Industry and Competitive Analysis:

Analysis

Thompson et al. (21st & 19th Edition; Ch:3)

Grant, R.M (8th Edition)
Lesson Plan
• Defining an Industry, Opportunity and Threat;
• Strategically relevant factors in the macro environment;
• Assessing co’s industry and competitive environment;
1. How Strong are the Industry’s Competitive Forces (Porter’s Five Forces
Model
• Critics of five forces model
2. What Factors are Driving Industry Change, and What Impact will they
have
3. How are Industry Rivas positioned in the Market: Strategic Groups
Within Industry
4. What strategic Moves are Rivals likely to make next?
5. What are the Industry’s Key Success Factors?
6. Is the Industry Outlook Conducive to Good Profitability?
 Industry Life-Cycle Analysis
What is an Industry, Market
Segment, Opportunity and Threat
Key Concepts

External Analysis begins with identifying industry that a

company competes.
 Industry can be defined – as a group of companies offering
products/services that are close substitute for each other.

 Close substitutes are the products/services that satisfy the same

basic consumer needs.

 Closest Competitors, are co’s rivals, are those that serve the
same basic customer needs.

 Sector , There is a clear distinction between Industry & Sector. It

means – the group of closely related industries of which it is a part.
 For ex: In telecom industry, there are two type; one is
telecom equipment & other is telecom service
Key Concepts contd…

 Market Segment– is the group of customers within a market

that can be differentiate from each other on the basis their distinct
attributes & specific demands.

 For ex: In soft drink industry, although all customers

demand refreshing & cold nonalcoholic sodas but they
might differ in choosing soda with or without caffeine.
 Industry boundaries may change over time as i) Customer needs
evolve; ii) New technologies emerge.
 For ex: During 1990 soft drink industries has identified,
an emergence of the need of fruit based drink. Coca-
Cola found itself in direct competition with
manufactureres off bottled water 7 fruit-based soft-
drinks.
 Key Concepts contd…

 Opportunities arises when – a company take advantage of conditions

in its environment to formulate strategies that enable it to become more
profitable.

 Threats arises when – conditions in the external environment endanger

the integrity & profitability of the company’s business.

 Strategically thinking process requires:

 Mgrs should understand how structure & competitive
dynamics of their industry affect the performance &
profitability.
Strategically Relevant Factors
in
the Macro Environment
Strategically Relevant factors in the Macro environment

 In order to chart a co’s strategic course wisely managers

first develop a deep understanding of the co’s present
situation –
 This understanding involves two facets:
o External Environment
o Internal Environment
 Strategic thinking begins with
o an appraisal of the co’s external & internal environment
(as a basis for deciding on a long term direction &
developing vision;
o Moves towards an evaluation of the most promising
alternative strategies & business models
o Culminates in choosing a specific strategy
 Strategically Relevant factors in the Macro environment contd…

From Thinking Strategically about the Co’s Situation to Choosing

Strategy

Thinking
Strategically about Select the
Form a best
a co’s External Env Identigy
Strategic strategy
promising
Vision of and
strategic
where the business
options for
co needs model for
the Co
Thinking to head the co
Strategically about
a co’s Internal Env