11:00 am Miller Peaden, Richard Kelly, Andy Rogers, Bowie Wynne Industry Analysis 11:00 am Miller Peaden, Richard Kelly, Andy Rogers, Bowie Wynne

What is Industry Analysis? Micro, Task, and Macro- environments State of competition External factors of the industry Potential entrants Substitute products

Analysis Types SWOT analysis-Strengths, Weaknesses, Opportunity, Threats PEST analysis- Political, Economic, Technological, Sociodemographic Competitive Force Model-

Defining An Industry Diversity of competitors- the extent to which a firm can avoid the elusiveness of pricing OPEC- Regulates the number of vehicles that can be put into a market each year- Markets are differentiated due to production costs, political agendas, and religion due to demographics Excess Capacity and Exit barriers- The more similar products are in a market, the higher willingness the customer is to switch products due to pricing (ex commodities, generic brands) Cost Conditions- Cost structure is key, fixed vs variable costs, contribution margins *things to consider= how costs are evaluated during a recession, if and when do you accept higher operating costs*

Factors That Affect a Firm’s Environment Understand your customer base Understand your suppliers Understand Intensity of competition

Industry Attractiveness Value of product to the customer Industries that operate at a high rate of profit- (pharma, tobacco) Industries that operate at a low rate of profit- (motor vehicles)

Porter’s Five Forces Industry Competitors Threat of new entrants Bargaining power of suppliers Threat of Substitutes Bargaining power of buyers Two types of competing markets: Market for Inputs- Raw materials, Labour etc. Market for Outputs- Products, Goods/services

Threats That New Entries Face Capital Requirements- startup costs, r&d, service facilities, Economies of Scale- New product development cost, High capital expenditures of market entry; barrier is sometimes impossible to overcome Absolute Cost Advantages- Acquisition of low cost materials (how much do we pay as a firm vs competition?) Product Differentiation- brand recognition, customer loyalty, marketing Access to channels of distribution- supply chain (slotting fees). (internet is great tool for marketing) Government/ legal barriers- Licensing, copyrights, patents, intellectual property Retaliation- price cutting, increased advertising, sales promotions, litigation *affective entries into new markets depend capital capabilities and the resources available to them*

Forecasting Industry Profitability Examine how the industry’s current and recent levels of competition and profitability are a consequence of its present structure. Identify trends that are changing the industry’s structure. Is the industry consolidating? Are new players seeking to enter? More differentiated or commoditized products? Will the industry grow? 3. Identify how these structural changes will affect the five forces of competition and resulting profitability of the industry. Ex: Consider the threat of Global Warming. Car producers need to evaluate the implications that have formed their industry environment. What will be the impact of consumer preferences? Will there be a switch from private to public transportation? With regard to to the competition, will there be new entry by manufacturers of electric vehicles into the industry? Will R&D costs cause the Industry to consolidate?

Industry Positioning Implementing product variety- Eliminate substitution by offering affordability, luxury, and transportation (18-wheelers) Tesla has already anticipated change in the industry by creating an electric 18 wheeler that can travel up to 300 miles per charge. Walmart has already pre ordered a little over 30 of these fully electric vehicles. They plan to use them for single day trips between distribution centers, and their stores.