The document provides an overview of industry and competitor analysis. It discusses analyzing industries to understand environmental trends, business trends, and key questions to assess industry attractiveness. It also covers analyzing competitors to identify direct, indirect, and future competitors. Tools discussed include Porter's Five Forces model to evaluate competitive forces in an industry, and a competitive analysis grid to organize information about competitors. The goal of industry and competitor analysis is to help firms understand opportunities and position themselves strategically within their industry.

1. Jon C. Stuart
CEO, Big Guy,
Head Honcho,
Benevolent &
All Knowing
Exalted Ruler
theNMB Inc
If we don’t
know we
make it up.
What do You Know
About Your Competition
Industry and
Competitor
Analysis
Bruce R. Barringer
R. Duane Ireland
Chapter
5
What is Industry Analysis?
• Industry
• A group of firms producing a
similar product or service, such as
airlines, fitness drinks, furniture, or
electronic games.
• Industry Analysis
• Business research that focuses on
the potential of an industry.
• In-depth detail understanding

2. • Economic
• Social
• Technological
• Political
• Legal &
Regulatory
• International
• Profit margins
• Innovation
accelerating
or waning
• Input costs
rising or
falling?
Environmental
Trends
Business
Trends
Study Environmental
& Business Trends

3. Is it an
accessible
Industry that
is realistic
for a new
venture to
enter?
Question 1
Are there
potential
positions in the
industry that
avoid some of
the negative
attributes of the
industry as a
whole?
Question 3
Does it have
markets that
are ripe for
innovation
and are there
underserved
market(s)?
Question 2
Key Questions
•Threat of new entrants
•Rivalry among existing
firms
•Bargaining power of
buyers
•Other related factors
Industry Level Factors
• Assets
• Products
• Culture
• Employee teamwork
• Reputation
• Other resource
Firm Level Factors
How Industry &
Firm-Level Factors Affect Performance
In various studies, researchers have found
that from 8% to 30% of the variation in firm
profitability is directly attributable to the
industry in which a firm competes.
http://www.census.gov/eos/www/naics/
Industry Information?

4. Study
Environmental
& Business
Trends
Michael
Porter’s Five
Forces
Competitive
Model
Techniques Available
to Assess Industry Attractiveness

5. Threat of
Substitutes
Threat
of New
Entrants
Bargaining
Power
of Purchasers
Bargaining
Power
of Suppliers
Porter’s Five Forces Competitive Model
Rivalry
Among
Existing
Competitors
Five Competitive
Forces Model
• Framework for understanding the structure
of an industry.
• Forces that determine industry profitability.
• Helps determine the average ROI for the
firms in an industry.
• Help determine what forces impacts ROI by
applying pressure on industry profitability?
• Try to position their firm in a way that
avoids or diminishes these forces
Rivalry Among Existing Firms
• In most industries, the major
determinant of industry profitability
is the level of competition among
existing firms.
• Some industries are fiercely
competitive, to the point where
prices are pushed below the level of
costs, and industry-wide losses
occur.
• In other industries, competition is
much less intense and price
competition is subdued.

6. Factors that
determine the
competitive intensity
Rivalry
Among
Existing
Competitors
Degree of difference between products HighLow
Growth rate of an industry HighLow
Level of fixed costs HighLow
Number & balance of competitors ManyFew
• Industry are highly
profitable, the industry
becomes a magnet to new
entrants.
• Desire to stop this, the
increase competition, &
average industry
profitability decline.
• Seek to keep the number
of new entrants low by
erecting barriers to entry.
Threat
of New
Entrants
Threat
of New
Entrants
A condition
that creates a
disincentive
for a new firm
to enter an
industry.
Seek to erect
barriers to entry

7. Nontraditional/Other Barriers to Entry
Access to Capital
Assembling a World
Class Management
Team
Passion of
Management &
Employees for
Success
Economies
of Scale
Capital
requirements
Government
and legal
barriers
Access to
distribution
channels
Cost
advantages
Product
Differentation
What are Barrier to Entry?
Evaluating theThreat of New Entrants
Factors that have an impact on the ability
of suppliers to exert pressure on buyers
Attractiveness
of substitutes
Threat of
forward
integration
Supplier
concentration
Switching
costs
Bargaining
Power
of Suppliers

8. Bargaining Power of Suppliers
• Suppress the profitability of the industries
to which they sell by raising prices or
reducing the quality of the components
they provide.
• Reduces the quality of the components it
supplies, the quality of the finished
product will suffer, and the manufacturer
will eventually have to lower its price.
• When they are powerful relative to the
firms in the industry to which they sell,
industry profitability can suffer.
Degree of
standardization of
supplier’s products
Threat of
backward
integration
Buyer group
concentration
Buyer’s
costs
Bargaining
Power
of Purchasers
Buyers demanding price
concessions or increases in quality.
Bargaining Power of Buyers
• Suppress the profitability of the industries
from which they purchase by demanding
price concessions or increases in quality.
• Automobile industry is dominated by a
handful of large companies that buy
products from thousands of suppliers in
different industries.
• Allows the automakers to suppress the
profitability of the industries from which
they buy by demanding price reductions.

9. Five Forces Model
Assessment Tool
• Assess the attractiveness of an industry
by determining the level of threat to
industry profitability for each of the
forces.
• Threats to industry profitability are high,
the firm may want to reconsider entering
the industry
• Think carefully about the position it
would occupy.
Assessment Tool
Industry Attractiveness Using
the Five Forces Model
Industry
Assessment Model Tool
• Help determine whether firm
should enter an industry is by
using the model to answer
several key questions.
• The questions and decision tree
help a firm project the potential
success of a new venture in a
particular industry.

10. To any of
these
questions
increases the
likelihood of
new venture’s
success
Yes
No
Are their areas in
which we can avoid
or diminish the
factors that suppress
industry profitability?
Is there a unique
position in the
industry that avoids
or diminishes the
factors that suppress
industry profitability?
Is there a superior
business model that
industry incumbents
would find hard to
duplicate?
Reconsider
new venture
No
Is the
industry a
realistic place
for a new
venture
Industry Assessment Modeling Tool
Yes
To all three
questions
indicates
reconsidering
the new
venture.
Industry Opportunity
Emerging First-mover advantage
Fragmented Consolidation
Mature Process innovation and after-sale
service innovation
Declining
Leadership, establishing a niche
market, & pursuing a cost reduction
strategy
Global Multi-domestic and global strategies
Industry Types & Opportunities
Competitor Analysis
• Detailed analysis of a firm’s
competition.
• Understand the positions of its
major competitors
• Understand the opportunities that
are available.
• Competitive Analysis Grid -tool
for organizing the competitive
information

11. Business
offering the
same or
similar
products/
services
Businesses
that do not
currently offer
competitive
products/
service but
could in the
future.
Businesses
that offer
products/
services that
are
considered
close
substitutes
Direct
Competitors
Future
Competitors
Indirect
Competitors
Identifying Competitors
Competitive Intelligence
• Need to understand
competitors:
• Strategies
• Behaviors
• Continual process.
• Collect professional &
ethical manner.
• Attend conferences and trade shows.
• Purchase competitors’ products.
• Study competitors’ Web sites.
• Set up Google andYahoo! e-mail alerts.
• Read industry-related books, magazines,
and Web sites.
• Talk to customers about what motivated
them to buy your product as opposed to
your competitor’s product
Ethical ways to obtain
information about competitors
Sources of Competitive Intelligence

12. • See how it stacks up
against its competitors.
• Provide ideas for markets
to pursue.
• Identify its primary sources
of competitive advantage.
Tool for organizing the
information a firm collects
about its competitors.
Competitive Analysis Grid
Competitive Analysis
Matrix For Your Biz/Product
Your Biz Comp A Comp B Comp C
Primary
Markets Local Retail
Local
Competitive
Nursery
Organic
Gardener
Internet Shopping
Gardener
Channel
Position
producer/retailer
30/70
produce/
retailer 30/70
Reseller
high end retail
consumer
Reseller
eCommerce
consumer
Key Sales
Data
$1-30M sales;
$750-$800,000
sales;
$350-$400,000 $2.5M- $3.0 M
Product Lines
Broad Product
Line Mix
Broad Product
Line Mix
Narrow Product
Line Mix
Broad and Deep
Product Line Mix
Buying Habits
trust of product;
personal
connection
trust of product;
price sensitive
shopper
local
Organic Grown/
Not Price
Sensitive
reputation;
Internet savvy
delivery
Market Size
and Share
200,000
share 5%
200,000
share 2-4%
20,000
share 5%
2M - 5M
share 1/5%
Competitive Comparison
YOUR BIZ Comp. A Comp. B Comp. C
Benefits
Features Base 3 2 3
Pricing Base 4 3 3
Sales Size/
Mix Base 2 3 5
Market
Strategy Base 3 5 4
Business
Model Base 3 3 4
This is a relative comparison from your perspective of
how your target CUSTOMERS might compare your
business to your competition
1-Much Worse 2-Worse 3-Equal 4-Better 5-Much Better

13. Competitive Analysis
Grid for Element Bars