivalents3,030,2002,758,477Gross
Profit11,141,75710,362,497Short Term Investments-
506,165Operating ExpensesNet
Receivables860,000327,166Selling General and
Administrative6,923,5646,375,071Inventory4,579,0004,187,243
Total Operating Expenses34,754,74131,877,238Other Current
Assets-12,217Operating Income or
Loss4,218,1933,987,426Total Current
Assets8,469,2008,485,727Income from Continuing
OperationsLong Term Investments--Total Other
Income/Expenses Net-44,982-130,838Property Plant and
Equipment5,255,2005,006,053Earnings Before Interest and
Taxes4,218,1933,987,426Goodwill97,600100,069Interest
Expense-8,860-64,295Intangible Assets-144,900Income Before
Tax4,173,2113,856,588Other Assets504,000321,266Income Tax
Expense1,113,4131,248,640Deferred Long Term Asset Charges-
6,558Net Income3,059,7982,607,948Total
Assets14,326,00014,058,015Current LiabilitiesAccounts
Payable2,644,1002,488,373Short/Current Long Term Debt--
Other Current Liabilities-1,429,136Total Current
Liabilities5,531,3005,125,537Long Term
Debt2,233,6002,230,607Other
Liabilities1,512,5001,331,645Total
Liabilities9,277,4008,909,706Stockholders' EquityPreferred
Stock--Common Stock5,048,600628,009Retained Earnings-
4,962,159Treasury Stock--441,859Capital Surplus--Other

11. Stockholder Equity--441,859Total Stockholder
Equity5,048,6005,148,309Net Tangible
Assets4,951,0004,903,340
IS Vertical AnalysisIncome Statement Vertical
AnalysisCOMPANY 1COMPANY
220182017201820172018201720182017RevenueTotal Revenue
Cost of Revenue Gross Profit Operating ExpensesSelling
General and Administrative Total Operating Expenses Operating
Income or Loss Income from Continuing Operations Total Other
Income/Expenses Net Earnings Before Interest and Taxes
Interest Expense Income Before Tax Income Tax Expense Net
Income
IS Horizontal AnalysisIncome Statement Horizontal
AnalysisCOMPANY 1COMPANY 220182017$ CHANGE %
CHANGE 20182017$ CHANGE % CHANGE RevenueTotal
RevenueCost of RevenueGross ProfitOperating ExpensesSelling
General and AdministrativeTotal Operating ExpensesOperating
Income or LossIncome from Continuing OperationsTotal Other
Income/Expenses NetEarnings Before Interest and TaxesInterest
ExpenseIncome Before TaxIncome Tax ExpenseNet Income
BS Vertical AnalysisBalance Sheet Vertical AnalysisCompany
#1Company #2Period
Ending20182017201820172018201720182017Current
AssetsCash And Cash EquivalentsShort Term InvestmentsNet
ReceivablesInventoryOther Current AssetsTotal Current
AssetsLong Term InvestmentsProperty Plant and
EquipmentGoodwillIntangible AssetsOther AssetsDeferred Long
Term Asset ChargesTotal Assets (BASIS)Current
LiabilitiesAccounts PayableShort/Current Long Term DebtOther
Current LiabilitiesTotal Current LiabilitiesLong Term
DebtOther LiabilitiesTotal Liabilities (BASIS)Stockholders'
EquityPreferred StockCommon StockRetained EarningsTreasury
StockCapital SurplusOther Stockholder EquityTotal Stockholder
Equity (BASIS)Net Tangible Assets
BS Horizontal AnalysisBalance Sheet Horizontal
AnalysisCOMPANY 1COMPANY 2Period Ending20182017$

12. CHANGE % CHANGE 20182017$ CHANGE % CHANGE
Current AssetsCash And Cash EquivalentsShort Term
InvestmentsNet ReceivablesInventoryOther Current AssetsTotal
Current AssetsLong Term InvestmentsProperty Plant and
EquipmentGoodwillIntangible AssetsOther AssetsDeferred Long
Term Asset ChargesTotal AssetsCurrent LiabilitiesAccounts
PayableShort/Current Long Term DebtOther Current
LiabilitiesTotal Current LiabilitiesLong Term DebtOther
LiabilitiesTotal LiabilitiesStockholders' EquityPreferred
StockCommon StockRetained EarningsTreasury StockCapital
SurplusOther Stockholder EquityTotal Stockholder EquityNet
Tangible Assets
Company 1Company #1Income StatementBalance SheetAll
numbers in thousandsAll numbers in
thousandsRevenue20182017Period Ending20182017Total
Revenue14,134,73212,866,757Current AssetsCost of
Revenue9,510,2388,668,505Cash And Cash
Equivalents1,290,2941,111,599Gross
Profit4,624,4944,198,252Short Term Investments512-Operating
ExpensesNet Receivables87,86875,154Selling General and
Administrative2,576,0982,395,608Inventory1,641,7351,512,886
Total Operating Expenses12,086,33611,064,113Other Current
Assets11,84713,642Operating Income or
Loss2,048,3961,802,644Total Current
Assets3,151,1572,813,049Income from Continuing
OperationsLong Term Investments7121,288Total Other
Income/Expenses Net-7,676-16,488Property Plant and
Equipment2,382,4642,328,048Earnings Before Interest and
Taxes2,048,3961,802,644Other Assets187,718166,966Interest
Expense-18,847-19,569Deferred Long Term Asset Charges--
Income Before Tax2,040,7201,786,156Total
Assets5,722,0515,309,351Income Tax
Expense677,967668,502Current LiabilitiesNet
Income1,362,7531,117,654Accounts
Payable1,059,8441,021,735Short/Current Long Term

13. Debt84,973-Other Current Liabilities9,90224,559Total Current
Liabilities1,926,4021,752,506Long Term
Debt311,994396,493Other Liabilities434,347412,335Total
Liabilities2,672,7432,561,334Stockholders' EquityPreferred
Stock--Common Stock3,7963,919Retained
Earnings2,071,4001,801,138Treasury Stock-318,252-
272,755Capital Surplus1,292,3911,215,806Total Stockholder
Equity3,049,3082,748,017Net Tangible
Assets3,049,3082,748,017
Company 2Company #2Income StatementBalance SheetAll
numbers in thousandsAll numbers in
thousandsRevenue20182017Period Ending20182017Total
Revenue38,972,93435,864,664Current AssetsCost of
Revenue27,831,17725,502,167Cash And Cash
Equivalents3,030,2002,758,477Gross
Profit11,141,75710,362,497Short Term Investments-
506,165Operating ExpensesNet
Receivables860,000327,166Selling General and
Administrative6,923,5646,375,071Inventory4,579,0004,187,243
Total Operating Expenses34,754,74131,877,238Other Current
Assets-12,217Operating Income or
Loss4,218,1933,987,426Total Current
Assets8,469,2008,485,727Income from Continuing
OperationsLong Term Investments--Total Other
Income/Expenses Net-44,982-130,838Property Plant and
Equipment5,255,2005,006,053Earnings Before Interest and
Taxes4,218,1933,987,426Goodwill97,600100,069Interest
Expense-8,860-64,295Intangible Assets-144,900Income Before
Tax4,173,2113,856,588Other Assets504,000321,266Income Tax
Expense1,113,4131,248,640Deferred Long Term Asset Charges-
6,558Net Income3,059,7982,607,948Total
Assets14,326,00014,058,015Current LiabilitiesAccounts
Payable2,644,1002,488,373Short/Current Long Term Debt--
Other Current Liabilities-1,429,136Total Current
Liabilities5,531,3005,125,537Long Term
Debt2,233,6002,230,607Other

14. Liabilities1,512,5001,331,645Total
Liabilities9,277,4008,909,706Stockholders' EquityPreferred
Stock--Common Stock5,048,600628,009Retained Earnings-
4,962,159Treasury Stock--441,859Capital Surplus--Other
Stockholder Equity--441,859Total Stockholder
Equity5,048,6005,148,309Net Tangible
Assets4,951,0004,903,340
Deliverable 3 - Evaluating Performance and
BenchmarkingCompetency
Appraise the financial health and performance of a
company.Scenario
The Corporate Director of Acquisitions has approached you to
assist with preparing financial data to help identify a potential
new acquisition for your company. They have narrowed down
the target to two companies and need your help in selecting the
best one. You agree to help and think that the best approach
would be to take the two companies and prepare a vertical and
horizontal analysis of both the income statement and balance
sheets for two years of data.Instructions
You discuss your plan with the director, and you both decide
that you should create an Excel file containing four tabs,
labeling the four tabs as follows:
· Tab1: “Income statement vertical analysis”
· Tab 2: “Income statement horizontal”
· Tab 3: “Balance sheet vertical analysis”
· Tab 4: “Balance sheet horizontal analysis”
In addition, you both decide it best to also create a Word
document with your assessment of each company’s performance
and support which company is the better acquisition target.
Financial Statements
Excel spread sheet will be attached

15. University of Houston - Victoria
School of Business Administration
Strategic MBA Program Assessment Rubric
Learning Goal 2: MBA students will be able to analyze changes
in the business environment to develop strategies that respond
to
emerging opportunities and threat.
Assessed in: MGMT 6359 - Seminar in Strategic Management
Traits Tool Used for
Assessment
1: Below Expectations 2: Meets Expectations 3: Exceeds
Expectations Rating
1. Analysis of external
environmental forces
and driving forces
causing industry
change.
Midterm
Project
Case does not demonstrate
clear understanding of the
driving forces causing the
industry to change.
All the driving forces are
identified and their linkages
to change are presented.
Complete analysis of the

16. driving forces that will cause
the industry to change.
2. Analysis of the
economic
characteristics of the
industry.
Midterm
Project
The section communicates a
superficial grasp of the
economics of the industry.
The economics of the
industry are identified, but
may not be clearly described
or depth may be lacking.
Complete description of the
economic features of the
industry demonstrating a solid
grasp of the context.
3. A profitability
analysis of the
industry (five-forces).
Midterm
Project
Superficial application of the
model without exposition of

17. its nuances. The section fails
to demonstrate mastery of
the tool.
Complete analysis of the
competitive nature of the
industry using the five-forces
model. Implications may not
be complete.
Complete analysis of the
competitive nature of the
industry using the five-forces
model. Implications for
industry profits are clearly
communicated.
4. Analysis of
potential strategic
moves of competitors.
Midterm
Project
The section communicates a
superficial grasp of the likely
future actions of competitors
or provides few insights into
a single or small group of
competitor(s).
A prediction of what some
relevant competitors are
likely to do in the future is
presented. Links to their

18. objectives, capabilities,
intentions and beliefs about
the industry may be scant.
A solid prediction of what all
relevant competitors are likely
to do in the future based on
their objectives, capabilities,
intentions and beliefs about
the industry.
Updated: 10/28/2009 By RS Reviewed: 10/28/2009 By RS
University of Houston - Victoria
School of Business Administration
Strategic MBA Program Assessment Rubric
Learning Goal 4: MBA students will be able to apply cross-
functional approaches to organizational issues.
Assessed in: MGMT 6359 - Seminar in Strategic Management
Traits Tool Used for
Assessment
1: Below
Expectations
2: Meets Expectations 3: Exceeds Expectations Rating
1. Evaluation of

19. the firm's
financial
performance.
Midterm
Project
The financial analysis may
be incomplete, missing
absolute or relative
measures of the firm's
performance. May take
only a historical
perspective.
Performs financial analysis
that measures the firm's key
financial statements from a
limited point of view. May
take a limited perspective or
not clearly reflect all the
implications.
Performs a complete financial
analysis that includes the
implications of absolute and relative
measures of the firm's financial
statements from a historical and
prospective point of view.
2. An evaluation
of the firm's
prices and costs
using value chain
approach.

20. Midterm
Project
Demonstrates either an
incomplete or superficial
understanding of either
the technique or the value
proposition of the firm.
Demonstrates adequate
understanding of both
technique and the value
proposition of the firm.
Identified major activities
undertaken to deliver value to
the customer. May omit one or
more minor components of the
factors constituting an
excellent analytical product.
Explains, decomposes, and evaluates
the value-creating activities of the
firm, identifying all major activities
undertaken to deliver value to the
customer and considering what
might be done to add the greatest
value and whether changes are
advisable.
3. A SWOT
analysis.
Midterm
Project

21. Superficial or incomplete
narrative description of
SWOTs of the situation.
May be missing supporting
linkages or overlook key
factors.
The SWOTs may be properly
identified with limited linkages
to context. May overlook
minor dimensions.
Accurately and clearly explains,
decomposes, and evaluates the
quality of the SWOTs in terms that
are applicable to the situation.
Absolute and relative measures are
included.
4. Description of
strategic issues
based on other
analyses.
Midterm
Project
The firm's strategic issues
are poorly defined or
some key aspects may be
missing. The description
may be poorly written.
The firm's strategic issues are

22. adequately defined although
minor aspects may be missing.
The description is adequately
written.
The firm's strategic issues are well-
defined and concise; all important
aspects are included. The
description is very well written.
Updated: Fall 2009 By RS Reviewed” Fall 2009 By RS
Strategic Issues
Strategic Issues1 Definition: Strategic issues are fundamental
policy questions or critical challenges that
affect an organization's:
• mandates, mission and values
• product or service level and mix
• clients, users, or payers, or
• cost, financing, organization or management.

23. 1
John M. Bryson, Strategic Planning for Public and Nonprofit
Organizations: A Guide to Strengthening and Sustaining
Organizational Achievement, rev. ed. (San Francisco: Jossey-
Bass, 1995), 30
Statement of issues /problem statements
You need to identify two issues/problems statements based on
the various analysis you have done in
your individual project as well as the strategic fit analysis
above. There could be several issues but you
need to identify the two most important issues that confront the
company as it heads into the future.
For each issue identified you need to explain how and why it is
the most significant issues facing the
company. To provide such rationale, you need to state explicitly
the analysis that is the basis of
identification of issues.
Evaluation Criteria: A statement of a strategic issue should
contain these elements:
The issue should be described succinctly, preferably in a single
paragraph, and it should be framed as a
question the organization can do something about. The factors
that make the issue a fundamental
challenge should be listed. In particular, what in terms of the
organization's mandates, mission, values,
internal strengths and weaknesses, and external opportunities
and threats, make this a strategic issue?
The consequences of failing to address the issue should be
identified, so that the organization will know

24. what kind of issues it faces. There are three kinds:
• those for which no action is required at present, but which
must be monitored
• those that are coming up on the horizon and are likely to
require some action in the future and
perhaps some action now
• those that require an immediate response
Driving Forces and Key Success Factors
Driving Forces (or Change Drivers)
Driving forces are forces outside the firm (external factors) that
trigger the change of strategy in an organization. Industry
conditions change because important forces (the most dominant
ones that have the biggest influence on what kinds of changes
will take place in the industry’s structure and competitive
environment) are driving industry participants (competitors,
customers, or suppliers) to alter their actions. Thus the driving
forces in an industry are the major underlying causes of
changing industry and competitive conditions. Driving forces
analysis has two steps: identifying what the driving forces are
and assessing the impact they will have on the industry.
The Most Common Driving Forces
Many forces can affect an industry powerfully enough to qualify
as driving forces. Some are unique and specific to a particular
industry situation, but most drivers of change fall into one of
the following categories:
1. The Internet and new e-commerce opportunities and threats it
breeds in the industry;
2. Increasing globalization of the industry;
3. Changes in the long-run industry growth rate;
4. Changes in who buys the products and how they use it.

25. 5. Product innovation;
6. Technological change;
7. Market innovation;
8. Entry or exit of major firms;
9. Diffusion of technical know-how across more companies and
more countries;
10. Changes in cost and efficiency
11. Growing buyer for preferences for differentiated products
instead of a commodity product (or for a more standardized
product instead of strongly differentiated products);
12. Regulatory influences and government policy changes;
13. Changing societal concerns, attitudes, and lifestyles;
14. Reductions in uncertainty and business risk.
The link between driving forces and strategy
Sound analysis of an industry’s driving forces is a prerequisite
to sound strategy making. Without keen awareness of what
external factors will produce the biggest potential changes in
the company’s business over the next one to three years,
managers will be ill prepared to construct a strategy tightly
matched to emerging conditions. Similarly, if managers are
uncertain about the implications of each driving force or if their
views are incomplete or wrong, it’s difficult for them to craft a
strategy that is responsive to the driving forces and their
consequences for the industry. Therefore, driving forces is not
something to take lightly. The concept has practical strategy-
making value and is basic to the task of thinking strategically
about where the industry is headed and how to prepare for the
changes.
Key Success Factors
An industry's key success factors (KSFs) are those things that
most affect industry members' ability to prosper in the
marketplace-the particular strategy elements, product attributes,
resources, competencies, competitive capabilities, and business
outcomes that spell the difference between profit and loss and,
ultimately, between competitive success or failure. KSFs by
their very nature are so important that all firms in the industry

26. must pay close attention to them-they are the prerequisites for
industry success or, to put it another way, KSFs are the rules
that shape whether a company will be financially and
competitively successful. The answers to three questions help
identify an industry's key success factors:
On what basis do customers choose between the
competing brands of sellers? What product attributes are
crucial?
What resources and competitive capabilities does a
seller need to have to be competitively successful?
What does it take for sellers to achieve a sustainable
competitive advantage?
In the beer industry, the KSFs are full utilization of brewing
capacity (to keep manufacturing costs low), a strong network of
wholesale distributors (to gain access to as many retail outlets
as possible), and clever advertising (to induce beer drinkers to
buy a particular brand and thereby pull beer sales through the
established wholesale/retail channels). In apparel
manufacturing, the KSFs are appealing designs and color
combinations (to create buyer interest) and low-cost
manufacturing efficiency (to permit attractive retail pricing and
ample profit margins). In tin and aluminum cans, because the
cost of shipping empty cans is substantial, one of the keys is
having plants located close to end use customers so that the
plant's output can be marketed within economical shipping
distances (regional market share is far more crucial than
national share).
Determining the industry's key success factors, given prevailing
and anticipated industry and competitive conditions, is a top-
priority analytical consideration. At the very least, managers
need to understand the industry situation well enough to know
what is more important to competitive success and what is less
important. They need to know what kinds of resources are
competitively valuable. Misdiagnosing the industry factors

27. critical to long-term competitive success greatly raises the risk
of a misdirected strategy. In contrast, a company with
perceptive understanding of industry KSFs can gain sustainable
competitive advantage by training its strategy on industry KSFs
and devoting its energies to being distinctively better than
rivals on one or more of these factors. Indeed, companies that
stand out on a particular KSF enjoy a stronger market position
for their efforts - being distinctively better than rivals on one or
more key success factors presents a golden opportunity for
gaining competitive advantage. Hence, using the industry's
KSFs as cornerstones for the company's strategy and trying to
gain sustainable competitive advantage by excelling at one
particular KSF is a fruitful competitive strategy approach.
Key success factors vary from industry to industry and even
from time to time within the same industry as driving forces and
competitive conditions change. Only rarely does an industry
have more than three or four key success factors at anyone time.
And even among these three or four, one or two usually outrank
the others in importance. Managers, therefore, have to resist the
temptation to include factors that have only minor importance
on their list of key success factors-the purpose of identifying
KSFs is to make judgments about what things are more
important to competitive success and what things are less
important. To compile a list of every factor that matters even a
little bit defeats the purpose of concentrating management
attention on the factors truly critical to long-term competitive
success.
MGT 6359 Page 3
Seminar in Strategic Management
Strategic Management Case Analysis instructions
This part of your strategic management midterm assignment

28. begins within your team. Confer with your teammates to
combine your thoughts and analytical abilities to analyze the
assigned firm. Each response should be single spaced and
contained on a single page
Work together to answer the following questions. YOU MUST
RESPOND TO THE QUESTIONS AS AN INDIVIDUAL. Do
discuss your answers with one another but do not write the
answers together. After watching the video and gathering the
necessary information, talk about the data sources and how they
might be used to gain an understanding of the firm, its industry
and the issues it is confronting. This is not a situation in which
you can cut and paste. Read, discuss and digest the data. Then
work independently to formulate your individual response.
1. Describe the driving forces of the firm’s industry
2. Provide a complete description of the economic features of
the industry. Be brief.
3. Provide a complete analysis of the competitive nature of the
industry using the five-forces model. Be brief.
4. Provide a solid prediction of what relevant competitors are
likely to do in the future based on their objectives, capabilities,
intentions and beliefs about the industry. Be brief.
5. Provide a complete financial analysis that includes the
implications of absolute and relative measures of the firm's
financial statements from a historical and prospective point of
view. Be brief.
6. Provide an evaluation of the firm's prices and costs using
value chain approach.
7. Provide a SWOT analysis. Be brief.
8. Provide a description of strategic issues based on other
analyses. Be brief. The definition of a strategic issue is
provided in the document titled Issues Statement.
https://www.sysco.com/

29. 1. Use the space below to describe the driving forces of the
firm’s industry
2. Use the space below to provide a complete description of the
economic features of the industry.
3. Use the space below to provide a complete analysis of the
competitive nature of the industry using the five-forces model.
4. Use the space below to provide a solid prediction of what
relevant competitors are likely to do in the future based on their
objectives, capabilities, intentions and beliefs about the
industry
5. Use the space below to provide a complete financial analysis
that includes the implications of absolute and relative measures
of the firm's financial statements from a historical and
prospective point of view
6. Use the space below to provide an evaluation of the firm's
prices and costs using value chain approach.
7. Use the space below to provide a SWOT analysis
8. Use the space below to provide a description of strategic
issues based on other analyses. The definition of a strategic
issue is provided in the document titled Issues Statement.
Page 1 of 1