Conducting an Industry Analysis

Seven Questions for Industry Analysis

1. What are the industry dominant economic traits? 2. What competitive forces are at work in the industry and how strong are they? 3. What are the forces of change in the industry and what impact will they have? 4. Which companies are in the strongest/weakest competitive position ? 5. Whos likely to make what competitive moves next? 6. What key factors will determine success or failure? 7. How attractive is the industry in terms of its prospects for above average profitability?

Q1. What are the industry dominant economic traits?

Market size (Global & Indian Scenario) Scope of competitive rivalry Market/industry growth rate (life cycle)
Fast growth breeds new entry; slowdowns lead to increased competition.

Number of rivals and their size Number of buyers and their size Level of backward and forward integration Technological change (rate and scope) Level of differentiation between firms products Opportunities for economies of scale Ease of entry and exit Capital requirements

Q1: Industrys Dominant Economic Traits

Market
Size Scope Growth rate Growth cycle size of competitors Distribution channels

Product
Differentiation Potential for economies of scale Entry / exit costs Technological change

Q2. What competitive forces are at work in the industry and how strong are they?
The rivalry among sellers
Greater the rivalry, lower the avg. profitability What causes rivalry to be strong or weak?
# of competitors Size / capability of competitors Financial status of competitors Slow growth Cost of exit barriers Switching costs for customers Variability in demand

Q2. What competitive forces are at work in the industry and how strong are they? Potential new entrants
Barriers to entry
Economies of scale Customer loyalty / brand preferences Resource / investment Access to distribution Regulation Patents, proprietary technology

Level of industry profits

Q3. What are the forces of change in the industry and what impact will they have?
The most dominant forces the cause the industry to change are called driving forces

Common Driving Forces

Changes in long term industry growth rate Changes in who buy the products and for what reason Product innovation Technological change Marketing innovation Increasing globalization Regulatory changes Changing societal concerns, attitudes and lifestyles

Environmental scanning

Q5. Whos likely to make what competitive moves next?

In order to outmaneuver your competition you have to evaluate the competitors future moves. Identify competitors strategies Evaluate who are the major players-- now Who will be the major players Evaluate what the major players are going to do

Q6. What key factors will determine success or failure?

Key success factors (KSF) are crucial elements that lead to success. What are they now? What will they be? In beer production KSF can be brewing skills In retail apparel KSF can be low cost, superior service, superior design In your industry, KSF=????

Q7. How attractive is the industry in terms of its prospects for above average profitability?
Growth potential Driving forces Entry/exit Stability of demand Competitive forces Risk and uncertainty Competition and its impact on the industrys future

SWOT Analysis
Identify the

Strengths Weakness Opportunity Threats