Industry Analysis I assume you have read chapter 3, the industry project outline, and sample paper. Your perspective: You are consultants hired by the Mega-Bucks Corp CEO – Me – to answer the corporate level strategy question, what business or industry should we want to be in? Your objective: Determine the attractiveness of your chosen industry. I await your report!

Porter’s 5 Forces My Socio-Econ 

Industry Analysis

Industry Analysis

Industry Analysis

Industry Analysis

Industry Analysis Industry Structure

Is Industry Attractive or Unattractive and Why? Objective This is the final statement for your industry project. It is your conclusion from your analysis: Develop conclusions about whether the industry and competitive environment is attractive or unattractive, for long-term survival. Principle A firm uniquely well-suited in an otherwise unattractive industry can, under certain circumstances, still earn unusually good profits

SOCIO-ECONOMIC INDUSTRY Government Regulations, legal & political trends Special Interest Groups INDUSTRY Competitors - Rivalry Economic Trends THE FIRM Employees Investors Suppliers Buyers Substitutes New Entrants Technological Change Social Trends Demographics Special Interest Groups

Socio-Econ Forces

Table 3.2: Relevance of Key Economic Features Market Size Market growth rate Capacity surpluses/shortages Industry profitability Entry/exit barriers Product is big-ticket item for buyers Standard products Rapid technological change Capital requirements Vertical integration Economies of scale Rapid product innovation Strategic Importance Small markets don’t tend to attract new firms; large markets attract firms looking to acquire rivals with established positions in attractive industries Fast growth breeds new entry; slow growth spawns increased rivalry & shake-out of weak rivals Surpluses push prices & profit margins down; shortages pull them up High-profit industries attract new entrants; depressed conditions lead to exit High barriers protect positions and profits of existing firms; low barriers make existing firms vulnerable to entry More buyers will shop for lowest price Buyers have more power because it’s easier to switch from seller to seller Raises risk; investments in technology facilities/equipment may become obsolete before they wear out Big requirements make investment decisions critical; timing becomes important; creates a barrier to entry and exit Raises capital requirements; often creates competitive & cost differences among fully vs. partially vs. non-integrated firms Increases volume & market share needed to be cost competitive Shortens product life cycle; increases risk because of opportunities for leapfrogging

Critical Success Factors This applies more toward the end of the project. Save it for now. Competitive elements most affecting every industry member’s ability to prosper (Text P. 80) Specific strategy elements Product attributes Resources Competencies Competitive capabilities CSFs spell the difference between competitive success or failure

Critical Success Factors Answers to three questions pinpoint CSFs On what basis do customers choose between competing brands of sellers? What resources and competitive capabilities does a firm need to have to be competitively successful? What does it take for firms to achieve a sustainable competitive advantage? CSFs consist of the 2 - 3 really major determinants of competitive success in an industry

Common Types of Critical Success Factors Distribution-related Marketing-related Skills-related Organizational capability Other types Technology-related Manufacturing-related Scientific research expertise; Product innovation capability; Expertise in a given technology; Capability to use Internet to conduct various business activities Low-cost production efficiency; Quality of manufacture; High use of fixed assets; Low-cost plant locations; High labor productivity; Low-cost product design; Flexibility to make a range of products Strong network of wholesale distributors/dealers; Gaining ample space on retailer shelves; Having company-owned retail outlets; Low distribution costs; Fast delivery Fast, accurate technical assistance; Courteous customer service; Accurate filling of orders; Breadth of product line; Merchandising skills; Attractive styling; Customer guarantees; Clever advertising Superior workforce talent; Quality control know-how; Design expertise; Expertise in a particular technology; Ability to develop innovative products; Ability to get new products to market quickly Superior information systems; Ability to respond quickly to shifting market conditions; Superior ability to employ Internet to conduct business; More experience & managerial know-how Favorable image/reputation with buyers; Overall low-cost; Convenient locations; Pleasant, courteous employees; Access to financial capital; Patent protection

Decision Matrix