1. 11:00 am Miller Peaden, Richard Kelly, Andy Rogers, Bowie Wynne
Industry Analysis
11:00 am
Miller Peaden, Richard Kelly, Andy Rogers, Bowie Wynne

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

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

4. 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*

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

6. 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)

7. Porter’s Five Forces Michael Porter 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
*These two factors are contingent on buyer’s price sensitivity and also relative bargaining power
Michael Porter

8. 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*

9. 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?

10. Gas Market
The automobile industry and the oil and natural gas industries have been directly correlated with one another since the introduction of the model T by Henry Ford. A buyer’s sensitivity to the price of the product is critical in determining if the use of one product is contingent on the use of another.
In order to be able to avoid the unwanted altering of an industries structure you must identify the key factors that lead to profitability, as well as the structural features present in a market that are susceptible to changes.(economic, sociodemographic)
Ex: If gas prices rise people are less inclined to go out and buy a new vehicle and vise versa.

11. Hybrid Market
The hybrid market of the automotive industry is combination of both the gas, and electric market that creates a more environmentally friendly vehicle.
The one thing that the hybrid industry has had issues with is the lack of demand of plug in vehicles, compared to production costs.
In 2016 Ford’s Hybrid sales shot up 38%. Ford sold 23,895 hybrids that year which doesn’t seem like much but is a substantial increase from 2015.

12. Hybrid Vehicle sales

13. Electric Car Market
As a blue ocean market, barriers to entry are relatively low for established automobile producers due to their size and experience as whole. Being already established into the automobile Industry allows for companies such as Ford and Chevy to penetrate that market with relative ease.
Tesla has established a trend and other automobile companies have followed accordingly at their own pace in how they are trying to integrate into the electric car market.

14. 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.