Professional Documents
Culture Documents
Conducting An Industry Analysis
Conducting An Industry Analysis
Industry Analysis
Seven Questions for Industry Analysis
1. What are the industry dominant economic traits?
2. What competitive forces are at work in the industry and how
strong are they?
3. What are the forces of change in the industry and what impact
will they have?
4. Which companies are in the strongest/weakest competitive
position?
5. Who’s likely to make what competitive moves next?
6. What key factors will determine success or failure?
7. How attractive is the industry in terms of its prospects for
above average profitability?
Q1. What are the industry
dominant economic traits?
Market size (Small markets don’t attract big fish)
Scope of competitive rivalry
Market/industry growth rate (life cycle)
– Fast growth breeds new entry; slowdowns lead to increased
competition.
Number of rivals and their size
Number of buyers and their size
Level of backward and forward integration
Technological change (rate and scope)
Level of differentiation between firms’ products
Opportunities for economies of scale
Ease of entry and exit
Capital requirements
Q1: Industry’s Dominant Economic Traits
Market Product
– Size – Differentiation
– Scope – Potential for
– Growth rate economies of scale
– Growth cycle – Learning effects
– # & size of competitors – Entry / exit costs
– Distribution channels – Technological
– Structure change
Forward Integration
Backward Integration
Q2. What competitive forces are at work in
the industry and how strong are they?
pg. 33 in Applegate
Q2. What competitive forces are at work in
the industry and how strong are they?
Substitute products
– Place a ceiling on prices and profits of industry
– Invite comparison shopping
– E.g., eyeglasses vs. contact lenses
– E.g., sugar vs. artificial sweeteners
Q3. What are the forces of change in the
industry and what impact will they have?
The most dominant Common Driving Forces
forces the cause the Changes in long term industry growth
rate
industry to change are Changes in who buy the products and
for what reason
called driving forces Product innovation
Task 1 - identify the Technological change
Marketing innovation
driving forces Increasing globalization
Growth potential
Driving forces
Entry/exit
Stability of demand
Competitive forces
Risk and uncertainty
Competition and its
impact on the industry’s
future
7 Questions
1. What are the industry dominant
economic traits?
2. What competitive forces are at work in
the industry and how strong are they?
3. What are the forces of change in the
industry and what impact will they
have?
7 Questions
4. Which companies are in the
strongest/weakest competitive position?
5. Who’s likely to make what competitive
moves next?
6. What key factors will determine success or
failure?
7. How attractive is the industry in terms of its
prospects for above average profitability?