Industry Analysis

Question 1

Industry Chain

Answer 1

Different players, from raw materials to the final product

Question 2

1st step of industry analysis

Answer 2

Define the relevant industry and identify the industry chain

Question 3

Porters 5 Forces

Answer 3

1. intensity of rivalry
2. bargaining power of the buyer
3. supplier power
4. threat of new entrants
5. substitutes

Question 4

Threat of new entrants

Answer 4

how easy is it for a new firm to enter a market and gain market share

Question 5

Bargaining power of buyers / suppliers

Answer 5

How concentrated they are, what % of the book of business they own, and level of differentiation

Question 6

Substitutes

Answer 6

A substitute performs the same or a similar function as an industry’s product by different means

Question 7

Rivalry intensity

Answer 7

How aggressively firms compete.

Influenced by:

• size of the market
• slow industry growth
• low switching costs
• product similarity

Question 8

Oligopoly

Answer 8

A few similar-sized firms compete amongst themselves

Question 9

Monopoly

Answer 9

Absence of competition

Question 10

Perfect Competition

Answer 10

Many similar firms that compete mainly on price

No firm makes a profit above its cost of capital

Question 11

Other factors to consider beyond the 5 forces

Answer 11

–Industry growth rate
–Technology and innovation
–Government
–Complementary products and services