2 Industry & Competitive Analysis Dominant economic features of industryCompetitive forces in industry - strength ofIndustry drivers - impact ofWhich companies in strong/weakest positionKey Success Factors of industryIndustry attractiveness
3 Dominant Economic Features of Industry Mkt sizeGeographic scopeMkt growth rate - stage of growth cycleNo. & relative size of rivalsNo. & relative size of buyersPrevalence of forward/backward integrationDistribution channels usedPace of technological change - process & product
4 Dominant Economic Features of Industry Pdt/service differentiationScope for economies of scaleLearning / experience curve effectsImportance of capacity utilisationResource requirements - ease of entry/exitIndustry profit potential/attractiveness
5 Porter’s 5 Force Model of Competition Rivalry among competitors / sellersThreat of substitutionThreat of new entrantsBargaining power of suppliersBargaining power of buyers
6 Rivalry among Competitors increases when....no. and size of competitors increaseproduct demand growing slowertactics used to increase unit volume eg. price cutslow switching costsone or more competitor dissatisfied with positionexit costs are highstrong co.s outside industry acquire weak firms in ind.
7 Threat of New Entrants Barriers to entry: Economies of scale Access to technology/expertiseLearning curve effectsBrand preference/customer loyaltyResource requirementsAccess to distribution channelsRegulatory policies
8 Threat of Substitution Eg. eyeglasses and contact lensessugar and artificial sweetenersDepends on:attractively priced substitutes being availablequality and performance of substitutesease of switchingThe lower the price of subs., the higher their quality andthe lower the user’s switching costs the more intense thethreat of substitution.
9 Power of Suppliers Threat depends on: significance of item they supply size of the customerno. of supplierswhether switching costs highpotential for backward integration
10 Power of Buyers High if... switching costs are low small no. of buyers if threat of backward integration - eg own labelif buyers are large eg. tesco - shelf spaceif prestige buyer
11 Implications of 5 Forces... 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.
12 Driving ForcesThe major underlying causes of change in industry and competitive conditions.Driving Forces Analysis -identify the driving forcesassess the impact they will have on the industryImportant to ensure strategies are as tightly matched to emerging conditions as possible.
13 Examples of Driving Forces Technological changeProduct innovationChange in buyer demographicsIncreasing globalisationChanging societal concerns
14 Key Success Factors - of the Industry 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.