|MBA 24 Batch|Session 4|12th February,‘24|Thiagarajar School of Management|

Attractiveness at 3 Levels

Levels Market
Industry
Business
Environment
Market Attractiveness

Market Segments

Market Growth

Market Size
Industry Attractiveness

Industr Indus
y try
Charac
teristic Struc
s ture
 Industry Characteristics

Degr Scop Indus

ee of e of try
Com
Oper Life
petiti
on ation Cycle
Degree of Competition

Fragm Conce
ntrate
ented
d
Indust
Industr
ries
ies
Scope of Operation

Glob
Local
al
Indus
Indus
tries
tries
Industry Life Cycle

Emer Matu
ging red
Indus Indus
tries tries
 Buffet’s Prescription

“When a management with a reputation for brilliance tackles

a business with a reputation for poor fundamental
economics, it is the reputation of the business
that remains intact”.
Porter’s Structural Attractivess
Industry Structure Dimensions

Competitive
Cooperative Dimension
Industry Rivalry
COMPETITIVE INTENSITY

1. Numerous or Equally Balanced Competitors

2. Slow Industry Growth
3. High Fixed or Storage Costs Case
4. Lack of Differentiation or Switching Costs Of
5. Capacity Augmented in Large Increments
Automobiles
6. Diverse Competitors
7. High Strategic Stakes
8. High Exit Barriers

9. High
Threat of New Entrants

1. 1. Economies of Scale
2. Product Differentiation
Case
3. Capital Requirements
Of
4. Switching Costs
5. Access to Distribution Channels Telecom

6. Cost Advantage Irrespective of Scale

Threat of Substitutes

 Substitutes and Alternatives

Case
 Price-Performance Ratio Of

EV
 Socio-Economic Development
Horizontal Dimension

 Bargaining Power of Suppliers

Petroleum

Semiconductors
 Bargaining Power of Buyers
Threat of Substitutes

 Substitutes and Alternatives

Case
 Price-Performance Ratio Of

EV
 Socio-Economic Development
Buyer Group Is Powerful When:
 It is concentrated or purchase larger volumes relative to seller sales;
 Product purchases from the industry represent a significant fraction of sales;
 Products are standardized or undifferentiated;
 Faces a few switching cost;
 It earns low profit;
 Buyers face a credible threat of backward integration;
 Unimportant to the quality of the buyers’ products or services; and
 Buyer has full information (about demand, actual market prices, and suppliers costs)
Seller Group Is Powerful When:

 Dominated by a few companies and more concentrated than the industry it serves;

 It is not obliged to contend with other substitute products;

 The industry is not important customer of the supplier group;

 Suppliers’ product is an important input to the buyers’ business;

 Suppliers’ product is differentiated or it has built up switching costs; and

 Suppliers’ group poses a credible threat of forward integration.

 Role of Strategy

Firm Effect

Industry Effect
Formulating a Strategy

Step 1- What is the structure of the industry and the positions of competitors?

Step 2 -Why is the industry fragmented?

Step 3 - Can fragmentation be overcome? How?

Step 4 – Is Overcoming fragmentation profitable? How should it be positioned?

Step 5 – If fragmentation is inevitable, what is the best alternative of coping?