Industry & Competitive Analysis. Dominant economic features of industry Competitive forces in industry - strength of Industry drivers - impact of Which companies in strong/weakest position Key Success Factors of industry Industry attractiveness. Dominant Economic Features of Industry.
Dominant economic features of industry
Competitive forces in industry - strength of
Industry drivers - impact of
Which companies in strong/weakest position
Key Success Factors of industry
Mkt growth rate - stage of growth cycle
No. & relative size of rivals
No. & relative size of buyers
Prevalence of forward/backward integration
Distribution channels used
Pace of technological change - process & product
Scope for economies of scale
Learning / experience curve effects
Importance of capacity utilisation
Resource requirements - ease of entry/exit
Industry profit potential/attractiveness
Rivalry among competitors / sellers
Threat of substitution
Threat of new entrants
Bargaining power of suppliers
Bargaining power of buyers
no. and size of competitors increase
product demand growing slower
tactics used to increase unit volume eg. price cuts
low switching costs
one or more competitor dissatisfied with position
exit costs are high
strong co.s outside industry acquire weak firms in ind.
Barriers to entry:
Economies of scale
Access to technology/expertise
Learning curve effects
Brand preference/customer loyalty
Access to distribution channels
Eg. eyeglasses and contact lenses
sugar and artificial sweeteners
attractively priced substitutes being available
quality and performance of substitutes
ease of switching
The lower the price of subs., the higher their quality and
the lower the user’s switching costs the more intense the
threat of substitution.
Threat depends on:
significance of item they supply
size of the customer
no. of suppliers
whether switching costs high
potential for backward integration
switching costs are low
small no. of buyers
if threat of backward integration - eg own label
if buyers are large eg. tesco - shelf space
if prestige buyer
The stronger the collective impact of the competitive forces, the lower the combined profit of participant firms.
However, even when industry is highly competitive (forces are strong) it can be profitable to those who are well positioned.
Successful strategists know what forces exist, the relative strength of each and understand the industry’s competitive structure as a whole.
The major underlying causes of change in industry and competitive conditions.
Driving Forces Analysis -
identify the driving forces
assess the impact they will have on the industry
Important to ensure strategies are as tightly matched to emerging conditions as possible.
Change in buyer demographics
Changing societal concerns
The things that most affect the ability of industry members to prosper in the marketplace.
eg. technology related KSFs; manufacturing related KSFs; distribution related KSFs; skills related KSFs.
Important to understand the industry well enough to know what is more important to competitive success and what is less important.