Industry Analysis Flashcards
define the term Industry.
= a group of organisations producing a similar product or service.
what are the three perspectives we analyse the industry from?
- structure (elements of a particular industry)
- dynamics (how industry is evolving over time)
- conditions (how harsh the environment of the industry is for a company)
how do we analyse industry sturcture? + 3 characteristics
Porter’s five forces.
- why certain industries are successful and others are not
- strength and importance of forces and changes through time.
- it helps to improve a company’s comptitive position.
define Porter’s five forces (and from which perspective it’s built).
it’s built from a perspective of an incumbent company (an already established one).
- bargaining power of buyers
- bargaining power of suppliers
- threat of new entrants
- threat of substitutes
- rivalry amongst existing firms
what are the barriers are there for new entrants?
- qualities already established companies have (economies of scale, access to distribution, learning curve advantages)
- legislation and government cations
- cost or quality advantages
expected retailiation from encumbents
customer / supplier loyalty
capital requirements
when is bargaining power of suppliers high? (5)
- large, few in number
- small buyers, many of them
- no substitutes
- suppliers’ products are critical
- high swtiching costs
when is bargaining power of buyers high? (5)
- large, few in number
- small suppliers, many of them
- substitutes available
- supplier’s products are not critical
- no high switching costs
when is threat of substitues high? what does account for a substitute?
- low switching costs
- low substitute prices
a product from DIFFERENT industry that satisfies the SAME need
when is rivalry amongst competitors high?
- slow industry growth / declining
- low differentiation opportunities
- high exit barriers (transfer of knowledge)
- high industry concentration
how can a company gain strategic advantage?
- low cost
- —- broad competitive scope: cost leadership strategy
- —- narrow competitive scope: cost focus - differentiation
- —- broad: differentiation
- —- narrow: differentiation focus
state the process of Porter’s 5 forces analysis (6 points)
- define industry (scope, geographical)
- identify participants
- evaluate forces
- analyse recent and likely changes in each force
- possible industry changes by competitors/new entrants
- strategic positions to exploit the advantages
how does Value Net differentiate from P5F?
it adds another force (complementors), since it critiques P5F about being a ‘zero sum game’ = not allowing anyone else to make a profit when I make one. that’s why there’s coopetion = both cooperation and competition in one
how do we analyse industry conditions?
what are the main three characteristics of the analysis?
with the Strategy Palette.
- 5 types of BE (critique P5F: only works in 1)
- differ by predictability, malleability (ability to influence the industry), and harshness
- different strategies required
state the 5 industry environments and what approach they require.
- classical (mature) -> low cost or differentiation
- adaptive (volatile growth) -> adapting and change
- visionary (white space = no concentration, they are not yet established = blue oceans) -> innovation
- shaping (no dominant player) -> cooperation
- renewal (low growth) -> renewal
how do we analyse industry dynamics? explain the analysis.
shorturl.at/lrKP4
with the industry life-cycle.
- development
- growth
- maturity
- decline
