Chapter 6: Analysing the industry environment Flashcards
Wrt Industry analysis
How do you define an industry?
Consider boundaries of an industry:
* Horizontal scope: Range of products & markets addressed
* Vertical scope: Which supply chain functions will be included
* Geographical scope: Where are you operating? (Local, regional, national or international)
- Do not define an industry too narrowly or broadly
- Consider that some industries might converge into one
Wrt industry analysis
What are industry key success factors?
- Sources of competitive advantage from external environment
Determined by 3 Cs: - Customers- What do they want?
- Competition- How can we compete successfully?
- Corporation- What unique resources do we have?
Industry key success factors in different industries?
Mature/Declining Industries
* Cost advantage(produce products cheaper than competitors)
* Segmentation (Focusing on more profitable segments within the industry)
* Differentiation (Way to escape the fierce competition on price, (could be done through complementary products)
* Strategic innovation (Offering new products/services in new markets)
Technology industries
* Strong IPRs (patents, trademarks etc.)
* Complementary products & services (value mustn’t all be in complementary products, otherwise innovator appropriates minimal value)
* How easily can technology be copied/imitated (Is it tacit or explicit knowledge)
* Lead times can also benefit innovator
What are Porter’s 5 forces?
- Rivalry amongst competitors
- Threat of new entrants
- Threat of substitutes
- Bargaining power of buyers
- Bargaining power of suppliers
What is the value net?
It refers to complementary relationships between different players in a market.
Rather than competing against each other, players can collaborate to add value to each others products by complementing the other product.
Influenced by complementor concentration, market visibility, market growth and switching costs
How do regulators affect industry?
- Maintain barriers to entry
- Price control
- Blocking of certain mergers/acquisitions
- Legislation
- Direct restrictions
What is the industry life-cycle theory?
It suggests that industries have different levels of competition depending on what stage of maturity or growth the industry is in.
Life cycle stages:
* Development- early adopters and few competitors
* Growth- competitors enter the market, competition based on market share rather than price
* Shake-out- industry growth slowing, but more competitors still entering, results in weaker competitors being forced out. (Typically seen when more firms are leaving the industry than joining)
* Maturity- industry is no longer growing, forcing players to focus on retaining market share, cut costs through efficiency & EoS, and compete on price. INdustry consolidation (M&As) is common
* Decline- demand shrinks, competitors leave market and focus switches to profitable niches for those that remain
Knowledge diffusion rate influences how quickly industry moves through stages.
Wrt Intra-industry analysis
Describe the framework for analysing competitors.
- Purpose is to analyse and predict how they might react to initiatives/changes in the industry environment
- Competitve Intelligence (CI) serves as input for framework
- Ask what drives competitors’ actions? (Their goals, their stakeholder expectations & their industry assumptions)
- Ask what are they capable of? (Core & dynamic capabilities, strangths & weaknesses)
Wrt Intra-industry analysis
Describe customer analysis.
Important to understand customers and their needs. Customers can be segmented for easier understanding.
* Segment uniqueness- Identify unique segments using variables such as geography, age, spending capacity etc.
* Segment attractiveness- segment must be able to deliver on the organisation’s goals (If goal is profit, then profitable segment is necessary)
* Key success factors(Customer preferences) - organisation must know what customers want and if they are delivering on those wants
* Scope of segmentation(Number of segments to use)- determined by presence of shared costs and similarity of key success factors
