1. 1 UNIT 7: STRATEGIC ANALYSIS: INDUSTRY, COMPETITORS, CUSTOMERS

2. INDUSTRY ANALYSIS Purpose Match strategy to industry conditions Identify opportunities and threats posed by the state of the industry Industries differ in terms of characteristics and attractiveness. Understanding of industry attractiveness important. Making entry/exit decisions 2

3. 3 Key questions (Issues) Degree of competition in the industry Dominant economic features Drivers of change in the industry Key success factors in the industry

4. 4 A. Competition in the industry Industry competition depends on five basic forces: (Michael Porter, 1980) 1.Threat of new entrants 2.Rivalry within the industry 3.Threat of substitute 4.Bargaining power of Suppliers 5.Bargaining power of buyers Collective strength of forces determines industry attractiveness

5. 5 SuppliersIndustryBuyers Value Creation R C R C Cost Accumulation

6. 6 B. Industry dominant economic features Industries differ in character and structure Need to understand an industry’s dominant features. Such features include:- -Market size and growth rate -Scope of competitive rivalry (Local, regional, national, international, global)

7. 7 -Number of rivals (competitors) and their relative sizes -Number of buyers and their relative sizes -Extent of product differentiation -Extent of vertical integration -Distribution channels used

8. 8 -resource requirements and ease of entry/exit -Any learning and experience effects -Industry profitability (attractiveness) -Capacity utilization – levels required to achieve production efficiency

9. 9 c. Drivers of change in the Industry How is the industry environment changing? What are the driving forces for change in the industry? These include:- -Changes in long term industry growth rate -Changes in who buys the product and how they use it -Product innovation -Technological change -Marketing innovation -Increasing globalization of industries -Government policy changes

10. 10 D. Key success factors in the industry Key success Factors (KSF)→The thing that most affects the ability of a company to succeed in the market place. A company must develop competence on its industry’s key success factors if it has to remain successful Key success factors are few in each industry Key success factors vary across industries Sound strategy incorporates efforts to be competent on all key industry success factors and to excel on at least one factor

11. 11 Competitor Analysis Identification of competitors (at least the major ones) Strategies used by competitors Performance of competitors Strategic moves competitors are likely to make

12. 12 Components of competitor analysis include:- -Competitors’ future goals -Current strategy -Assumptions -Competitor capabilities

13. 13 Managers need to provide answers to the following questions: -Is the competitor satisfied with current position? -Any likely competitor strategy -Where is the competitor vulnerable? -What is likely to provoke competitor retaliations?

14. 14 Sources of competitor information include: -Published sources -Electronic media (advertising) -Sales people -Middlemen -Surveys by the company

15. 15 MARKET ANALYSIS The essence of any business is the Customers Customer information important Successful companies tend to be market- oriented Strive to create value See value through the eyes of the customer

16. 16 -Maintain true customer focus -Customer is the focal point of all company activity -Customer is the starting point for company action -Everyone defines their job in terms of satisfying customers

17. 17 Question to be answered include: Who are our customers Where are they located? Any changes in customers?

18. 18 What do customers see as important? What are customer preferences? Can the customers be segmented? Any unserved segments?