How much does industry matter
Download
1 / 7

How Much Does Industry Matter - PowerPoint PPT Presentation


  • 508 Views
  • Updated On :

How Much Does Industry Matter?. Firm performance depends a great deal on the attractiveness of the industries in which the firms compete. See Exhibit 1 on next slide.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'How Much Does Industry Matter' - wan


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
How much does industry matter l.jpg
How Much Does Industry Matter?

  • Firm performance depends a great deal on the attractiveness of the industries in which the firms compete.

    • See Exhibit 1 on next slide.

    • Regression analysis on almost any industry shows that the variation in the average performance of all firms in an industry will explain about 20% of the variation in the performance of any single firm in that industry.


Exhibit 1 average return on assets of different industries l.jpg
Exhibit 1: Average Return on Assets of Different Industries


How much does industry matter cont l.jpg
How Much Does Industry Matter? (cont.)

  • One cannot generalize that the “industry is all that matters.”

    • Returns vary in any industry from year to year (see exhibit 2 on next slide).

    • Some industries are more cyclical than others.

    • Evidence indicates that the difference between the performance of the highest- and lowest-performing firms in any industry will be 6 times greater than the difference between the performance of the highest- and lowest-performing industry (see Exhibits 3 [A] and [B]).


Exhibit 2 average return on assets in the automobile industry 1993 1997 l.jpg
Exhibit 2: Average Return on Assets in the Automobile Industry: 1993 - 1997


Exhibit 3 a roas of high and low performing firms in the steel industry l.jpg
Exhibit 3 [A]: ROAs of High- and Low-Performing Firms in the Steel Industry


Exhibit 3 b high and low performing firms in the pharmaceuticals industry l.jpg
Exhibit 3 [B]: High- and Low-Performing Firms in the Pharmaceuticals Industry


The five forces model l.jpg
The Five Forces Model

  • Devised by Michael Porter of Harvard.

    • Examines the 5 forces which influence the structure of industries

      • Framework suggests that industry structure will impact the competitive behavior of firms in that industry.

      • Also suggests that firm conduct will influence the average performance of firms in that industry.

      • As intensity of forces increases, the industry environment becomes more hostile and overall industry profitability will decline


ad