Presented by:IMRAN AHMAD

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Industrial Analysis
Industry analysis is a tool that facilitates a company's understanding of its position relative to other companies that produce similar products or services. Understanding the forces at work in the overall industry is an important component of effective strategic planning. Industry analysis enables small business owners to identify the threats and opportunities facing their businesses, and to focus their resources on developing unique capabilities that could lead to a competitive advantage.

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Competitive Strategy
It means Long-term action plan that is devised to help a company gain a competitive advantage over its rival. This type of strategy is often used in advertising campaigns by somehow discrediting the competition's product or service. Competitive strategies are essential to companies competing in markets that are heavily saturated with alternatives for consumers
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Industry Analysis : Porter’s Five Forces Model  Generic Strategies  EMERGING INDUSTRY  DECLINING INDUSTRIES Economic Reforms: Industrial Policy And Foreign Investment  Fiscal Stabilization  TRADE AND EXCHANGE RATE POLICY  Tax Reformations  Public sector policy  FINANCIAL AND BANKING SECTOR REFORMS 4 .

published work Porter provided an operational frame to conduct an assessment of an investment opportunity in an industry. the five fundamental forces that determine the long-term prosperity of an industry are: 5 .Porter’s Five Forces Model  In his well. According to Porter.

Porter’s Five Forces Model Threat of Threat of New New Entrants Entrants Bargaining Power of Suppliers Rivalry Among Competing Firms in Industry Bargaining Power of Buyers Threat of Substitute Products 6 .

(1) Rivalry  Good rivals. good rivals are satisfied with taking care of their groups and letting you take care of yours.  They are willing to following your firm’s lead.  In markets that are segmented into different groups of buyers. are rivals who are restrained in their competition. in terms of industry profits. 7 .

firms in a profitable industry remain profitable to the extent that barriers to entry keep out potential entrants.Psychological barriers 8 .  Barriers can be of two types: -Tangible barriers .(2) Potential Entrants & Barriers to Entry  Since industry profits encourage new firms to enter.

firms already in the business will react aggressively.Types of Entry Barriers Tangible barriers – anything that would put a potential entrant at a competitive disadvantage after entry. to force out the new entrant. 9 . 2. 1. and are even willing to incur short-term losses. Psychological barriers – beliefs on the part of potential entrants that. if they enter.

airlines may control landing slots at favorable times.) favored access to distribution channels: when existing firms can more easily reach the customers 10   .Tangible barriers – examples  financial resources: when firms are able to fight off new entrants by cutting prices as a result of having significant financial resources available favored access to particular resources: when existing firms control resources that are useful or essential to efficient operation (For example.

(3) Substitutes & Complements  This will limit the ability of the firm to raise prices and will consequently lower potential profits. For example. that a firm raises its prices. the profitability of the original firm would be limited.  Strong complements can increase the profitability of a good.  Suppose in addition. Both products are complementary to each other. 11 . If firms producing substitute goods would take advantage of the opportunity to actively entice away customers. vehicles and Fuel.

iron ore and other mineral based industries exercise a significant control on the buyer. industries where the supplier industry capacity is in excess of demand.  Similarly. the supplier industries like coal. 12 . In an underdeveloped supplier industry like the auto components industry in India. limestone.(4) Suppliers  Bargaining power of suppliers is another force which determines the industry structure by its strong influence on cost structure.  On the other hand. the bargaining power of the suppliers is limited. due to the socio-political reasons. the bargaining power of suppliers is restricted.

3. 2.Factors that tend to make a supplier more powerful: 1. The supplier has a franchise or patent on a particular item that is required by firms in the industry. 13 . The supplier industry is concentrated (there are very few firms) and the firms are not aggressive rivals with each other. The supplier is not restrained by any close substitutes for its product.

 The bargaining power of a consumer is real only when the consumer has a choice.(5)Bargaining power of Consumers  Typically. in a competitive environment. 14 . the industry players would like to influence the consumer decision to select the product and service he would like to use.

bargaining power  Price flexibility  Enhanced after-sales service  Introduction to new product features  Developing new market segment  Creating an exclusive product image 15 .Factors influencing consumers.

Generic Strategies Cost Differentiation Strategy A generic business strategy in which a business produces distinct products or services industrywide for a large market Ivory Intro. AA Differentiation 16 .

needfulfilling products or services for the speialized needs of a narrow range of customers in a market niche.Generic Strategies Focus Differentiation Strategy Cost Cray Is appropriate for business units that produce highly differentiated. Differentiation 17 .

organizational reputation and brand name 18 .Differentiation  Objective: Incorporate differentiating features that cause buyers to prefer firm’s product or service over the brands of rivals  Uniqueness through:  unique product features  quality of inputs  performance  after sale service  speed and flexibility  image .

19 .What does it take to be a differentiator?  Customers should be willing to pay a premium price  attributes that make the product unique should be valued by the customer  attributes should appeal to large percentage of the market (broad differentiator)  Company should be able to communicate its uniqueness  Costs of differentiation should not be too high.

 Competitors may imitate the differentiating feature. 20 .  Not understanding what buyers want or prefer and differentiating on the “wrong” things.Risks of Differentiation Strategy  Customers may choose to sacrifice some features.

 Focus strategies  Best-cost strategy 21 .

 Risks:  Cost focus . 22 . Focus:  Serving the needs of a special market segment better than anyone else  What does it take to pursue a focus strategy?  Ability to segment the market  Ability to assess and meet the needs of buyers in a particular segment better than other competitors.cost leadership  Differentiation focus .differentiation  The narrow market segment may become like the broader market thus eliminating the need for a focused approach.Generic Strategies III.

”  Process Innovation  A business unit’s activities that increase the efficiency of operations and distribution. 23 .Ways Organizations Can Simultaneously Differentiate Their Products and Lower Their Costs  Dedication to Quality  Quality is defined as “the totality of features and characteritics of a product or service that bear on its ability to satisfy needs or implied needs.  Product Innovation  A business unit’s activities that enhance the differentiation of its products and services.

24 .  Profits generated from pursuit of low costs allow investments in differentiating features.  High differentiation and low costs can be complementary:  Total Quality Management (TQM)  High levels of advertising and promotional expenditure (differentiation) --> increased market share --> economies of scale (low costs).Best-Cost Strategy  Hybrid strategy:  Firm pursues low cost and differentiation simultaneously.

then use cost advantage to under price comparable brands 25 .Best Cost Provider Strategies  Combine a strategic emphasis on low-cost with a strategic emphasis on differentiation   Make an upscale product at a lower cost Give customers more value for the money  Deliver superior value by meeting or exceeding buyer  expectations on product attributes and beating their price expectations Be the low-cost provider of a product with good-toexcellent product attributes.

How a Best-Cost Strategy Differs from a Low-Cost Strategy  Aim of a low-cost strategy--Achieve lower costs than any other competitor in the industry  Intent of a best-cost strategy--Make a more upscale product at lower costs than the makers of other brands with comparable features and attributes  A best-cost provider cannot be the industry’s absolute low-cost leader because of the added costs of incorporating the additional upscale features and attributes that the low-cost leader’s product doesn’t have 26 .

ExampleToyota’s Lexus Line  Designing high performance characteristics and upscale features  Transferring its low-cost capabilities to making premium quality cars  Underprice Mercedes and BMW  Established a new network of dealers 27 .

GROWING AT A RATE FASTER THAN THE OVERALL ECONOMY . SUCH INDUSTRIES USUALLY COME INTO BEING WHEN CUSTOMER NEED CHANGE NEW TECHNOLOGY REPLACE OLDER ONES OR WHEN SOCIO-ECONOMIC CONDITION EMERGE 28 .EMERGING INDUSTRY ENTIRELY NEW OR RESTRUCTURED INDUSTRIAL SECTORS.

 Courier is fast emerging as substitute to regular post cards  2 stroke engines are being replaced by 4 stroke engine  And insurance industry is expected to grow rapidly 29 .EXAMPLE OF EMERGING INDUSTRIES  Cell phone are replacing conventional telephone systems.

30 .STRATEGIC OPTIONS AVAILABLE TO NEW ENTRANCE ARE  How and what investment to commit to cultivate the market  How to sustain the market presence and  What entry barriers are important and how to achieve them etc.

DECLINING INDUSTRIES An industry where growth is either negative or is not growing at the broader rate of economic growth. or there may be emergent substitute because of technological innovation. 31 . There are many reasons for declining industries  Consumer demand may be steadily evaporating  The depletion of natural resources may be occurring.

where the supply is larger than demand.Declining industry are the resultant of the gap in the demand and supply situation. 32 .

THE STRATEGIC OBJECTIVE OF DECLINING INDUSTRIES  How to postpone the actual decline of the industries  How to retain the market share  How to improve the market share and  How to expand (in a limited sense) the market 33 .

POLICIES AT DECLINING PHASE  Enhancing the product features or repositioning the persuasion  Attempting to hold the existing customers and  If possible to find new customers 34 .

Economic Reforms 35 .

Industrial Policy And Foreign Investment Perhaps the most radical changes implemented in the reform package have been in the area of industrial policy. 36 . removing several barriers to entry existing in the earlier environment.

However. 37 . the Government has indicated that the general policy of reserving certain items for the small-scale sector will continue for social reasons. has been virtually abolished. which required Government permission for new investments as well as for substantial expansion of existing capacity.Abolition of Industrial Licensing The system of pervasive industrial licensing prevalent earlier.

Abolition of MRTP Act The parallel but separate controls over investment and expansion by large industrial houses through the Monopolies and Restrictive Trade Practices (MRTP) Act have also been eliminated. 38 .

Restructuring of Companies Act A comprehensive restructuring of the companies Act is also underway which aims at simplifying and modernizing this aspect of the legal framework governing the corporate sector. 39 .

Opening up of public sector industries The list of industries reserved for the public sector has been drastically pruned and many critical areas have been opened up to private sector participation.  Electric power generation  Petroleum exploration  Air transport  telecommunication 40 .

 The new policy is much more actively supportive of foreign investment in a wide range of activities. Permission is automatically granted for foreign equity investment up to 51% in a large list of industries.  Earlier. percentage of equity allowed to foreign investor was generally restricted to a maximum of 40%.Radical restructuring of foreign investment policy  The liberalization of controls over domestic investors has been accompanied by a radical restructuring of the policy towards foreign investment. except in certain high technology areas. 41 .

42 .  Further to 5.  The abolition of export subsidies in 1991-92 and reduction in fertilizer subsidy in 1992-93.9 % in 1991-92.7 % in 1992-93. to 5.4% of GDP in 1990-91.4 % of GDP in 1990-91.Fiscal Stabilization  The central government’s fiscal deficit had expand steadily during the 1980s and had reached a peck level of 8. P 1:-CONTAINMENT OF FISCAL DEFICIT: Substantial reduction in fiscal deficit from 8.  It is achieved by.

including expenditure on social and economic infrastructure.  The budget support to loss-making public sector units in the form of government loan to cover their loss would be phased out. 43 . P 2.  But there was a substantial slippage from this target and estimated to 7.INCREASE IN FISCAL DEFICIT: The process of fiscal deficit was to continue into 3rd year to be reduced to 4.6% of GDP in 1993-94. Restricting development expenditure.3% of GDP in 1993-94.

 Excise duty collections also fell short because industrial production did not recover as expected. This increase in fiscal deficit is due to.  Customs revenue were below the target because imports were much lower than expected. 44 .  A shortfall in tax revenues compared to budget targets.  Expenditure also exceeding targets.  Delays In adjusting food prices in the public distribution system led to higher food subsidies.  Expenditure on development were higher than projected.

TRADE AND EXCHANGE RATE POLICY 45 .

 Imports of manufactured goods have generally banned except limited goods through special import licenses. the scope for consumer goods imports has been liberalized by considerably expanding items which can be imported. production materials and capital goods. 46 .  Today.  In the 1994-95 policy. all raw materials. other inputs and consumer goods can be freely imported except small items.Liberalization of import controls  Earlier import control was applicable to imports of raw materials.

 The rate of customs duties on consumer goods was 90100% in 1991 and now been lowered to a range 20-40%. 47 .Lowering of customs duties  The removal of quantitative restrictions on imports has been accompanied by lowering of customs duties.  The peak rate of customs duties 200% in 1991 was lowered to 65% in 1994.  The government has made lowering of customs duties each of four budgets since 1991.

The reforms began with a devaluation of 24% in July 1991.The price of one currency in terms of another is called the foreign exchange rate. Exchange rate policy has gone through a series of transformation since 1991. The system was modified in march 1992 by explicit dual exchange rate system. The devaluation was accompanied by an abolition of export subsidies to help the fiscal position. 48 . simultaneously with the dismantling of licensing restrictions on import of raw material and capital goods.Transformation of exchange rate policy      Exchange rates :.

 This dual exchange rate system was again modified to

a unified floating rate on march 1993.  After a year , the government , in march 1994, announced further liberalization of payment restrictions on current transactions.  Thus between this period of time trade and payment system has moved from a fixed and typically overvalued rate to a market-determined exchange rate within a framework of considerable liberalization on the trade account.

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Tax Reformations
 Reform of tax system has been an important element

in the Government’s reform programme with major changes in both direct and indirect taxes.  Reduction in personal income tax,
 The maximum marginal rate personal income tax was

56% in June 1991 which has now been reduced to 40%.

 Modification in wealth tax,  Earlier wealth tax applicable to all personal assets, has been exempt all productive assets including financial assets such as bank deposits and shares.
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 Reduction in corporate tax,  The rates of corporate income tax were 51.75% for publicly listed company and 57.50% for a closely held company have been unified and reduced to 46%.  Reduction in excise duties,  Excise duties have been significantly reduced over the past years.

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Sales Tax  We know that it is 6%.  Does not apply to groceries or services. It was 4% until 1994.  Tried to extend it to services in 2007. the sales tax base is . 52 .  Since services are  as a percentage of purchases. but it was beaten back.

Excise taxes  Cigarettes. the lower the percentage. property. fuels are taxed in $/unit. which are taxed in % terms. 53 .  Taxes do not go up in times of inflation. the more expensive the unit. liquor.  This contrasts with income. sales. Curiously.

 When this happens. we are exporting part of our income tax. 54 .Prescriptions – 1  Add a second bracket to income tax  Most states do this  Some of this might be borne by people elsewhere. thus reducing their federal taxes  other states’ taxes would go up to make up for the drop in MI payments. because MI residents would have higher state tax deductions against their federal taxes.

Is this what we want?  Wouldn’t taxes be more neutral if services were treated similarly to goods? 55 .Prescriptions – 2  Extend sales tax to services  Goods tax base is shrinking  Services are now favored relative to goods.

56 .  On net they pay negative amounts (i. get back more than they put in). these losses could really grow.Prescriptions – 3  Reduce tax preferences for elderly  Elderly get extraordinarily high tax preferences.e.  With baby boom generation  age 65.

cigarettes. fuel from per unit to ad valorem.  Why do they get special treatment?  Raise more revenue 57 .Prescriptions – 4  Change taxation of liquor.

 Removes lock-in of people to locations.  Raises more revenue.Prescriptions – 5  Remove assessment cap to property tax  Gives localities more control over their finances. 58 .  Removes inequitable treatment of long-time residents and recent movers.

59 .  For taxpayers other than financial institutions and insurance companies.  Financial institutions and insurance companies are subject to industry-specific taxes  In addition. the MBT imposes two taxes — a modified gross receipts tax and a business income tax. significant personal property tax relief is granted for Michigan commercial and industrial personal property.What they did!  Enacted Michigan Business Tax in July 2007`.

9% to 4. 60 .35%.  This is supposed to be phased out between 2011 and 2015 (after most of the current politicians are gone) and is expected to increase revenues by $765 million a year.What they did! – Part 2  Raised income tax from 3.

61 .  But lawmakers added a surcharge of about 22 percent to the tax that will make it more expensive for some companies.What they did! – Part 3  The original Michigan Business Tax won praise from businesses when it was adopted in the summer. It was estimated that up to seven of 10 businesses would pay less under the new format than under the Single Business Tax it replaces. The surcharge was crafted to replace an unpopular 6 percent tax on some services.

However . 62 .this is an area where change are being implemented slowly .Public sector policy  Reform of the public sector is a critical element in structure adjustment programs all over the world and is included on India’s reform agenda.

Disinvestment of govt.  The disinvestment helps provide non-inflationary resources for the government budget. without adding to physical deficit. 63 . equity in PSC  Instead of outright privatization. the government has initiate a limited process of disinvestment of government equity in public sector company with government retaining 51% of the equity and also management control.

Changed policy towards lossmaking PSU’s  The government has announced that budgetary support to finance losses will be phased out over 3 years and this has had salutary effect in confronting PSU with a hard budget constraints.)  BIFR (Board for industrial and financial reconstruction) 64 .  SICA(Sick industrial company’s Act.

REGULATORS 3.CONSOLIDATION IMPERATIVE 65 .THE BANKING SYSTEM 4.CAPITAL MARKET DEVELOMENT 10.THE CAPITAL MARKET 6.OVERALL APROACH TO REFORMS 8.FINANCIAL AND BANKING SECTOR REFORMS           1.NON-BANKING FINANCE COMPANIES 5.FINANCIAL MARKETS 2.MUTUAL FUNDS 7.DEREGULATION OF BANKING SYSTEM 9.

small business and agricultural finance.BANKING SYSTEM:.they started making debt in the market.REGULATORS:. They grew rapidly in commercial banking and asset management business with the opening of this institutions . The RBI become more important. The government accepted the important role of regulators.Private sector institutions played an important role. 66 . Many banks are successfully running in the retail and consumer segment .The finance ministry continuously formulated major policies in the field of finance.  2. 1.but they are yet to deliver services to industrial finance.FINANCIAL MARKETS:. retail trade.  3. SEBI and the IRDA became important institutions.The RBI has given license to new private sector banks as part of the liberalization process.

asset management and insurance through separate ventures. Until recently.DEVELOPMENT FINANCE INSTITUTIONS:. 67 . 4. the money market in India was narrow and circumscribed by tight regulations over interest rates and participants. DFI’s such as IDBI. the requirement of minimum net owned funds has been raised to 2 crores.In the case of new NBFCs seeking registration with RBI.NON BANKING FINANCE COMPANIES:.FIs’s access to SLR funds reduced.ICICI have entered other segments of financial services such as commercial banking.  5. Now they have to approach the capital market for debt and equity funds.

68 .The number of share holders in India is estimated at 25 million. The SEBI decided to concentrate on the development of the debt markets.  7.The development of a long term debt market is crucial to the financing of infrastructure.The last ten years have been major improvements in the working of various financial market participants.LONG TERM DEBT MARKET:. 6. stamp duty is withdrawn at the time of dematerialization of debt instruments in order to encourage. How ever .THE CAPITAL MARKET:.  8:OVERALL APPROACH TO REFORMS:.only an estimated 2 lack persons actively trade in stocks.

New private sector banks allowed to promote and encourage competition.The mutual fund industry is now regulated under the SEBI regulations.Government pre-emption of banks’ resources through SLR and CRR.DEREGULATION OF BANKING SYSTEM:.1996 and amendments there to.office of the controller of capital Issues were abolished and the initial share pricing were decontrolled. and special recovery tribunals set up to facilitate quicker recovery of loans arrears.The capital Issues Act 1947 . both Indian and foreign players. 69 . With the issuance of SEBI guidelines.  11. 9. the industry had a frame work for the establishment of many more players.  10.MUTUAL FUNDS:.repealed . Recovery of debts due to banks and the and the financial institutions Act 1993 passed.CAPITAL MARKET DEVELOPMENT:.

The consolidation of existing institutions which is especially applicable for the commercial banks.  CONCLUSION : It is not possible to play the role of the Oracle of Delphi when a vast nation like India is involved. In india.CONSOLIDATION IMPERATIVE:. 12. There is no need for 27 PSBs wit branches all over India. the banks are in huge quantity. and the coming decade should be as interesting as the last one 70 . How ever a few trends are evident.

THANK YOU 71 .

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