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Module II

Structure and dynamics of


the industry

Introduction

Module I

Module II

Module III

Module V

Roll-out
Qtr 1
4

Qtr 2

Qtr 3

Qtr

Action 1
Action 2
Action 3
Action 4
Action 5

Module VI

Conclusion

Module IV

Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

Introduction

Schedule for the A.T. Kearney Business Unit Strategy Training Program

Time

Monday

Tuesday

Wednesday

Thursday

Friday

Module II

Module III

Module V

Final presentation

8-9
Introduction
9-10
10-11
11-12
12-1

Module I

1-2

Lunch

Conclusion
Lunch

Lunch

Lunch

2-3
3-4

Module VI
Guest Speaker
Module IV

Guest Speaker

4-5
Case preparation

Case preparation

Case preparation

Strategy literature
review

7-8

Case presentation

Case presentation

Case presentation

Case Dinner
preparation

8-9

Dinner

Dinner

Dinner

Dinner

5-6

Lunch

6-7

9-10
10-?

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

Introduction

Positioning of Module II in the overall training context


Module II
Structure and
dynamics of the
industry

Module I
Identification of the key
issues of the
engagement

Module III
Characteristics and
dynamics of the
individual companies

Module V
Definition and
evaluation of strategic
alternatives

Module VI
Implementable
recommendations

Roll-out
Qtr 1

Qtr 2

Qtr 3 Qtr 4

Action 1
Action 2
Action 3
Action 4
Action 5

Module IV
Execution
capacity of the
client

Note: The order of presentation of the curriculum elements should not be interpreted as a sequential guideline for a strategy engagement. Different
elements of the program may be referenced at different times in the engagement
Module II
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
Source: A.T. Kearney

Introduction

Module II teaches techniques and frameworks used to analyze the structure and
dynamics of the industry

Generate an understanding of the environment


in which the client and its competitors
compete
Establish an overview of the specifics of the
industry in which the client acts
Ensure an understanding of the competitive
rivalry

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

Introduction

Deliverables and techniques in Module II

Deliverables

Techniques

Industry structure

Players analysis
Strategic group analysis
Substitution threat analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry

Industry strategic era analysis


Industry life cycle analysis
Trends analysis

Product/market analysis

Size and growth of the market


Product/market segmentation

Demand and supply economics

Demand and supply economics

Industry analysis frameworks

Structure-conduct-performance
The five forces
The strategic triangle

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

Industry structure

Introduction

Describing the industry in which the client is acting establishes the boundaries of
the competitive arena

Understanding the industry structure

Establishes a foundation for many other analyses


related to the industry and competing companies
Creates a point-of-departure for related analyses
Reveals the context in which the client competes
Identifies basic information about the competition
Suggests an appropriate positioning of the client
companys offering
Identifies opportunities for growth into related areas

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

Industry structure

Introduction

An industry is a group of companies that offer a product or range of products that


are close substitutes for each other

Definition

Economists define an industry as a group of


companies that supply a market where a market is
defined in terms of substitutability, both on the
demand side and the supply side

Source: Grant, R.M. (1995); Contemporary Strategy Analysis


A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

Industry structure

Introduction

An industry can be defined from two perspectives, both of which are based on the
concept of substitute products

Product point-of-view
(supply side)

Analyze companies
offering:
The same product
A similar product
range

This definition creates four


levels of industry based on
the concept of product or
market substitution
Market point-ofview (demand side)

Source: A.T. Kearney

Analyze companies
catering to:
The same need
The same customer
group

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

10

Industry structure

Introduction

An industry can be defined on four different levels and its scope can vary
considerably, depending on which perspective is taken
Product approach
(supply side)

The automaker, Cadillac, can have


four different levels of competition

Same
products
Similar product
or product range

Products that serve


same needs

Products competing for


the spending of the same
customer group

Manufacturers of full-size luxury


automobiles such as Lincoln, BMW,
Mercedes and Lexus
All automobile manufacturers

All automobile manufacturers, and


manufactures of motorcycles, bicycles
and trucks
All companies selling major consumer
durables, such as new homes, household
appliances, etc.

Market approach
(demand side)
Source: Kotler, P. (1997); Marketing Management
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

11

Industry structure

Introduction

Defining the industry from a product perspective versus a market perspective

Company

Product perspective

Market perspective

Revlon

We make cosmetics

We sell hope

Missouri - Pacific Railroad

We run a railroad

We are a people and goods mover

Xerox

We make copying equipment

We help improve office productivity

Standard Oil

We sell gasoline

We supply energy

Columbia pictures

We make movies

We market entertainment

Encyclopedia Britannica

We sell encyclopedias

We distribute information

Carrier

We make air conditioners and furnaces

We provide climate control in the home

Source: Kotler, P. (1997); Marketing Management


A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

12

Industry structure

Introduction

From a theoretical perspective, five different types of industry structures exist

Type

Characteristics

Example

Pure monopoly

A pure monopoly exists when only one company provides a


certain product or service in a certain country or area

Local electricity company

Pure oligopoly

A pure oligopoly consists of a few companies producing


essentially the same commodity

Oil and steel

Differentiated oligopoly

A differentiated oligopoly consists of a few companies


producing partially differentiated products

Autos and white goods

Monopolistic competition

A monopolistic competitive industry consists of many


Restaurants and beauty shops
competitors able to differentiate their offerings in whole or parts

Pure competition

A pure competitive industry consists of many competitors


offering the same product and service

Table salt

Source: Kotler, P. (1997); Marketing Management


A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

13

Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

14

Industry structure

Players analysis

Description

An overview of the different players positions and directions provides an


understanding of the players current objectives, strategies, and capabilities
Current strategy

Objectives

Capabilities

Strategic intent
Information on the
companys intended
direction
Realized strategy
Information on capital
investment decisions,
product lines, mergers,
acquisitions and alliances,
and advertisement and
promotion indicate the
realized strategy

Does the current


performance meet
objectives in terms of
profitability, market share,
growth, R&D,
performance, etc?
Will the current objectives
change in the future?

How serious is the potential


challenge from this
competitor?
Financial reserves
Capital equipment
Work force
Brand loyalty
Management
Alliances

What changes in competitors strategies are likely as a


result of the clients strategic initiatives?
Note: Also see Module III, Purpose of the organization
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING
Source: A.T. Kearney

Module II

15

Industry structure

Players analysis

Usage

A players analysis enables a company to better understand the behavior of its


competition

Purpose of players analysis


Forecast competitors future strategies and
decisions
Predict competitors reactions to the clients
strategy and competitive initiatives

Questions to answer
Who are the competitors?
What are their objectives?

Determine how competitors behavior


patterns can be influenced

What are their strategies?

Gain insights into competitors competitive


advantages and use this information to
improve the clients chances of success

What are their strengths and weaknesses?

What are their reaction patterns?

Source: Grant, R.M. (1995); Contemporary Strategy Analysis;


Kotler, P. (1997); Marketing Management
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

16

Industry structure

Players analysis

Usage

A players analysis makes competitor responses more predictable which enables


the client to optimize its strategic initiative

Predict behavior

How should client respond

Define relevant competitors


Define the strategic shifts a competitor
might initiate
Define potential retaliatory actions a
competitor may take against the clients
proposed strategy

Determine the most effective actions


with respect to competitors' positions
Determine how the client should
communicate information to
competitors. Signaling can be used
to influence competitor perceptions and
behavior to stimulate or suppress
specific reactions from competitors

Source: A.T. Kearney; Hail, O. and Robertson, T. (1991); Toward a Theory of Competitive Market Signaling
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

17

Industry structure

Players analysis

Example

All relevant competitors should be analyzed to generate a complete picture of the


competitive rivalry

Overview of Nestl and Danone


Listing of key
players
Player

Intended and
realized strategy
offensive/defensive?

Size
Business areas
Other

Objectives

Capabilities

Other

Nestl

Strategic intent
To develop the position
as the worlds largest
food company
Realized strategy
Growth by strategic
acquisitions
Joint venture with
General Mills
Growth by exploiting
existing brands in new
growth areas

To realize the USD 100


billion revenue target in
year 2000

The worlds largest food


company with more than
490 factories in 70
countries
Very strong brands such
as Nescafe, KitKat, Lion,
After Eight, and
Nestl
World no.1 in mineral
water, milk powder and
dried milk
No. 2 in ice cream
Generally a dominating
player in Europe

Danone

Strategic intent:
To become one of the
world's leading food
companies
Realized strategy:
Focus on a limited
number of core
businesses
Focus on developing
synergies between
activities

To reverse a four year


decline in operating
margins by 1998

The worlds largest


producer of fresh dairy
products
Strong brands such as:
Evian, Volvic,
Kronenburg, etc.
Mainly a European
vendor, except for dairy
products and mineral
water, where Danone has
a strong global presence

Revenue: USD 13.6 bill.


Net income: USD 550
mill.
Employees: 81,579
Business areas:
Diary products
Grocery
Biscuits
Beer
Mineral water
Containers

Does the current


performance meet
goals?
How serious is the
potential challenge?
Strong
Weak

Current strategy

Revenue: USD 45 bill.


Net profit: USD 2.6 bill.
Employees: 221,144
Business areas:
Hot and cold
beverages
Milk products
Chocolate and
confectionery
Convenience and
prepared foods
Pharmaceutical
products

Source: A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

18

Industry structure

Players analysis

Methodology

Methodology for using the players analysis

Output

Input
Issue analysis
Client
data/interviews
Customer and
supplier
surveys/interviews
Annual reports
Expert interviews
Analyst reports
SEC filings*
Industry reports
Trade Journals
Press clippings
Purpose of the
organization

Define players

List all potential competitors


Identify key information:
Revenue
Profit
Size
Products
Customers
Stakeholders
Mission/vision

Analyze players

Identify most important


competitors
Create a matrix of
relevant information
Define the competitors
on the basis of their
industry and market
perspective
Define in which
segments they operate
Assess players
capabilities

Summarize
competitive
environment

Industry description
Key success factors
of the industry
Game theory
Decision tree
End game analysis
Players focus and
competitive
positioning/strengths/
weaknesses vis--vis
the client

Determine the strengths and


weaknesses of individual
players:
Revenue and profit by
business
Cash flow position
Experience curve
Stock price performance
Financial return measures
Product/market
performance

* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

19

Industry structure

Players analysis

Conclusion

Conclusion

Key points

Use purpose of the organization from Module III, which examines vision/mission, objectives,
strategies, and value propositions, as a point of departure
Be careful not to neglect examination of peripheral players
Players analysis is a fundamental techniques with many uses: overview of competitive
structure, predicting competitive behavior, alliance opportunities, etc.
The scope of the project will determine the depth of the analysis required

Strengths

Establishes overview of industry situation


Predicts competitor behavior
Useful starting point for many other techniques

Weaknesses

References

Source: A.T. Kearney

Grant, R.M. (1995); Contemporary Strategy Analysis - Concepts, Techniques, Applications;


Blackwell Business
Hail, O. and Robertsen, T. (1991); Toward a Theory of Competitive Market Signaling; Strategic
Management Journal, 12
Johnson, G. and Scholes, K. (1984); Exploring Corporate Strategy; Prentice Hall
Kotler, P. (1997); Marketing Management - Analysis, Planning, Implementation and Control;
Prentice Hall

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

20

Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

21

Industry structure

Strategic group analysis

Description

A strategic group is part of the substructure of an industry

Definition*
A strategic group is a group of companies in an

industry following the same or a similar


strategy along relevant strategic directions
A strategic group has common specific assets
and thus follows common strategies in setting
key decision variables

* The strategic group concept was developed at Harvard Business School


Source: Grant, R.M. (1995); Contemporary Strategy Analysis
Kotler, P. (1997); Marketing Management
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

22

Industry structure

Strategic group analysis

Description

Strategic group analysis is a commonly used technique for analyzing players


positions in the competitive environment

Strategic groups can be created based on


many different factors

Specialization
Brand identification
Push vs pull
Channel selection
Product quality
Technological position
Vertical integration
Cost position
Service
Price policy
Financial or operating leverage
Parent company relationship
Government relationship

Source: A.T. Kearney

Most of the empirical research


into strategic groups has
focused on the differences in
profitability between companies
in different groups
It can often be very useful to
generically differentiate the
groups based on How they
compete and Where they
compete

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

23

Industry structure

Strategic group analysis

Description

A goal of strategic group analysis is the comprehension of the underlying


factors that determine a companys profitability
Profitability

Spread
within
industry

Determinants

Spread within
strategic group

Industry wide elements of


structure that determine the
competitive forces and that
apply equally to all
companies in the industry
Rate of growth in demand
Potential for
differentiation
Structure of supplier
industries

Source: A.T. Kearney

Strategic group specific elements


of structure that apply differently
to companies in different strategic
groups
Height of mobility barriers
Bargaining power of suppliers
and customers
Substitution threat
Exposure to rivalry from other
groups

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Specific company
profitability

Company specific elements that


apply differently to companies
within a strategic group
Scale of companies relative to
others in the group (if
economies of scale are an issue)
Cost of entry into the group
(e.g. via a companys position
in another industry)
Ability to implement the
common strategy of the
strategic group

Module II

24

Industry structure

Strategic group analysis

Usage

The strategic group analysis enables consultants to more easily identify potential
strategies and to better predict competitors responses to the clients strategic
initiatives

Key strategic questions


What are the directions of competitors strategic
movements over time?
Are there uncovered and attractive market segments
on the strategic map?
How can we exploit the clients competitive
advantage to move toward an uncovered segment?
Are there barriers against these strategic
movements? Can they be overcome?
What are competitors likely responses to the
clients strategic moves? Do they face mobility
barriers?

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Establish which
dimensions
differentiate companies
or groupings of
companies from each
other

Assess current and


potential strategic
moves of the client and
of other competitors in
the market

Module II

25

Industry structure

Strategic group analysis

Usage

A strategic group analysis provides a useful means to assess competitive dynamics

Individual player

Isolating
mechanisms

Dimension
Industry

Strategic
group
Strategic
group

Dimension

There should be a correlation


between the key success factors
and the dimensions in focus
The sustainability of the groups
will depend on the:
Mobility barriers of each
group (the barriers that
characterize each group and
how easily these can be
penetrated)
Isolating mechanisms of each
company (the unique resources
of the company that will aid in
preserving advantage) or
position within a group

Mobility
barriers

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

26

Industry structure

Strategic group analysis

Usage

The strength of a strategic group depends on its mobility barriers and isolating
mechanisms
Sources of mobility barriers

Sources of isolating mechanisms

Market-related strategies
Product line
User technologies
Market segmentation
Distribution channels
Brand names
Geographic coverage
Selling systems
Industry supply characteristics
Economies of scale (in production, marketing,
administration, etc.)
Manufacturing processes
R&D capability
Marketing and distribution system
Characteristics of companies
Ownership
Organizational structure
Control systems
Management skills
Boundaries of the company (diversification,
vertical integration)
Company size
Relationships with influence groups

Source: A.T. Kearney

Sunk costs and limited markets


Switching costs and search costs
Consumer and producer learning
Team embodied skills
Unique resources
Special information
Patents and trademarks
Reputation and image

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

27

Industry structure

Strategic group analysis

Example

By mapping the industry players into strategic groups, the clients closest
competitors are defined

Local players with a


very focused product
range

Kellogg's
PepsiCo
Carlsberg
Coca Cola

CPC International
Quaker Oats
Sara Lee
Heinz
RJR Nabisco

Seagram
Bongrain
Beesnier
Heineken
MD Foods
Firesland Dairy Foods
Danish Crown
Allied Domecq

Bols Wessanen
Cadbury Schweppes
GrandMet
United Biscuits
Bahlsen
Albert Fisher
Tate & Lyle
Eridania Beghin-Say
Tomkins
Dalgety

LVMH
Conagra

Lindt & Sprngli

Dairy Crest

Unigate

Avonmore

Coberco

Socopa

BASS

Guinness

Interbrew

Campina Melkunip
Scottish & Newcastle

High

Geographic scope

Global players where


the economies of
operating in a
particular market
depend not only on
what the company is
doing in that market,
but on its worldwide
activities

Strategic grouping of food and beverage industry players

Low

Dimensions should
differentiate the
players into groups
relevant to the issues.
Choosing appropriate
dimensions may
required trial and error

Irish Dairy Board


Soiaal
Sdfleisch
Danisco
Pernod Ricard
Sdzucker
Moksel
Pripps
Booker
Whitbread

Focused

Orkla
Saint Louis

Product range

Danone (BSN)
Nestl
Philip Morris (Kraft Jacobs Suchard)
Unilever
Proctor & Gamble

Associated British Foods


Hillsdown
Northern Foods
Parmalat

Wide
3

Source: Datamonitor; A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

28

Industry structure

Strategic group analysis

Example

Strategic groups might become evident when evaluating an industry using matrices
with how to compete and/or where to compete factors as dimensions

Snackwells

Nips

McVitis

Nilla
Wafers
Mothers

Entenmanns
Freyhofers
Pepperidge
Farms

Low

Relative health value

Choose how to
compete and/or
where to compete
factors as the generic
matrix dimensions

High

The cookie industry consists of five major strategic groups

Blue chip
Mrs.. Fields

Sunshine

Davids

Hydrox

Follower
Leader
Pricing policy

Strategic groups will


generally become clear
within the matrix
Source: A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

29

Industry structure

Strategic group analysis

Example

The strategic group analysis can also be applied to analyze development over a
period of time

Development of the food industry in the 1980s

High
Geographical coverage

Low

Shifts in the strategic


intent of a strategic
group can be
captured on such a
matrix given that the
dimensions are
relevant to the
developments

Unilever
Danone
Nestl

Minor
national brands

National
own labels

Focused

Colmans
ABF

Multinational
major brands

United Biscuits
Unigate

National
major brands
Hillsdown
Booker
Marketing intensity*

Wide

* Marketing costs as a percentage of sales


Source: Datamonitor; A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

30

Industry structure

Strategic group analysis

Example

Companies in the same industry may follow very different strategies

Group C
Full line
Low manufacturing
cost
Medium price
Group D
Broad line
Medium manufacturing
costs
Low service
Low price

Source: A.T. Kearney

High

Group A

Mobility barriers
Product line
Brand names

Group B

Mobility barriers
Economics of
scale
Expertise
Relationships
with private
label dealers

Group C
Low

Group B
Moderate line
Medium manufacturing
costs
Medium service
Medium price

Strategic grouping of food and beverage industry players

Quality

Group A
Narrow line
Lower manufacturing
costs
Very high service
High price

Group D
Low

High
Vertical integration
3

Source: Kotler, P. (1997); Marketing Management

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

31

Industry structure

Strategic group analysis

Methodology

Methodology for using a strategic group analysis

Input

Players analysis
SEC filings
Annual reports
Client
data/interviews
Expert interviews
Analyst reports
Trade journals
Press clippings
Trends analysis
Substitution threat
analysis

Source: A.T. Kearney

Output

Determine
dimensions

Identify players
(see players
analysis)
Choose the most
relevant
dimensions that
define how the
players compete
Ensure that the
dimensions
correlate with the
issues analysis

Group players

Position client and


competitors in the
matrices
Group players with
common
characteristics

Evaluate group
mobility and
direction

Understanding of
player
characteristics
and interaction
and reactions to a
strategic
initiative

Evaluate strategic
intent of individual
companies to
determine potential
movements within
and between
groups
Study industry
trends to
understand
direction of groups

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

32

Industry structure

Strategic group analysis

Conclusion

Conclusion

Key points

Profitability may at a corporate view be the driver for strategic groups. However, at a business
unit level, other dimensions might be more important determinants of strategic groups
Dimensions whereby strategic groups are identified must be carefully selected to be of relevance
Strategic group dimensions should be chosen on the basis of the identified issues
There are not simply two generic dimensions that can characterize groups from all industries;
there are many

Strengths

Assesses strategic dynamics and shifts in the industry


Defines the nearest competitors of the client

Weaknesses

Wrong dimensions will not differentiate groups into useful categories


May require trial and error to find useful dimensions

References

Source: A.T. Kearney

Grant, R.M. (1995); Modern Contemporary Analysis


Kotler, P. (1994); Marketing Management
McGee, J. and Howerad, T. (1986); Strategic Groups: Theory, Research and Taxonomy
Oster, S.M. (1994); Modern Competitive Analysis

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

33

Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

34

Industry structure

Substitution analysis

Description

Substitute products are alternative solutions that meet a particular customer


demand

Definition

Purpose

Substitute products are those


that can perform the same function or
satisfy the same need as the given
product of an industry. Substitution
threat analysis identifies three
important criteria about products and
their substitutes:
The relative value delivered and the
price of a substitute when compared
to the existing product
The cost of switching to the
substitute product
The buyers tendency to switch
between substitute products

The goal of the analysis is to


understand what products constrain
the ability of companies in the
industry to substantially raise their
prices?

Source: Oster, S.M. (1994); Modern Competitive Analysis


Porter, M.E. (1980); Competitive Strategy
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Substitution analysis

Description

By offering an alternative, substitute products limit the potential returns of an


industry by placing a ceiling on the price companies in the market can charge

A need for warmth can be satisfied by


Blankets and clothes
Heaters - electric, gas and other
Building insulation
Exercise
Warming food and drink
Increased body fat
Substitutes never offer exactly the same level of functionality they may provide:
More functionality - e.g. a computer spreadsheet program as a
substitute for a calculator
Less functionality - e.g. a type-writer as a substitute for a wordprocessor

Substitute products play an


uneven role in industry structure
analysis
In highly competitive
industries or during periods of
excess capacity, substitute
products play a very modest
role
In times of rapidly increasing
demand or in industries in
which there are few
competitors, substitute
products may become quite
important

Substitute products also influence the market price in certain cases;


e.g. printer industry (laser printers have become cheaper, because
of the low cost of ink jets, which offer comparable print quality)

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Substitution analysis

Description

The wider the definition of the need, the greater the number of possible
substitutes (and any complementary products)
Potential substitutes for metal downhill skis

Epoxy and
fiberglass
skis
Cross country skis

Winter sports equipment

Leisure products that


can be used in winter

The buyer taking more leisure


time in summer than in winter

Source: A.T. Kearney; Oster, S.M. (1994); Modern Competitive Analysis


A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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37

Industry structure

Substitution analysis

Description

The value of the link between industry definition and substitutes should not be
understated
Industry definition

Substitutes by segment

Segment C
(e.g., coal fuels)

1
2

Drivers

Segment A
(e.g., refined oil
fuels)

Value

Segment B
(e.g., natural gas
fuels)

Clients dont often think through to


level 4
Promotes out of the box thinking
Forces thinking about what business
are we really in and who are our
real competitors

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Substitution analysis

Usage

Substitution analysis is the basis for identifying threats and opportunities in


strategy engagements

Defend against substitution

Promote substitution

Improve the value of own products relative to all


substitutes
Redefine competition away from the strengths of
the substitute
Enlist suppliers in the defense
Focus on segments least susceptible to
substitution

Use
substitutio
n analysis
actively

Target switchers early:


Invest in advertising to let buyers know
about the products
Improve offering in the areas where own
product offers the greatest relative value to
buyers
Reduce or eliminate switching costs
Selective forward integration to create pullthrough demand
Promote improvements in complementary
products and infrastructure

Source: Porter, M.E. (1985); Competitive Advantage


A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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39

Industry structure

Substitution analysis

Example

A value/cost matrix can be used to map substitutes

By mapping substitutes,
one can determine a
products optimal
value/cost combination

Products S1 and S3 deliver the most value to the customer with respect to cost
Mapping of dairy products

Value can sometimes


be stated in financial
terms, but is most often
qualitative or based on
an arbitrary scale
The diagonal line
suggests that there is a
level of value/cost
equivalence

S3

S4
S1

Value to customer
(match with the
underlying need)*

S2

S5

S1, S2, S3, and S4


deliver more value than
cost. Products S1 and
S3 present the greatest
substitution threat
S5 and S6 cost more
than the value that they
deliver

S6

Cost to customer
* What customers get relative to next best option
Source: A.T. Kearney

Note: Such analysis can be related to conjoint analysis


Source: A.T. Kearney
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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40

Industry structure

Substitution analysis

Example

Costs are incurred by customers when they switch among substitutes

Primary switching costs for an international food manufacturer

A next step could


involve a
quantification of
each switching cost
to determine their
impact on the
company

Complementary
product costs

Installation
costs

Each of these
switching costs must
be addressed both
when promoting
substitution and
defending against it

Complexity cost
Purchasing
costs*

Switching
costs

Decommissioning
costs

Service and
maintenance costs
over the lifetime
of the products

Source: A.T. Kearney

* Including delivery to the point of need at a specific time


Source: Porter, M.E. (1985); Competitive Advantage
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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41

Industry structure

Substitution analysis

Example

Buyers tendency to switch products or services might differ considerably

If up-front
investments are
needed to use the
substitute, buyers
without access to
financing might be
restricted from
switching

Assessment of switching requirements for a small dairy company contemplating


manufacturing a new soft drink

Buyer characteristic
Risk averse buyers
are unlikely to
switch
Some buyers are
more comfortable
trying new products
and are more likely
to switch
Buyers who have
experience switching
are more likely to
change products than
buyers who have
never switched
before

Effect on likelihood of buyer switch


from dairy to soft drink

Access to financing

Low to moderate as products are


priced competitively

Risk profile

Low as there is no risk associated


with buying a new soft drink

Behavior

Previous experience of
switching

Moderate as it can be difficult to


persuade people to try new
brands
Moderate as there will always be
a group of buyers shopping
around

Source: A.T. Kearney

Source: Porter, M.E. (1985); Competitive Advantage


A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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42

Industry structure

Substitution analysis

Methodology

Methodology for performing a substitution analysis

Input

SEC filings*
Annual reports
Analyst reports
Expert interviews
Client data/interviews
Trade journals
Customer surveys
Strategic groups
Players analysis

Output

Define industry
boundaries

Define industry
boundaries by analyzing
companies offering a
similar product range
Define industry
boundaries from a
market perspective
based on common needs
of customers

Determine
substitution
threats

Assess the value


delivered by
different products
relative to cost
Determine
switching costs
Analyze buyers
tendencies to
switch
Assess threat of
substitution

Assess market
opportunities

Industry description
Understanding of
customer needs
New entrant threats
New market
opportunities

Identify
opportunities for
clients product in
areas traditionally
considered outside
the market

Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Substitution analysis

Conclusion

Conclusion

Key points

A substitution threat analysis can identify the:


Relative value of products
Switching costs
Buyers tendency to switch products
A substitution threat analysis can be used to:
Promote substitution
Defend against substitution

Strengths

Raises focus on all products competing for the customer - not just those similar to the clients
own products
Particularly useful where industries are going through radical changes
Can add considerable value to the client by redefining competition in value/cost terms

Weaknesses

Not a science - some degree of ambiguity always remains


Can be difficult to quantify the costs of promoting or defending against a substitute product

References

Oster, S.M. (1994); Modern Competitive Analysis


Porter, M.E. (1980); Competitive Strategy

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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44

Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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45

Industry structure

Supply chain analysis

Description

To understand the dynamics of an industry, it is necessary to analyze the entire


supply chain

Definition

The supply chain is a series of interlinked processes that are performed in a


given sequence to efficiently acquire raw
materials and then convert them into
products and transport them to customers
for use in producing final products for
end-users

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

The supply chain


describes the activitiesfrom raw material to the
end-customer and
therefore spans several
industries

Module II

46

Industry structure

Supply chain analysis

Description

A supply chain describes a relationship among a group of integrated industries that


together work to transform a set of raw materials into final products*

Raw
material
sources

Suppliers

Manufacturers

Distributors

Retailers

Customers

An industry
consisting of
several
companies**

* A supply chain is not necessarily linear. The structuring of a supply chain as a linear diagram forces a consultant to simplify a relationship among industries
that might be extremely complicated
* * Supply chain analysis should not be confused with the term value chain analysis. The value chain disaggregates a companys activities into strategically
relevant steps to understand the behavior of costs and the existing and potential sources of differentiation (See Module III)
Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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47

Industry structure

Supply chain analysis

Usage

A supply chain facilitates an understanding of the industry structure

Key outcome of a supply chain analysis

Analysis of linkages to suppliers and customers


Analysis of the value generated at each step in the supply
chain

Analysis of the degree of vertical (backward and forward)


integration
Analysis of the structures and level of company concentration
at each stage in the supply chain

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Supply chain analysis

Usage

An analysis of the strengths and power of a clients buyers and suppliers is


essential for understanding the clients degrees of freedom

Client
industry

Suppliers are powerful if:


Their industry is dominated by a few
companies and is more concentrated than the
industry it sells to
Their product is unique or at least
differentiated, or if it has built up switching
costs
They are not obliged to contend with other
products for sale to the industry
They pose a credible threat of integrating
forward into the clients business
The client industry is not an important
customer of the supplier group

Source: A.T. Kearney

Buyers are powerful if:


They are concentrated or purchase in large
volumes
The products purchased from the clients
industry are standard or undifferentiated
The products purchased from the clients
industry are a component of their products and
represent an insignificant fraction of costs
They earn low profits, which creates great
incentive to lower their purchasing costs
The clients product is unimportant to the
quality of the buyers products or services
The clients products do not save the buyer
money
The buyers pose a credible threat of
integrating backward to make the clients
product

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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49

Industry structure

Supply chain analysis

Example

A supply chain can be drawn to illustrate the amount of value captured by each
step in the process

The amount of value captured by the clients industry is shrinking


Actual retail sales; DEM/kg

Indicate the actual


level of value added

Supply chain analysis for the German flour industry


100% = 1.50

100% = 1.40
1.50

Split the supply


chain into its relevant
industries

Retailers

29%

1.40
32%

1.06

Client industry

0.95
14%

27%
0.66

Transportation

End-user

5%

0.76
0.69

0.40

0.19

1990

1996

8%
0.54
49%

Illustration of the
supply chain over
time provides an
opportunity to
understand how the
clients industry has
performed

Source: A.T. Kearney

Grain suppliers

36%

1990

1996

Raw material

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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50

Industry structure

Supply chain analysis

Example

A supply chain can be drawn to illustrate the profit levels attained by the players
across the various steps

Grain supply represents the most profitable industry in the supply chain
Cost

The cost incurred at a


specific level of the
supply chain in
preparing the input
for sale represents
the value added at
that level

Profit

100% = 1.40
1.40
1.30

Total value added to


the product equals
the sum of the
shaded areas

Source: A.T. Kearney

ValueAdded

0.10

Retailers
0.35
Client industry

Total cost per step


includes the cost of
the input from the
preceding step plus
the expenses incurred
to add additional
value

Profit

Transportation

0.95
0.90

0.05

0.76
0.73
0.69

0.03

0.14
0.04

0.39
Grain suppliers

0.30

0.30

1996
Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Supply chain analysis

Example

An illustration of an industry that is being threatened by its suppliers and buyers

Through an analysis
of the suppliers and
customers strengths,
the vulnerability of
the industrys
position becomes
evident

The industry is under pressure from both its suppliers and customers

Suppliers

Client
industry

The suppliers are very


concentrated - only two players
generate approximately 80
percent of output
The suppliers have created high
switching costs, especially due to
legislation

Customers

Four customers control the


market and determine price
setting
The customers use the clients
product as a loss leader to attract
their customers
The customers are seriously
considering a direct relationship
with the clients suppliers

Source: A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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52

Industry structure

Supply chain analysis

Example

The degree of vertical integration can be presented along side the supply chain to
show the activities that the players perform in-house

Degree of vertical integration of different food players


Overview of the
supply chain

Suppliers

Manufacturers

Distributors

Retailers

Consumers

Degree of vertical integration of different players


Player A
Player B
Player C

Mapping the
different players

Player D
Player E
Player F

Source: A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Supply chain analysis

Example

Another analysis indicates the degree of vertical integration of the players and their
relative positions in each stage of the supply chain

This technique
provides an
opportunity to
analyze the level
of market
concentration at
each stage of the
supply chain

Concentration and vertical integration of food players in the supply chain

Suppliers

Manufacturers

Market share
100%

Distributors

Retailers

Other

H
G
F
E
D

The client is in
this case heavily
involved in two
stages of the
supply chain.
However, its
position differs
considerably in
each step

Consumer

Client

Other

B
Client
A

A
0%

Note: Letters refer to different companies


Source: A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Supply chain analysis

Methodology

Methodology for using a supply chain analysis

Input

Output

Client data/
interviews
Annual reports
Expert interviews
Analyst reports
SEC filings*
Trade journals
Customer surveys
Value chain
Trends analysis
Substitution analysis
Players analysis

Linkages to suppliers
and customers
Value-added analysis
Degree of vertical
integration
Substitution threats
Exit and entry barrier
assessment
Cost and margin
driver analysis
Value-added
structure

Identify supply
chain activities

Identify the end product


Define raw materials
required to produce the
end product
Define the intermediate
steps required to
transform raw materials
into the final product
A step should be
composed of players
producing products that
are equivalent or
substitutes of each other

Develop valueadded structure

Determine the
value-added by
each step of the
supply chain. This
can be determined
by taking the
selling price, less
retail margin,
minus the input
price
Determine costs
and margins within
each segment

Identify players
at each step

Group players that


produce equivalent
or substitute
products
Determine the
concentration of
competitors at each
step

Identify
relationships
within/across
steps

Analyze specific
relationships
among players
Assess the degree
of vertical
integration among
players in the
various steps

* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney

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Industry structure

Supply chain analysis

Conclusion

Conclusion

Key points

A supply chain analysis provides:


An overview of linkages to suppliers and customers
An assessment of the value generated at each stage at the supply chain
A determination of the degree of vertical integration
An analysis of the concentration of players at each step of the supply chain

Strengths

Provides an overview of the companys supply chain mechanisms, and generates an


understanding of the company's relative strengths and weaknesses

Weaknesses

Difficult to obtain exact quantifiable data for a cost analysis

References

Source: A.T. Kearney

Oster, S.M. (1994); Modern Competitive Analysis, Oxford University Press


Poirer, C. and Reiter, S.E. (1996); Supply Chain Optimization, Berret-Koehlers Publishers, Inc.
Porter, M.E. (1979); How Competitive Forces Shape Strategy, Harvard Business Review,
March/April
Porter, M.E. (1980); Competitive Strategy - Techniques for Analyzing Industries and
Competitors, The Free Press

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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56

Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

57

Industry structure

Exit and entry barrier assessment

Description

Comprehension of entry and exit barriers is key to industry analysis

Entry
barriers

Entry barriers are economic, strategic, and emotional factors that keep
companies from entering a business even though they might earn high or
adequate returns on investments

Exit
barriers

Exit barriers are economic, strategic, and emotional factors that keep
companies competing in a business even though they might earn low or
even negative returns on investments

Source: Porter, M.E. (1980); Competitive Strategy


A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Exit and entry barrier assessment

Description

Structural barriers and behavioral barriers represent the two types of entry
barriers

Type
Structural barriers

Comment
Structural barriers exist as a result of differences in the structure between the
companies under consideration - the incumbent and the new entrant

Behavioral barriers

Behavioral barriers exist as a result of expected changes in competitive


behavior of the incumbents that run counter to the interests of the entrant

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Exit and entry barrier assessment

Description

Seven types of structural entry barriers exist


Economies of scale

Economies of scale deter entry by forcing the newcomer to enter the market at a large scale
and thus risk strong reaction from existing companies or enter the market at small scale and
accept a cost disadvantage, both undesirable options

Product differentiation

Product differentiation results in a barrier to entry by forcing entrants to expend significant


resources to overcome existing customer loyalties, which stem from advertising, customer
service, product differences, or from simply being the first into the industry

Capital requirements

The need to invest large financial resources to compete creates a barrier to entry,
particularly if the capital is required for risky or unrecoverable up-front advertising or research
and development

Switching costs

A barrier to entry is created by the presence of switching costs (e.g. employee retraining costs,
cost of new equipment, cost and time in testing or to qualify a new source, need for technical
help as a result of reliance on seller engineering aid, product redesign), that is, one-time costs
facing the buyer that switches from one product to a new one
A barrier to entry can be created by the new entrants need to secure distribution channels.
To the extent that distribution channels for the product have already been monopolized by
established companies, the new company must persuade distributors to accept its product
through price breaks and co-operative advertising allowances, which reduce profits
Barriers to entry can result from proprietary product technology (product know-how or design
characteristics), favourable access to raw materials, favourable locations, government
subsidies, learning or experience curve effects (there is an tendency for unit costs to decline
as the company gains more cumulative experience in producing a product), etc.

Access to
distribution channels

Cost disadvantages
independent of scale

Government policy

Governments can limit or even prohibit entry into industries with controls such as licensing
requirements and limits on access to raw material (like coal lands or mountains on which to
build ski areas)

Source: Porter, M.E. (1980); Competitive Strategy


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Industry structure

Exit and entry barrier assessment

Description

Four types of behavioral entry barriers are also likely to exist

History

A history of vigorous retaliation by incumbents against new entrants

Incumbents have significant


sunk costs*

Established companies with substantial resources to fight back, including: excess production
capacity, unused borrowing capacity, and significant leverage with distribution channels or
customers

Threats of aggressive
response from incumbent

Established companies with great commitment to the industry and highly illiquid assets
employed in it

Slow industry growth

Slow growth, which limits an industrys ability to absorb a new company


without negatively impacting the performance of established companies

Sunk costs are non-recoverable costs


Source: Porter, M.E. (1980); Competitive Strategy
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Exit and entry barrier assessment

Description

Exit barriers restrict companies from discontinuing operations in an industry


despite poor earnings

Specialized assets

Assets highly specialized to the particular business or location have low liquidation values or
high costs of transfer or convert

Fixed cost of exit

These include labor agreements, resettlement costs, maintaining capabilities for spare parts,
etc.

Strategic interrelationships

Interrelationships between the exiting business unit and other business units in the company
in terms of image, marketing ability, access to financial markets, shared facilities, etc.

Emotional barriers

Managements unwillingness to make economically justified exit decisions caused by


identification with the particular business, loyalty to employees, fear for ones own career,
pride or other reasons

Government and social


restrictions

These restrictions involve government denial or discouragement of exit out of concern for job
loss and regional economic effects

Source: Porter, M.E. (1980); Competitive Strategy


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Industry structure

Exit and entry barrier assessment

Usage

Entry and exit barriers are analyzed to gain an understanding of the industry
structure and dynamics

Entry barriers

Exit barriers

Identify current entry barriers


To understand potential industry
profitability
To understand how high prices can
be set without attracting new
entrants

Identify exit barriers to understand


industry profitability and attractiveness
Identify exit barrier when considering
exit to allow for action to be taken in
reducing them

Develop actions to change situation


Raise entry barriers to prevent new
entrants (as an incumbent)
Lower entry barriers (as a new
entrant)

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Exit and entry barrier assessment

Example

Entry and exit barriers are important factors, which can help to explain the
performance of companies within an industry
When both entry and exit
barriers are high, profit
potential is high, but is
usually accompanied by
more risk. Although
entry is deterred,
unsuccessful companies
will stay and fight

Positioning of industries in terms of entry and exit barriers

High
The most attractive
segment - few new
companies can enter and
poorly-performing
companies can easily
exit
The case of low entry
and exit barriers is
uncommon

Here entry is relatively


easy and will be attracted
by upturns in economic
conditions or other
temporary windfalls.
However, capacity will
not leave the industry
when results deteriorate

Local food players


Dairy producers
Pharmaceutical

Multinational food
players
Automobile
manufacturing
Aerospace

Mining

Entry barriers
Food stands
Grocery store
Financial services
PC assembly

Low

Low

High
Exit barriers

10

Source: A.T. Kearney

* These expressions are generic in nature and can vary considerably depending on the specific industry situation
Source: A.T. Kearney; Porter, M.E. (1980); Competitive Strategy
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry structure

Exit and entry barrier assessment

Example

Entry barriers exist in almost every industry . . .

Industry

Example of entry barrier

Comment

Cosmetics

Product differentiation

Heavy advertising

Telecom

Capital requirements for a new


project

Incumbent telecom companies find it easier to find financing


for new projects than a new entrant would

Utility

Switching costs for customers

Moving between electricity and gas for heating requires


a significant expenditure on new equipment

Consumer

Access to distribution channels

Soap powder manufacturers (P&G and Unilever) have wide


access to distribution through the retail chains. Often
they can stop new entrants from gaining access hindering
smaller producers from being able to compete

Software

Cost advantages based on scale

Software manufacturers in China and India have a major cost


advantage (independent of scale) over American and
European software producers

Multimedia

Government policy

Licenses for radio broadcasting in most countries are


restricted. Without a license, new entrants cannot broadcast
(legally)

Source: A.T. Kearney; Porter, M.E. (1980); Competitive Strategy


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Industry structure

Exit and entry barrier assessment

Example

. . . as do exit barriers

Industry

Example of exit barrier

Comment

Coal industry

Fixed costs of exit e.g. labor


redundancy settlements and
environmental clean-up costs

The coal industry in most countries has traditionally been


highly unionized and required major redundancy settlement
for non-profitable mines to be shut down

Family owned companies

Emotional barriers loyalty to


employees, status, etc.

Many community based companies with strong local links,


e.g. family companies in many countries

Companies from previous Government and social restrictions


socialist countries
governments often intervene to
prevent companies from closing
down to safeguard jobs

This situation is becoming less true world-wide as countries


move toward market economies. However, companies are
still influenced by governments and prevented from
closing, e.g. Japanese and Korean financial institutions

Retail clothing

Promise to shareholders or to corporate management might


prevent withdrawal from otherwise unpromising markets

Company political barriers

Source: A.T. Kearney; Porter, M.E. (1980); Competitive Strategy


A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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66

Industry structure

Exit and entry barrier assessment

Methodology

Methodology for performing an exit and entry barrier assessment

Input

Output

Client
data/interviews
Expert interviews
Analyst reports
SEC filings*
Annual reports
Players analysis
Strategic group
analysis
Substitution analysis
Supply chain
analysis

Degree of industry
vulnerability to new
entrants
Assessment of
sustainability of
present competitive
structure
Cost and margin
driver analysis
Understanding of
profitability structure

Identification of
barriers

Determine the factors


that make an industry
accessible or
inaccessible to new
entrants
Determine the factors
that would restrict a
players departure
from an industry

Analysis of
barrier sizes

Quantify the
resources,
relationships or scale
required to
successfully overcome
the entry barriers
Determine both the
direct and residual
costs associated with
leaving the industry

Determination
of barrier
significance

Compare the levels of


resources, skills,
technology, etc. against
those required to
overcome the entry
barriers
Determine steps required
for incumbents to raise
entry barriers
Compare the cost of exit
against the benefit
Determine steps required
to lower exit barriers

* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney

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Industry structure

Exit and entry barrier assessment

Conclusion

Conclusion

Key points

Provides an understanding of industry attractiveness and profitability and thus the likelihood of
new entrants or players leaving the industry

Strengths

Easily understood as an explanation of above normal returns in an industry


Combines several different concepts into one technique for understanding the entire industry
Strong technique if the barriers can be quantified

Weaknesses

Not easily translated into impact on price without significant analysis, as many barriers are not
easily quantifiable

References

Oster, S.M. (1994); Modern Competitive Analysis


Porter, M.E. (1985); Competitive Strategy
Scherer, F.M. and Ross, D. (1980); Industry Market Structure and Economic Performance

Source: A.T. Kearney

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Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
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Development of the industry

Introduction

Development of an industry must be understood by the company seeking to remain


competitive

Strategic era analysis

Industry life cycle analysis

Trends analysis

Summarizes the past

Examines where the


industry is today

Studies what the industry


is moving towards

Comments on where the


industry might be headed,
given its past

Sheds light on the drivers


of change

Present

Future

Tells us how the industry


arrived at its present
structure

Past

Source: A.T. Kearney

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Contents of Module II

Introduction

Defining the industry structure


Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
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Development of the industry

Industry strategic era analysis

Description

An industry strategic era analysis is a time line that is segmented based on shifts in
strategic paradigms

Definition

Purpose

A time line segmented by eras


corresponding to major shifts in
the key success factors of an
industry
A summary of an industry's
relevant history

To gain a big picture


introduction to an industry
To understand an industrys
development and situation
To uncover and present industry
background facts
To determine the industry
inflection points that mark
significant change

Source: A.T. Kearney

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Development of the industry

Industry strategic era analysis

Usage

An industry strategic era analysis is useful to learn about an industrys background

Modes of usage
Creating an appreciation of a client
perspective via a historical understanding
Briefing colleagues about an industry of
concern
Understanding why a company did or did not
succeed or excel in certain period

Introduction to a company presentation

Source: A.T. Kearney

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Development of the industry

Industry strategic era analysis

Example

An industry strategic era analysis as it would be presented internally or externally

Dates and names of eras

The food industry has undergone continuous change


Description of the major
strategic paradigm(s) of the
industry and the KSF

Mention the key events that


characterized the era or led
to its beginning or end. One
can give specific dates for
specific events (e.g.,
mergers, political events of
significance, etc.), or provide
general statements
summarizing the key events*

Freedom to have one or


more (or no) categories
concerning relevant
information about the
client, major trends, etc.

1958

1981
Growth

1989
Diversification

Consolidation

Strategic paradigm

Meet local/specific
customer needs

Industry characterized by Industry characterized by


regional or international
multinational and global
players with a somewhat
players with a broad but
diversified product range directed product range
Focus on diversifying
Attacking the entire market
product offering
with an array of core
competence based product lines

Key events

Product development

Internationalization
Diversification

Key players

Many national players


with limited
international exposure

A range of both regional Unilever


and international players Danone
Masterfoods

Key success factors

Focus on costs

Gain market share

Globalization

Access to distribution channels


Economies of scale

.
Source: A.T. Kearney

Note: See strategic era analysis in Module III for an era analysis for key events with specific dates
Source: A.T. Kearney
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Development of the industry

Industry strategic era analysis

Methodology

The analysis phase of an industry strategic era analysis aims to reveal not only
how the KSFs have changed, but also why they have changed

Methods of investigation
Consider the drivers of change by looking directly at the
shifts in the key success factors (Changes in the strategic
gameboard)

The segment (Where to compete?)


The value chain (How to compete?)
Consider the drivers of change by using frameworks to
identify fundamental shifts in the strategy of an industry
Structure-conduct-performance analysis*
The five forces model*

* Explanation located later in module


Source: A.T. Kearney

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Development of the industry

Industry strategic era analysis

Methodology

Methodology for creating an industry strategic era analysis

Input

SEC filings*
Annual reports
Strategic paradigms
Key events
Key products
Players analysis
Industry description
Client data/interviews
Analyst reports
Player chronologies
(from investor
reports)
Company anniversary
report
Key success factors

Output

Fact finding

Introduction to the
industry
History of industry
development
Trends

Defining strategic
paradigms

Compile data from sources Identify the past


about:
drivers of the industry
Industry founding
Product evolution
Competitive structure
Sales growth
Key events affecting or
characterizing change
Key players
Key success factors

Define and
characterize
eras

Segment the industry


history into eras
Each era should have a
title and dates
Begin analysis with
industry founding and end
with the present
List characterizing
strategies, facts, events
and conditions
corresponding to each era
Include greater detail as
the present is approached

* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney

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Development of the industry

Industry strategic era analysis

Conclusion

Conclusion

Key points

Strengths

Provides a useful overview of the industry


Gives a presentation of background facts and summarizes an industry's relevant history
Provides a clear presentation/confirmation of A.T. Kearneys understanding of the industry

Weaknesses

Can be difficult to obtain the information required to construct an industry strategic era analysis

Do not let specific time periods control the strategic eras


Gives a quick industry overview
Important to emphasize the key drivers in each era and which drivers make the era shift
Especially valuable in an industry going through significant change

References

Source: A.T. Kearney

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Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
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Development of the industry

Life cycle analysis

Description

Definition of the industry life cycle analysis

Definition
The life cycle model is a concept used to characterize
common strategic issues corresponding to different
stages of the development of an industry. A life cycle
is drawn by plotting sales of an industry with respect
to time. A life cycle analysis is based on the
hypothesis that the sales pattern/history of every
industry, product, or brand passes through four stages,
which are defined by an S-shaped curve

Source: A.T. Kearney

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Development of the industry

Life cycle analysis

Description

A life cycle analysis is based on the hypothesis that the sales pattern/history of
every industry, product, or brand passes through four stages, which are defined by
an S-shaped curve
Life cycle stages
Sales
Introduction

Growth

Maturity

Decline
Assumptions
All industries have limited life spans
Industry sales pass through distinct
stages, each posing different
challenges to the seller
Profits rise and fall at different
stages of the industry life cycle
Time

Sales
Costs
Buyers
Profits
Competitors
Products
Marketing
Strategy

Low
High cost
Innovators
High Price/Margins
Few
Poor quality
High advertising
Gain share

Rapidly rising

Decreasing avg. cost


Early adopters

Rising profits

Growing number

Quality differentiation
High advertising

Good marketing

Peak
Low cost
Middle majority
High profits
Stable number
Superior quality
Segmentation
Gain cost advantage

Declining sales
Low cost
Laggards
Declining profits
Declining number
Lower quality
Low advertising
Harvest & divest

Players require different strategies in


each stage of their industrys life
cycle

Source: A.T. Kearney; Kotler P. (1997); Marketing Management; Porter, M.E. (1980); Competitive Strategy
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Development of the industry

Life cycle analysis

Description

The particular stage of the industry life cycle influences business unit strategy

Sales
Introduction

Growth

Maturity

Decline

Possible life cycle extension

New entrants
Shakeout

Market share

Production costs

Profit
Market structure

Sole supplier

Competitive
penetration

Share
stability

Commodity
competition

Time

Withdrawal

Source: A.T. Kearney; Kotler, P. (1997); Marketing Management


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Development of the industry

Life cycle analysis

Usage

The industry life cycle model can be used as an input to strategy formulation

Modes of usage

In interpreting product/market dynamics


As a comparative tool, to measure against
past product performance

As a planning tool to identify challenges


and alternatives

Source: Day, G.S. (1986); Analysis of Strategic Market Decisions


Grant, R.M. (1995); Contemporary Strategy Analysis
Ohmae, K. (1976); The Mind of the Strategist
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Development of the industry

Life cycle analysis

Usage

The duration of a life cycle stage can often be estimated given the nature of the
product/industry

Life cycle stage

Length

If product characteristics are

Development

Long

High-tech

Introduction/growth

Short

Not requiring new


Distribution channels
Transportation mechanisms
Services
Communication
Readily accepted and promoted
Interesting to consumers

Maturity

Long

Fairly stable with regard to


consumer demands and product
technology

Decline

Long

High brand loyalty


Slow technology changes
High exit barriers

Compare industry
sales data to that of
related industries to
learn of special
characteristics or
anomalies within the
life cycle

Source: Kotler, P. (1997); Marketing Management


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Development of the industry

Life cycle analysis

Example

Life cycles can have different scopes and some life cycles are subsets of others

Demand life cycle


Humans have needs
that change over time
(and are met by
products)

Life cycles related to food storage


Sales

Demand-technology
life cycle
Each succeeding
technology that better
satisfies a need has a
life cycle

Food storage

Product life cycle


A succession of
products can be
redeveloped within a
given demandtechnology

Mini-bar

Brand life cycles


Each product then has
brands each with its
own life cycle

Refrigerators

GE
Time

Source: A.T. Kearney

Source: Kotler P. (1997); Marketing Management


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Development of the industry

Life cycle analysis

Example

Industry life cycles rarely conform exactly to the theoretical shape. Here are some
common variants
Sales

Growth-slump-maturity

Equilibrium (petrified) level is


sustained by early adopters
replacing the product and by late
adopters, who are buying it for
the first time
Characteristic for small kitchen
appliances (e.g. electric knives)

Sales

Style

Time

Sales

Cycle-recycle

Primary cycle

Recycle

Time

As sales decline, the company (or


companies) gives the product a
new promotional push
Second cycle is usually smaller in
size and duration
Typical of pharmaceutical
companies promoting a drug

Sales

Fashion

Time

Sales

Scalloped

A style is a basic, distinctive mode of


expression
A style appears in a field of human
endeavor (home, clothing, art)
A style can endure for generations,
cycling up and down

A fashion is a currently accepted or


popular style. e.g. jeans are a fashion in
todays clothing
A fashion has stages: distinctiveness
emulation mass-fashion decline
A fashion grows slowly, becomes
popular for a while, then decline slowly
Time

Sales pass through a succession of


life cycles based on discovery of
new uses, characteristics or users of
the product
An example is nylon sales and
application: Parachutes hosiery
shirts carpets

Sales

Fad

A fad is a fashion that develops quickly, is


adopted with great zeal, peaks early, and
declines rapidly, e.g. pet rocks
A fad does not survive, because it does not
satisfy a strong need

Time

Time

Source: Kotler P. (1994); Marketing Management


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Development of the industry

Life cycle analysis

Methodology

Methodology for using an industry life cycle

Input
Sales data
Sales data from
closely related
industries
Analyst reports
SEC filings*
Annual reports
Client
data/interviews
Trade journals
Industry strategic
era analysis
Substitution analysis

Output

Graph
sales over
time

Obtain sales data


and graph over
time

Study industry
history

Account for
inconsistencies or
anomalies due to
special circumstances
Study the industry
strategic era analysis
to place the sales
growth in a historical
context

Draw
conclusions

Review
periodically

Determine the
industrys present
stage in its life cycle
Compare sales history
to that of similar
products or industries
to understand how they
relate
Assess the ability of
existing factors to alter
the life cycle

Reevaluate the life


cycle periodically to
consider new factors
that might alter position
or length of stages

Segmentation
analysis
Penetration
analysis
Pricing strategy

* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney

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Development of the industry

Life cycle analysis

Conclusion

Conclusion

Key points

Important to recognize that the duration of the life cycle stages can differ significantly between
industries, products, or brands
Important to understanding the potential for and implications of prolonged and renewed life cycles
Important to recognize the life cycle as a deterministic approach to strategy development, not merely
an evolutionary one that is unaffected by individual company actions

Strengths

Provides insight into potential structure of an industry


It provides implications of the key success factors
It provides an impetus to shift strategy

Weaknesses

Highly variable in shape and duration


Difficult to identify current stage (what is seen as maturity may really be a temporary plateau in
growth)
Potentially a consequence of strategy rather than an unchangeable course (self-fulfilling prophesies)

References

Day, G.S. (1980); Analysis of Strategic Market Decisions


Kotler, P. (1994); Marketing Management
Porter, M.E. (1980); Competitive Strategy

Source: A.T. Kearney

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Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
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Development of the industry

Trends analysis

Description

Definition of a trend

Definition

A trend is a direction or a sequence of


events which have some momentum and
durability. A trend is not a fad, forecast,
or a prediction, but a stable movement
that is a gradual progression

Source: A.T. Kearney; Kotler, P. (1997); Marketing Management


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Development of the industry

Trends analysis

Description

Distinguishing among fad, trend, and megatrend


Category
Fad

Description
Unpredictable
Short-lived
Without social, economic or political significance
e.g. Cabbage-patch dolls, Tamaguchis

Trend

Predictable (within certain limitations)


Durable impact on industry structure and where
demand is headed
Observable across several market areas and consumer
activities
Consistent with other significant indicators
occuring/emerging at the same time

Megatrend

Social, economic, political or technological changes


with high impact
Slow to form

Once in place, has a long-lasting influence (~7 or


more years)
Source: Kotler, P. (1997); Marketing Management
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Development of the industry

Trends analysis

Description

Trends can be grouped into one of six macro-environmental forces which together
shape customer preferences
Political

End-user
preferences

Technological

Economic

Industry

Natural

Cultural

Demographic

Source: A.T. Kearney; Kotler, P. (1997); Marketing Management


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Development of the industry

Trends analysis

Description

Trends within any of the macro-environmental forces can have a significant impact
on an industry
Forces

Example of trends

Implications

Political

Increasing deregulation of the


telecommunications industry

Companies are forced to transform their


scope and partnerships to compete in a
more competitive business environment

Economic

Increasingly weak currency

Foreign markets are exploitable

Cultural

Development of subcultures
with strong identities such as
Hells Angels, Episcopalians or
teenagers

Marketers should monitor these


subcultures as these groups demonstrate
common preferences and behaviors

Demographic

Ethnicities in the US are not


integrating - salad bowl
society

Products can specifically be directed to


one or more of these groups

Natural

Increasing public concern about


the environment

A large market for pollution limiting


solutions will exist (e.g. alternative
packaging, recycling centers)

Technological

Development of products that


allow us to work from home the electronic cottage

Working from home will create a need


for additional home-centered
entertainment products

Source: A.T. Kearney; Kotler, P. (1997); Marketing Management


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Development of the industry

Trends analysis

Usage

Trends analysis allows companies to better understand their business environment

Trends reflect changes in end-user preferences


Increasing quality/lifestyle
orientation
Increasingly
differentiated brand
preference
Increasing health/environment
consciousness
Polarization of
customers

Increasing cost consciousness

Source: A.T. Kearney

Increasingly
differentiated price
preference

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Development of the industry

Trends analysis

Example

Trends can simply be represented in raw form when their implications are obvious

Total sales are expected to increase significantly in the coming years


400
340
320
280
CAGR**
= 26%

Gives an
indication of future
levels of activity
Makes it possible
to (re)-direct
resources to other
segments

200
140
100

1997

1998

1999*

2000*

2001*

2002*

2003*

Source: A.T. Kearney

* Projected
** CAGR = Compounded Annual Growth Rate
Source: A.T. Kearney

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Development of the industry

Trends analysis

Example

Numerous trends can be grouped together to present an overall portrait of an


industrys development

Simple listing of
trends allows an
overall picture to
be easily grasped

Different
segments, which
influence each
other, can be
positioned together

Key trends for the consumer catering industry


Trends

Sector

Positive

Negative

Fast food

Snacking
Brand identity
Franchising
Corporate-funded
expansion
Increase in consumption
by 25-35 age group

Growth in home delivery


restaurants
Growth in supermarket preprepared foods
Increase in number of
convenience stores
Consumers trading up to
restaurant food

Restaurants

Variety and choice of food


demanded by customers
Faster service
Increase in number of
customers

Reduction in average consumer


expenditure per visit
Smaller meals
Lower consumption of drinks

Hotel restaurants

Growth in international
travel
Some hotel restaurants
have decreased prices

Growth

Business entertainment cutbacks


Over-priced image
More adventurous tourists
Highly volatile

Source: A.T. Kearney

Source: A.T. Kearney

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Development of the industry

Trends analysis

Example

It is often useful to rate trends in terms of their significance


The clients
objective should first
be recognized
Trends of
significance within
the six macroenvironmental forces
should be recognized
via research

Trends of significance with respect to a European dairy company that


specializes in organic products and seeks to enter the mainstream Western
marketplace
Define essential trends in the business environment and evaluate whether the described trend constitutes a threat (-2) or an
opportunity (+2) to the company in the relative assessment sheet (1/2)

Importance

7
5

The impact of the


trends to the client
and its competitors
can also be rated

Company

Trends within Political Environment:


General increase in strictness of drugs
Trends in Economic Environment:
Strong US economy
EU moving forward with integration
Trends in cultural environment:
More biologically literate environment
Increased health consciousness
Increased dependency on and faith in medicine for healing
Trends within Demographic environments:
Slow population growth
Aging baby boomers of US and Europe
Trends in Natural Environment:
El Nio causing strange weather patterns
Development in technological environment:
Genetically engineered foods decrease need for pesticides

10

The significance of
the trends to the
industry should be
rated

Evaluation criteria

8
10
8
5
8
3
5
Score: weight
10: Very important criteria
5: Important criteria
0: Unimportant criteria

Score:
Opportunity
Threat

Large +2
Large -2

Competitor
Big

Small

+2

-2

+1

+1
+1

+1
+1

+1
-1

+1
+2
+2

-2
-2
+2

+1
+1
+2

+1
+2

+1
+2

+1
+2

-2

-1

-2

+1

+1

+1

Small +1
Small -1

Source: A.T. Kearney

Source: A.T. Kearney

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Development of the industry

Trends analysis

Methodology

Methodology for using a trends analysis

Input
Issue analysis
Client
data/interviews
Analyst reports
Annual reports
SEC filings*
Expert interviews
Trade journals
Periodicals
Press clippings
Customer surveys

Output
End game
Scenario planning
1

Define the
industry and the
client situation

Identify trends
of relevance

Assess the
significance of
trends

Evaluation of
product/market
segments
Strategic era analysis
SWOT

Refer to issue
analysis
Determine industry
boundaries and
how they have
changed

Locate trends within


the industry or external
ones that may impact it
Determine the
magnitude and
duration of the trends

Assess and rank


the importance of
trends with respect
to the client and its
competitors
Analyze threats
and opportunities

* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney

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Development of the industry

Trends analysis

Conclusion

Conclusion

Key points

Fads should not be mistaken for trends


Trends should not be confused with prospects or with speculation about the future
Most trends have generally been identified by experts - it is the consultants job to uncover the
ones of greatest relevance to the client
Remember that trends are movements already under way that have momentum

Strengths

Forces strategists to look ahead in formulating strategy


Little analysis is required, mostly research intensive

Weaknesses

Does not convey information that could warn of future shocks or sudden strange occurrences
Requires much education to comprehend implications of trends

References

Kotler, P. (1997); Marketing Management


Naisbit, John (1990); Megatrends
Popcorn, Faith (1996); The Popcorn Report

Source: A.T. Kearney

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Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
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Product/market analysis

Introduction

Determining where to compete requires an assessment of the size and growth of


the overall market and an understanding of its segments as they relate to the
industrys offerings
Market A
as seen by competitor 1

Market A
as seen by competitor 2

Size and growth of the market - reflects market potential


Product/market segmentation - characterizes end-users
Well-performed product/market analysis can lead to a
competitive advantage by providing superior understanding of
customers

Source: A.T. Kearney

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Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

101

Product/market analysis

Size and growth of the market

Description

An analysis of the size and growth of the market is a measure of how much the
players in the industry sell and how fast that is changing over time

Year 5
Year 1
The market

The market

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

It is imperative that a
client know the size
and forecasted growth
rate of its market for
strategic planning
purposes

Module II

102

Product/market analysis

Size and growth of the market

Description

There are two main ways to measure the size of the market - both must be
considered when drawing conclusions about the performance of a business unit

Units

Revenues

Size of the market

Size of the market

Unit sales millions

Revenue USD millions

14.2
8.7

10.8

1997

1996

4.5

1996

1997

Profit?

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

103

Product/market analysis

Size and growth of the market

Description

The growth of the market is the percentage change in its size

200
175

175

Comment
CAGR
= 19%
100

100

1994

1995

Year to year
growth

0%

Source: A.T. Kearney

1996
75%

1997
0%

It is easy to manipulate
growth rates by varying the
years of data included in the
calculation
CAGR 1996 - 1998: 7%
CAGR 1995 - 1998: 26%
CAGR 1994 - 1998: 19%

1998E
14%

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

104

Product/market analysis

Size and growth of the market

Usage

Changes in the size of the market or in its particular segments are starting points
for many revealing analyses

Size of the market

Customer
segment
A
Customer
segment
B

Customer
segment
A

Size of the market


Product
segment 1
Product
segment 1

Customer
segment
B

Product
segment 2

Customer
segment
C

Customer
segment
C

Product
segment 3

1996

1997

Source: A.T. Kearney

1996

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Product
segment 2

Product
segment 3

1997

Module II

105

Product/market analysis

Size and growth of the market

Usage

Penetration levels can be useful indicators of the size of the market

Low penetration

High penetration

If a product has a high penetration rate,


(e.g. televisions) the majority of target
consumers own the item
Penetration rates can be useful in analyzing
and predicting the potential size and
growth of the market in a given area

Introduction

Growth

Maturity

Decline

A new or growing market


should have low penetration
rates

A mature/declining market
will have high penetration
rates

Extremely high growth rates


come from adding new
customers (e.g., by introducing
a new product)

Establishing a high rate of


repeat customers is key to
slowing product demand in the
decline stage

Such periods of high growth


do not last indefinitely

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

106

Product/market analysis

Size and growth of the market

Usage

An analysis of market size and growth with respect to penetration rates can reveal
the potential for growth or profit in a market or a certain segment
Mobile telephone penetration, 1997

Key observations
Switzerland
Norway
GDP/
per capita

Denmark

Sweden

US
Japan
Germany

Finland

Finland has the highest mobile phone


penetration in the world, followed by
Sweden
Denmark and Norway are similar
nations in terms of GDP, geography,
population, and culture; however,
Denmark has significantly lower
penetration

Key conclusions
Namibia

Degree of penetration

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Given that the present sizes of the


mobile phone markets in Denmark
and Norway are small, a high growth
rate therein would reflect a potential
for significant increase in size, given
the close similarities with Sweden and
Finland
This means that Denmark are Norway
are particularly attractive market
segments

Module II

107

Product/market analysis

Size and growth of the market

Example

A demonstration of the size and growth of a clients market

Growth can be
graphically depicted

Total consumption of dietary supplements in California


USD Million

1,400
1,250
1,150
40.8%

1,000
920
Vitamin supplements as
a part of the entire
market
The entire size of
market, the overall
market

The number of years


displayed can affect the
growth rate and the
message conveyed by
the slide

Source: A.T. Kearney

Vitamins

Other
supplements

CAGR =
11%

40.1%
38.2%

39.1%
39.0%

61.0%

1994

60.9%

1995

61.8%

1996

59.9%

1997

59.2%

1998B

Note:The category other supplements is composed primarily of protein or energy supplements, but also includes other
products such as fiber, crack cocaine, etc.
Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

108

Product/market analysis

Size and growth of the market

Example

A breakdown of the overall market into the clients targeted market gives clientspecific insight

Daily multi-vitamins accounted for 18% of dietary supplement market in 1997


This figure is taken
from the present year
of the slide depicting
size over time
(previous page)

USD Million
1,400

300

1,100

400

700

350

The clients specific


market is graphically
depicted as a portion of
the entire market

A percentage can be
calculated of the clients
specific market as a share
of the overall market
Source: A.T. Kearney

150
200

Total
Retail
dietary
profits
supplement
turnover
excluding
VAT

Wholesale Prescribed
turnover
suppleof dietary ments
supplements

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Supplements for
commercial use

Exports of
supplements for
commercial use

All single
Daily
vitamin/
multimineral
vitamins
supplements,
and other
excluding
daily multivitamins
3

Module II

109

Product/market analysis

Size and growth of the market

Methodology

Methodology for finding the size and growth of the market

Input

Output

Client
data/interviews
Analyst reports
Industry reports
SEC filings*
Expert interviews
Trade journals
Periodicals
Players analysis
Customer
surveys

Segmentation
analysis
An understanding
of growth potential
Competitive
structure

Obtain size of
overall market

Find data for years


deemed relevant
Market size is usually
presented over a three
to five year scope
It is useful to create
subsets within the
overall market to
differentiate between
the clients actual
market and its potential
ones
Determine future
growth rates both by
extrapolation and by
studying projections

Calculate
growth rate

Growth rate can be


calculated using
compound annual
growth rate (CAGR) or
average annual growth
rate (see next page for
comparison)

Calculate
clients specific
market size

Beginning with the


size of the overall
market, reduce its size
by segments not
directly related to the
clients business
The waterfall graph
is useful to portray
this information

Calculate the
clients market as
a percent of the
overall market

Divide size of the


clients specific market
by the size of the
overall market for that
year
Perform this calculation
for several years to
illustrate trends in the
sizes of the relative
markets

* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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110

Product/market analysis

Size and growth of the market

Methodology

Compound annual growth rate calculation vs. average annual growth rate
calculation

CAGR formula

Example

1
n-1
) -1 ] X 100
[( Last year )
First year

1
5-1
)-1 ] X 100 = 18.9%
[( 200 )
100

Average annual growth formula

Example

( Last year - first year ) n X 100


First year

( 200-100 ) 5 X 100 = 20.0%


100

Note: See chart from the description section of this technique for the source of the numbers
Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

111

Product/market analysis

Size and growth of the market

Conclusion

Conclusion

Key points

Size of the market should account for imports/exports when using overall sales of individual
companies to calculate
Markets should be properly subdivided when calculating size of the market and the percentage
composition of sub-markets. (e.g. beverages into alcoholic vs. non alcoholic)

Strengths

Necessary point of departure for many other analyses such as segmentation


Allows market share to be calculated

Weaknesses

Data is not always available


Data must often be extrapolated, leading to inaccuracies

References

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

112

Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

113

Product/market analysis

Product/market segmentation

Description

Channels

The Market
1997

USD 1,300 mill.

Geographic segments

Segmentation is the process of dividing the overall market into groupings along the
dimensions most relevant to maximizing profit in the industry

Product segments

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

114

Product/market analysis

Product/market segmentation

Usage

Markets can usually be segmented along four generic dimensions

Segmentation category

Description

Products

Different types available to the customers: size, technology,


cost structure, types, package, etc.

Customer

Clusters of users divided according to: demographics,


behavior, economic characteristics, etc.

Geography

Different areas where the customers are present on a spatial


level: regional, national, international, etc.

Distribution channels

Various means of reaching the customers: wholesalers,


national chains, specialty stores, mail orders, etc.

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

115

Product/market analysis

Product/market segmentation

Usage

Segments must meet fundamental requirements

Requirement

Source: A.T. Kearney

Comment

Relevance

How much and what the segmentation adds to our


understanding of customers behavior and
attitudes

Measurability

The degree to which the size and purchasing


power of segments can be measured

Accessibility

The degree to which the segments can be


effectively reached and served

Substantiality

The degree to which the segments are large and/or


profitable enough to be worth considering for
separate marketing attention

Durability

The degree to which segments will diminish as the


product category or industry matures

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

116

Product/market analysis

Product/market segmentation

Example

A product segment map gives an overview of the various offerings and their place
within the overall industry

An overall, broad
industry definition
provides a context for
a specific offering

Product segments in the confectionery industry


USD Mill.

Pick & Mix


100% = 3,300

The position of the


specific market of
relevance

Other

25%

Gummi-products

30%

15%
Filled chocolate

5%

Pure chocolate

Licorice
5%

10% 10%

Sugar

Toffee

Source: A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

117

Product/market analysis

Product/market segmentation

Example

Customer segments, on a generic level, illustrate characteristics about the


consumer

A segmentation can
be performed in a
number of ways. It
is the strategists job
to find the most
meaningful depiction
of the market
components

Characteristics about
the consumer
highlight challenges
or opportunities
within the market

Danish consumer habits - mixed candy bags


Percent
29%

Frequency

17%

22%

19%

11%
0%
Daily/
almost
daily

01

1%
3-4
1-2
1-3 1-5 times Rarely
times a times a times a per half
week
week month
year

Never

42%
26%
22%

Unanswered

75-80% percent of the


consumers buy mixed
candy in bags
More than half of the
consumers choose
among different
products/brands

Loyalty
6%

4%

Stick to Shift
Choose Do not
brand among 2- among all know
3 brands brands

Never
use

Source: 100% = 4,428 respondents


Source: A.T. Kearney; Index DK/Gallup marketing

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

118

Product/market analysis

Product/market segmentation

Example

Geographic segmentation can prove to be very revealing depending on the industry

Consumption of sugar goods is greatest in Denmark, Ireland, and Germany


Kg. per capita 1994
100%= 15.44

Geographic segments
can be useful both for
benchmarking against
neighboring areas or
to reflect market
opportunities abroad

13.89
12.89
Sugar
Goods

9.85

12.44 12.17

5.81

6.13

4.36

11.80

11.53
10.71

2.91

2.63

10.12 10.12 10.03

9.62

5.04
5.31

8.04

4.18
5.22 5.08

7.67

5.53

Source: A.T. Kearney

Source: Leatherhead Food; IOCCC

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

4.63 4.49

4.27 4.04

2.13

2.13

3.31

4.59

2.54

2.77
1.77

Japan

Brazil

2.14 1.50
1.18
1.00

Italy

2.50

France

Finland

4.09 3.41

The Netherlands

Australia

Sweden

USA

Belgium

5.40 4.90 5.04 5.85

Austria

Great Britain

Switzerland

6.76

Norway

Germany

Ireland

Areas of particular
interest or potential
(e.g., the
Scandinavian market)
can be highlighted

6.76

6.59

Denmark

Chocolate
Goods

8.90

8.08

Spain

9.26
8.08

3.09

Greece

4.63

Module II

119

Product/market analysis

Product/market segmentation

Example

Distribution of confectionery products by wholesale channel

Supermarkets distribute approx. twice as much candy


as convenience stores do
Tons

Distribution channels
can often be the
lifeline of a product

100% =

30,707

Metro and others

6.0

Dagrofa kiosk

8.8

Sgro

Convenience store sector


Supermarkets

27,384 tons
5.6
8.2
7.2

Total market share 33.9%

9.6
9.6

Lekkerland

12.6

Vibham

4.5
6.5

Dagrofa
Dansk Supermarked*

7.6

Other discount chains**

16.2

5.6
7.7
8.8

16.0

Groupings of
distribution channels
can highlight the
potential market areas
that offer significant
expansion
opportunity
Source: A.T. Kearney

FDB Group***

* Excl. Netto
** Aldi, Fakta, Netto
*** Excl. Fakta
Source: A.T. Kearney

Total market share 66.1%

31.3
28.2

Sugar goods

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Chocolate
3

Module II

120

Product/market analysis

Product/market segmentation

Example

Begin the segmentation process by determining the criteria that will be most useful
in grouping customer behavior
The goal of market
segmentation is to
find information
about the customer
that can be used as
criteria to best
explain/ predict sales

A list of possible
criteria should be
evaluated with
respect to fulfillment
of different aspects of
the product offering

The criteria that best


explain the markets
reactions to the
product offering
should be selected for
further analysis

Source: A.T. Kearney

Frequency of movie theater visits is the segmentation criterion that best


correlates with the purchase of confectionery products
Correlation
5 = High
1 = Low
Offering
components
Segmentation
criteria

Price

Service
required

Frequency
of visits

Outlet
range

Frequency of shopping visits

Profession

Income

Family structure

Age

Frequency of movie theater


visits

Segmentation
criteria

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

121

Product/market analysis

Product/market segmentation

Example

Once the most critical segmentation criteria have been chosen, the market should
be divided accordingly into discrete segments

This is the criterion


that was defined to
best describe
consumer behavior in
the preceding
analysis

A cluster analysis reveals four distinct segments of the market

50

Segment
1

45

Plotting the number


of movie-goers
against their total
expenditure on pick
& mix products
makes evident four
distinct groups of
customers

Segment
2

Segment
3

Segment
4

40

35
Number of
people

30
25

20
15
10

This dimension
allows us to
distinguish between
the customers to
whom the company
markets and those
that are most key to
the clients success
Source: A.T. Kearney

5
0
0

100

200

300

400

500

600

700

800

900

1,000

Total expenditure on pick & mix


(DKK per person)
Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

122

Product/market analysis

Product/market segmentation

Example

Once the segments have been identified, their worth should be evaluated

The least attractive


segment

An illustration of the confectionery customer segments and their


corresponding consumption of pick & mix products
Expenditure
on pick & mix

100%

The proportion of the


population that offers
disproportionate
expenditure on the
product offering
(20% of movie-goers
make up 57% of
confectionery sales)

92%

Segment
1

57%

35%

The most attractive


segment

Segment
2

Segment
3

Segment
4
20% 25%

50%

75%

100%

% of moviegoing
population

Source: A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

123

Product/market analysis

Product/market segmentation

Example

After identifying and evaluating the segments, study them to determine


distinguishing characteristics

The qualities that


would best
characterize the
customers grouped
together by the cluster
analysis
The most important
segment in terms of
per capita expenditure
on pick & mix

Characterization of the four identified confectionery segments

Characteristic

Segment 1

Segment 2

Segment 3

Segment 4

Demographics

40-55
Parents

18-25

55-70
Grandparents

25-40
Large families
Young children

Geography

Urban
sub-urban

Sub-urban
Rural

Urban
residence

Urban
Sub-urban

Behavior

Health conscious Not health Distrust of


conscious
unpackaged
goods

Particular in
taste and style

Particular in
taste and style
Trendy

Educational
background

Mostly college
educated

Varied

Mostly college
educated

Various

Source: A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

124

Product/market analysis

Product/market segmentation

Methodology

Methodology for performing product/market segmentation

Input

Players analysis
Strategic group
analysis
Trends analysis
Client
data/interviews
Expert interviews
Annual reports
Industry reports
Analyst reports
SEC filings*
Trade journals
Customer surveys

Output

Define the
segmentation
criteria

Survey the market


according to each of the
four generic dimensions
(product, customer,
geography and
distribution channel)
Determine which other
market specific factors
might also be valuable
for the analysis
Apply the market
specific characteristics to
the industry to uncover
segments

Identify the
segments

Isolate the
segments
according to both
the generic and
market specific
dimensions

Value the
segments

Determine the
absolute size of
each segment and
its value in
proportion to that
of the overall
market

Characterize the
segments

Key success
factors
Evaluation of
segment
attractiveness and
development
Substitution threat
analysis

Characterize the
factors that drive
the growth of the
different segments
from a qualitative
perspective

* Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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125

Product/market analysis

Product/market segmentation

Conclusion

Conclusion

Key points

Not something that can only be done on a generic level - it should be performed to capitalize on
every markets unique characteristics
Requires much practice, experience and effort to perfect

Strengths

A competitive advantage can be built on appropriate market segmentation


Allows for improved product-customer matching

Weaknesses

Can be difficult to acquire data

References

Kotler, P. (1997); Marketing Management

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

126

Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

127

Demand and supply economics

Demand and supply economics

Description

Demand and supply analysis can provide an understanding of the components of


industry structure

Demand analysis

Supply analysis

The aim of demand analysis is


to understand the structure and
nature of the demand for the
companys product
Provides the basis for analyzing
market influences

Supply analysis helps to


define the economics of
supply and therefore the cost
curve of the industry. The
analysis helps to determine
how companies will choose a
given products market price
Supply affects the number of
producers and their
respective sizes
The sustainability of a
market structure is dependant
on the supply curve

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Essential outcomes

Economies of scale
Economies of scope
Experience effects
The effect of pricing

Module II

128

Demand and supply economics

Demand and supply economics

Description

Demand and supply curves identify the market equilibrium

Price

Market
equilibrium

Supply

P1

Demand

Demand curve shows the total


quantity demanded at each price (all
other factors held constant)
Supply curve shows the total
quantity supplied at each price (all
other factors held constant). Supply
curve is also called a cost curve
The market equilibrium is the point
where price and quantity reach a
stable state

Quantity
Q1

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

129

Demand and supply economics

Demand and supply economics

Usage

The industry demand curve is a depiction of price plotted against volume sold at
that price for a given product

Price
Total quantity demanded depends on:

The products price


The price of substitutes or complements
Product quality
Consumer income
Advertising
Tastes and other factors

Demand Curve
P1
P2

Q1

Source: A.T. Kearney

Q2

Quantity

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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130

Demand and supply economics

Demand and supply economics

Usage

The demand curve can shift over time due to changes in the underlying market
characteristics

Possible causes for increase in demand


Price

Increase in product value/quality


Price of substitutes rises
Shift in consumer preferences
Increase in disposable income of
consumers
Decrease in price of complementary
products
Trends (economic, social, cultural,
marketing variables, etc.)

Possible causes of a decrease in demand


Demand Curve

Quantity

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Decrease in product value/quality


Increase in value/quality of substitute
products
Increase in price of complementary
products
Trends (economic, social, cultural)

Module II

131

Demand and supply economics

Demand and supply economics

Usage

The demand curve indicates price elasticity, i.e., how the quantity demanded will
respond to a given change in price

Price

Price elasticity
greater than 1

Price

Elastic

Price elasticity
between 0 and 1

Inelastic

Elasticity of demand
The price elasticity of
demand is defined as
the percentage change
in the quantity
demanded divided by
the percentage change
in price
A demand curve that
has a constant 45%
angle represents
elasticity equal to one

Quantity
Price elasticity is
infinite
Price

Price elasticity
equals 0
Price

Perfectly elastic
Perfectly
inelastic

Quantity

Source: A.T. Kearney

Quantity

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Quantity

Module II

132

Demand and supply economics

Demand and supply economics

Usage

An understanding of market elasticity helps to predict the impact of changing


market conditions

Enables companies to understand and predict the market response to


Price war

New entrants
Change in supply of substitute products
Enables companies to understand and predict the financial impact of
changes in tactics and strategy:
Profit impact of a product promotion
Volume impact of a price increase

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

133

Demand and supply economics

Demand and supply economics

Usage

The supply curve presents the quantity of goods supplied at each price

Price
Economists use the concept of
supply to describe the quantity of a
good or a service that a company
would like to sell at a particular
price

P2

The market supply of a good is


simply the total quantity of goods
produced by all of the companies in
the economy that are willing to
manufacture and sell at a given price

P1

Q2

Source: A.T. Kearney

Q2

Quantity

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

134

Demand and supply economics

Demand and supply economics

Usage

Changes in the underlying market variables can cause the supply curve to shift
over time

Price

Shifts in the supply curve can be caused by


changes in the following factors

S2
S1

P2
P1

Q2

Source: A.T. Kearney

Q1

Quantity

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Technology
An improvement in technology will shift
the supply curve to the right because
producers will be able to supply a greater
quantity profitably at each price
Input costs
A reduction in input prices (lower wages,
lower fuel costs, etc.) will induce
companies to supply more output at each
price, shifting the supply curve to the right
Government regulation
Government regulations can sometimes be
viewed as imposing a technological
change that adversely affects producers.
The effect of this regulation would be to
shift the supply curve to the left, reducing
the quantity produced at each price

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Demand and supply economics

Demand and supply economics

Usage

The likely behavior of new and existing players to changes in market factors can be
inferred from the supply curve, because it illustrates the cost structure of the
industry
Price

The equilibrium price equals the cost to


produce the unit of product when it is
equal to the maximum price that the
market will pay for that product
When the industry supply curve is flat, it
is more likely that companies will price in
a collectively rational way. When the
curve is steep, it is less likely that
collectively rational pricing will occur
consistently

Demand

Excess supply
P*

Excess demand
A

D
Q*

Source: A.T. Kearney

In terms of production:
Companies A, B and C will produce at full
capacity
Company D will produce at half capacity
Company E will not produce, because it
cannot manufacture cheaply enough to
make a profit

Quantity

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Demand and supply economics

Demand and supply economics

Usage

A company has to decide how much to produce by evaluating the cost of


production and the demand structure of the market

Relevant cost

Supply
(cost of
production)

Companies
choose
level of
output

Demand
(Revenue)

Marginal cost refers to the increase in total


cost when output is increased by one unit.
As long as marginal revenue (the increase
in total revenue when output is increased
by one unit) exceeds marginal cost, the
company should increase output
Long-run total cost describes the
minimum cost of producing at each output
level when the company can adjust all
inputs. This full reinvestment cost is
relevant when the company considers to
enter a new line of business
Non-sunk cost refers to all fixed and
variable costs a company can recover, if
operations are discontinued

Source: A.T. Kearney; Begg D. (1994); Economics


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Demand and supply economics

Demand and supply economics

Usage

The cost structure of a company and the industry is influenced by economies of


scale
Economies of scale

Minimum efficient scale

Economies of scale AC*


exist when long-run
average costs decline
as output rises
(increasing returns to
scale)

Diseconomies of scale
exist when long-run
average costs increase
as output rises
(decreasing returns to
scale)

AC*

Minimum efficient scale (MES) is the


minimum market share (or level of production)
that a company (or a plant) must achieve to
reach a break-even point
Q

Economies of
scale
AC*
Q
AC*

Constant returns to
scale exist when output
has no affect on longrun average costs
Q*

Diseconomies
of scale
MES = Q*/total
market demand. Q*
is the rate of output
at which long-run
average costs are
minimized

Q
* Average cost
Source: A.T. Kearney

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Demand and supply economics

Demand and supply economics

Usage

Economies of scope and learning also influence the cost structure of a company

Learning

Economies of scope
Arise when the average cost of producing
declines as the number of different products
manufactured increases

Present when joint output of a single


company is more efficient than production
by a group of specialized companies, each
producing one product

Occurs when the cost to produce a given


level of output falls with an increase in
manufacturing experience
AC*

AC*
AC1
AC2
AC3

Q*

* Average cost
Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Current
output

1Q* 2Q* 3Q* Cumulative


output

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Demand and supply economics

Demand and supply economics

Example

By combining the demand and supply curves, one can realize excess supply, excess
demand, and the equilibrium price in the market

The market for chocolate


FG shows the amount
of excess supply at
the price GBP 0.40
Price
GBP/bar

The market equilibrium


is represented at point
E. At prices below the
equilibrium price,
excess demand will be
present. At prices above
the equilibrium price,
there will exist excess
supply

AB shows the
amount of excess
demand at the price
GDP 0.20

0.50

S
F

0.40

0.30
E
B

0.20
A
0.10

S
D

0.00
0

40

80

120

160

200 Quantity

Million bars/year

Source: A.T. Kearney

Source: Begg, David et. al (1994); Economics

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Demand and supply economics

Demand and supply economics

Example

The consequences for the client of market changes can be realized by analyzing
demand curve shifts

At low ice cream prices,


the demand curve for
chocolate is DD and the
market equilibrium
occurs at point E

The chocolate market is highly influenced by the pricing behavior


of ice creams
D

Price
GBP/bar

0.50
D

Higher ice cream prices


raise the demand for
chocolate, shifting the
demand curve from DD
to DD

S
E

0.40
E

0.30
0.20

At the former
equilibrium price,
there would be excess
demand EH, which
gradually bids up the
price of chocolate
until the new
equilibrium is reached
at E

0.10

40

80

120

160

Source: A.T. Kearney

Source: Begg, David et. al (1994); Economics

0.00

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

200

240

280

Quantity
Million bars/year

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Demand and supply economics

Demand and supply economics

Example

An understanding of the expected price development can be gained by analyzing


shifts in the supply curve

The new
equilibrium at E is
at a higher price
and a lower
quantity than the
old equilibrium, E

A reduction in the supply of chocolate caused by a shift in the supply


curve will have significant implications for the price level in the industry
D
0.50

Price
GBP/bar

0.40

S
E

0.30
When the supply curve
is initially at SS, the
market equilibrium is
at E. Reduction in the
supply of chocolate
shifts the supply curve
to the left and is shown
by the new supply
curve SS

0.20

0.10

0.00
0

40

80

120

Source: A.T. Kearney

Source: Begg, David et. al (1994); Economics

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

160

200

Quantity
Million bars/year

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Demand and supply economics

Demand and supply economics

Methodology

Methodology for using demand and supply economics

Input

Players analysis
Substitution analysis
Supply chain analysis
Size and growth of the
market
Client data/interviews
Expert interviews
Analyst reports
SEC filings*
Trade journals
Customer surveys

Output

Construct the
demand curve

Forecast demand by
segment at various
price levels
Determine the factors
that shape the demand
curve
Calculate the elasticity
of demand and how it
varies along different
parts of the curve

Construct the
supply curve

Identify units of
capacity and order them
from lowest to highest
cost producers
Determine the factors
that shape the supply
curve
Calculate the elasticity
of supply and how it
varies along different
parts of the curve

Determine the
industry impact of
supply/demand
interaction

Price/quantity
relationship
Competitive
structure of the
industry
Changes in
customer needs
Changes in
manufacturing
efficiency

Determine how the


industry dynamics operate
Scale
Scope
Learning
Determine the most
important measure of
cost to industry producers
Marginal cost
Long-run total cost
Non-sunk cost

Reports filed by publicly held companies with the Securities and Exchange Commission: e.g., 10K, 10Q
Source: A.T. Kearney

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Demand and supply economics

Demand and supply economics

Conclusion

Conclusion

Key points

Strengths

Weaknesses

Difficult to get data on supply and demand, which often results in having to obtain estimates from
experts or historical data (which might no longer be valid)
When a curve shifts, the new shape might be different from the original one
In monopolistic or oligopolistic markets, the clients strategies have an impact on market structures
and the demand curve, which makes the analysis more complex. The market must be clearly defined
or the wrong supplier may contribute to the curve
Capacity at a plant can be allocated to several different product groups meeting very different needs
Helps to identify value and to depict it graphically
Useful in understanding industry dynamics; even if used in a rough manner

More difficult to use with products that have perceptual needs


Primarily a static description
Assumes that many of the factors are constant - in real life they might be constantly changing
More effective for commodity products

References

Source: A.T. Kearney

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Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
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Industry analysis frameworks

Introduction

Three frameworks are commonly used in business unit strategy engagements to


characterize the industry

Framework

Source: A.T. Kearney

Comments

Structure-conductperformance

Model for analyzing the


industrys performance

The five forces

Analysis of forces determining


industry structural
attractiveness

The strategic triangle

Strategic triangle focusing on


customer needs, company
strengths, and competitor
positions

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Contents of Module II

Introduction

Industry structure
Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
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Industry analysis frameworks

Structure-conduct-performance

Description

The SCP framework builds on the assumption that performance is dependent on


structure and conduct

Static
SCP
model

Dynami
c SCP
model

Source: A.T. Kearney

Structure

External
shocks

Conduct

Structure

Performance

Conduct

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Performance

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Industry analysis frameworks

Structure-conduct-performance

Description

Elements of the Structure-Conduct-Performance framework and some of the


factors that affect the model
External
shocks

STRUCTURE

CONDUCT

PERFORMANCE

Feedback
Examples of shocks
Technology breakthroughs
Changes in government
policy/regulations
Domestic
International
Changes in tastes/lifestyles

Economics of demand
Availability of substitutes
Differentiation of products
Rate of growth
Volatility/cyclicality
Economics of supply
Concentration of producers
Import competition
Diversity of producers
Fixed/variable cost structure
Capacity utilization
Technological opportunities
Shape of supply curve
Entry/exit barriers

Supply chain economics


Bargaining power of input
suppliers
Bargaining power of
customers
Information market failure
Vertical market failure
Source: A.T. Kearney

Marketing
Pricing
Volume
Advertising/promotion
New products/R&D
Distribution

Profitability
Profitability
Value creation
Technological progress
Employment objectives

Capacity change
Expansion/contract
Entry/exit
Acquisition/merger/
divestiture
Vertical integration
Forward/backward
integration
Vertical joint ventures
Long-term contracts
Internal efficiency
Cost control
Logistics
Process R&D
Organization effectiveness

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Industry analysis frameworks

Structure-conduct-performance

Usage

The SCP model is used for gaining an overall understanding of an industry

Usages

To develop a situational analysis of an industry

To aid in the generation of hypotheses about


future changes in industry structure, conduct,
and performance
To characterize the cascading effects of
particular events on an industry

Source: A.T. Kearney

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Industry analysis frameworks

Structure-conduct-performance

Example

The SCP analysis provides a dynamic view of industry structure

Begin with situational


analysis. Analyze
shocks that might
influence the industry

The US telecommunications industry after 1995


Externa
l shocks

The structure of the


industry should be
examined with respect
to the identified shocks

Thereafter, the conduct


of the industry players
should be studied

Performance should be
seen not only as a
consequence of
industry structure and
competitor conduct, but
also as a factor in
determining them
Source: A.T. Kearney

Structure

Conduct

Performance

Feedback

US government
Long-distance
Long-distance
Profits remain
deregulates the
players and local
carriers scramble to constant as
telecommunications service providers are enter local markets companies
industry
free to enter each
Local carriers do the restructure
others markets
same to enter long
distance markets
Internet continues Demand for longto penetrate rapidly distance services
Customers demand
continues to rise
full service
rapidly
providers

Many mergers
between longdistance carriers and
local service
providers

Source: A.T. Kearney

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Industry analysis frameworks

Structure-conduct-performance

Methodology

Methodology for using the SCP framework

Input

Output

Supply and demand


economics
Expert interviews
Trends analysis
Players analysis
Strategic group
analysis
Supply chain
analysis
Value chain analysis
Financial resources
and performance
Analyst reports
Annual reports
Press clippings

Relevant
analyses

Study basic
conditions

Study basic conditions


Study current and past
events relevant to the
course of the industry

Basic conditions
Supply
Demand
Raw materials Price elasticity
Technology
Substitutes
Unionization
Rate of growth
Product
Cyclical and
durability
seasonal
Business
character
attitudes
Purchase
Public politics
method
Marketing type

Examine
industry
structure

Understanding of
industry structure
Understanding of
industry evolution
and direction

Examine and
predict conduct

Study industry reports


Examine recent
changes to the industry
structure
Link changes to
external shocks

Study recent conduct


and identify links to
changes in industry
structure (past or
anticipated)
Predict changes in
conduct

Structure

Conduct

Number of sellers
Product differentiation
Entry and mobility
barriers
Exit and shrinkage
barriers
Cost structures
Vertical integration
Global reach

Pricing behavior
Product strategy and
advertising
Research and
innovation
Plant investment
Legal tactics

Examine and
predict
performance

Study performance of
individual companies,
linking it to the basic
conditions and the following
structure and conduct
Predict future performance of
the individual companies
Performance
Production and
allocation efficiency
Technological
progress
Profitability
Employment

Source: A.T. Kearney; Scherer, F.M.; Ross, D. (1990); Industrial Market Structure & Economic Performance
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Industry analysis frameworks

Structure-conduct-performance

Conclusion

Conclusion
Key points

Very useful in showing causality

Strengths

Considered superior to other general models for industry analysis because


Can be used in static and dynamic industry settings. Explicitly treats behavior and
performance of individual companies
Can be widely applied to many industries
Has sound academic, theoretical and empirical backing
Provides framework for integrating other existing economic models
Industry cost curve
Economic value to customer (EVC)
Porter model
Applies well in assignments
Is logical and sensible to clients
Has descriptive and predictive power

Weaknesses

Requires large amounts of analyses

References

Scherer, F.M.; Ross, D. (1990); Industrial Market Structure and Economic Performance

Source: A.T. Kearney

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Contents of Module II

Introduction

Defining the industry structure


Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
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Industry analysis frameworks

The five forces

Description

The collective strength of these forces determine the ultimate profit potential of an
industry
Threat of entry
New entrants to an industry bring new
capacity, the desire to gain market share and
often substantial resources
Profitability can thereby be reduced through
the bidding down of prices or the inflation of
cost

Bargaining power of suppliers


Suppliers can exert bargaining
power over participants in an
industry by threatening to raise
prices or reduce the quality of
purchased goods and services

Powerful suppliers can thereby


squeeze profitability out of an
industry unable to recover cost
increases in its own prices

Intensity of rivalry among


existing competitors
Rivalry occurs when one or
more competitors either feel
the pressure or see the opportunity to improve position
Rivalry takes the form of
price competition, advertising
battles, product introductions, etc.

Bargaining power of buyers


Buyers compete with the industry
by forcing down prices, bargaining
for higher quality or more
services, and turning competitors
against each other - all at the
expense of industry profitability

Pressure from substitute products


Substitutes limit the potential
returns of an industry by placing
a ceiling on the prices
companies in the industry can
charge

Source: Porter, M.E. (1980); Competitive Advantage


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Industry analysis frameworks

The five forces

Description

The five forces can be expanded to include other dimensions of specific relevance to
industry profitability
Government

Other

Many consider this sixth


force as unaccounted for in
the five forces model. It is
often a critical factor

Different client industries


may have different forces
that require special
consideration

Global economic

Exit barriers

The global economic


situation can greatly
influence the profitability
of an industry

High barriers to exit may


also have a significant
effect on the structure of an
industry

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Industry analysis frameworks

The five forces

Usage

The five forces framework provides a checklist to analyze the industry structure,
environment, and trends affecting industry profitability

Usages

Identifying the most important


drivers of industry competition
or profitability
Providing a concise overview of
an industry's structural
attractiveness

The goal of this analysis


is to find a position in
the industry where the
company can best
defend itself against the
five competitive forces
or can influence them in
its own favor

Source: A.T. Kearney; Porter, M.E. (1980); Competitive Strategy


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Industry analysis frameworks

The five forces

Example

Such a framework can be presented to the client or simply used for internal
analysis

Threats of new entrants


require barriers to entry
to be examined. Perhaps
threats of sharp
retaliation to entrants
need to be expressed by
incumbents

Overview of competitive dynamics for retail packed milk powder


Entry barriers are low
Large-scale operations and
brand positions are only a
partial barrier if a potential
new entrant has access to
cheap milk

Supplier
strength is low
Cooperatives have direct
access to the milk
Whole milk powder is
sold in bulk as a
commodity on the world
market

Competitor intensity
is high and growing
Low/stagnating growth
Aggressive players
Products with few
differentiating factors
Increasing growth in the
world market due to
population growth

Customer strength
is limited
Distributor's strengths
depends on
The brands strength
of the markets
The number of
alternative
distribution channels

Threat from substitute


products is increasing

This reality will limit the


price that companies can
charge for retail packed
milk powder

Source: A.T. Kearney

Source: A.T. Kearney

Fresh milk is becoming a


threat in selected markets
The threat from UHT
milk and recombined milk
is increasing

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Industry analysis frameworks

The five forces

Example

Often the additional forces might be very relevant in presenting the forces faced by
an industrys competitive environment

It can often be useful to


consider and present
forces outside the
standard five,
depending on the nature
of the clients industry

Overview of competitive dynamics for retail packed milk powder


Stagnant global market
Low growth rate of the
global economy

Supplier
strength is low
Cooperatives have direct
access to the milk
Whole milk powder is
sold in bulk as a
commodity on the world
market

The five forces model


is often criticized for
not including
government as a force

Source: A.T. Kearney

Political uncertainty
GATT will have
negative affect on EU
players
Political instability in
large foreign markets

Entry barriers are low


Large-scale operations and
brand positions are only a
partial barrier if a potential
new entrant has access to
cheap milk

Competitor intensity
is high and growing
Low/stagnating growth
Aggressive players
Products with few
differentiating factors
Increasing growth in the
world market due to
population growth

Threat from substitute


products is increasing
Fresh milk is becoming a
threat in selected markets
The threat from UHT
milk and recombined milk
is increasing

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Customer strength
is limited
Distributor's strengths
depends on
The brands strength
of the markets
The number of
alternative
distribution channels
Exit situation is
unattractive
Main customers serve as
suppliers to the
companys other business
3

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Industry analysis frameworks

The five forces

Methodology

Methodology for using the five forces framework

Input
Underlying needs
Supply and demand
economics
Entry and exit
barriers
Substitution analysis
Supply chain analysis
Players analysis
Strategic group
analysis
Customer surveys
Annual reports
Analyst reports
(See following page
for details)

Source: A.T. Kearney

Output

Define the
industry

Identify the five


forces at work

Define the industry,


seen in this framework
as the group of
companies producing
products that are close
substitutes for each
other
Employ players
analysis and strategic
groups analysis to gain
an understanding of
the competitors

This requires extensive


analysis (See following
page for specific
considerations
regarding each of the
five forces)
List the specific forces
under the five
categories

Make strategic
conclusions

Industry
description
Development of
strategy
Understanding of
the profit structure
of an industry

Evaluate the profit


potential of the industry
Draw strategic
conclusions from the five
forces
Design a strategy that
defends the BU against
threats from each of the
five forces

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Industry analysis frameworks

The five forces

Methodology

A list of potential analyses to perform a five forces analysis


New entrants
Economies of scale
Proprietary product differences
Brand identify
Switching costs
Capital requirements
Access to distribution channels
Absolute cost advantages
Proprietary learning curve
Access to necessary inputs
Proprietary low-cost product design
Government policy
Expected retaliation

Rivalry Determinants
Industrial growth
Fixed (or storage) costs/value-added
Intermittent overcapacity
Product differences
Brand identify
Switching costs
Concentration and balance
Informational complexity
Diversity of competitors
Corporate stakes
Exit barriers

NEW ENTRANTS
Threats of new
entrants

Bargaining power
of suppliers

INDUSTRY
COMPETITORS

Bargaining
power of buyers

SUPPLIERS

BUYERS

Determinants of Supplier Power


Differentiation of inputs
Switching costs of suppliers and
companies in the industry
Presence of substitute inputs
Supplier concentration
Importance of volume to supplier
Cost relative to total purchases in the
industry
Impact of inputs on cost or differentiation
Threat of forward integration relative to
threat of backward integration by
companies in the industry

Intensity of Rivalry
Threats of new
substitutes

SUBSTITUTES
Determinants of
Substitution Threats
Relative price performance
of substitutes
Switching costs
Buyer propensity to
substitute

Determinants of Buyer Power


Bargaining leverage
Buyer concentration versus company
concentration
Buyer volume
Buyer switching costs relative to
company switching costs
Buyer information
Ability to backward integrate
Substitute products
Pull-through
Price sensitivity
Price/total purchases
Product differences
Brand identity
Impact on quality/performance
Buyer profits
Decision-makers incentives

Source: Porter M.E. (1980); Competitive Strategy


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Industry analysis frameworks

The five forces

Conclusion

Conclusion

Key points

Five-forces model is based on the concept that competition in an industry is rooted in its
underlying economic structure
Collective strength of these forces determines the ultimate profit potential in the industry

Strengths

Structures the industry analysis in a logical way

Weaknesses

Static approach

References

Porter, M.E. (1980); Competitive Strategy

Source: A.T. Kearney

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Contents of Module II

Introduction

Defining the industry structure


Players analysis
Strategic group analysis
Substitution analysis
Supply chain analysis
Exit and entry barrier assessment

Development of the industry


Industry strategic era analysis
Life cycle analysis
Trends analysis

Product/market analysis
Size and growth of the market
Product/market segmentation

Demand and supply economics

Industry analysis frameworks


Structure-conduct-performance
The five forces
The strategic triangle
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Industry analysis frameworks

The strategic triangle

Description

The strategic triangle (3Cs) is a framework used to establish the competitive


position of the client company in relation to its customers and competitors

Target segments

Company

Customers

Cost

The framework is based


on the premise that
competitive advantage is
determined by the ability
to deliver greater value to
customers at a lower cost
than competitors do

Competitors

Product/service differentiation
Source: Ohmae, K. (1976); The Mind of the Strategist
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Industry analysis frameworks

The strategic triangle

Usage

The job of the strategist is to find a way to achieve superior performance relative to
the competition, and the 3Cs provide a context for such a mind-set

Identify segments in which


the company can achieve
positive differentiation

Customers

Maximize relative
strengths to best meet
customer objectives

Company

Cost

Competitors

Identify sources of
differentiation

Source: Ohmae, K. (1976); The Mind of the Strategist


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Industry analysis frameworks

The strategic triangle

Example

Customer-based strategies aim to determine where to compete given a companys


limited resources and inability to access every potential customer

Identify which
segments the
company can serve

Customer-based strategies for a coffee bean refinery


Segmentation by
objectives

High caffeine content


Image
Taste

Targeted
customers

Customer
Cater to the coffee
connoisseurs of
California and Oregon
Customer
coverage
California and Oregon
Northeast
South
Mid-west

Identify segments in
which the company
can achieve positive
differentiation
Source: A.T. Kearney

Source: A.T. Kearney

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Industry analysis frameworks

The strategic triangle

Example

Company-based strategies are functional in nature

Strategy used by the car maker, Toyota, in the 1970s

Maximize relative
strengths to meet
customer objectives

Identify key functions

Design, engineering, and


manufacturing are the key functions

Selectivity and
sequencing

Entry was made via focusing first on


cost of manufacturing and later shifting
focus to design

Optimize functional
performance

The customers greatest demands from


the product were fuel-efficiency and
affordability

Improve cost
effectiveness

Reduction of overhead was combined


with selectivity in terms of orders
accepted, products offered and
functions performed

Company

Source: A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

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Industry analysis frameworks

The strategic triangle

Example

Competitor-based strategies seek to identify possible sources of differentiation

Aim to identify
possible sources of
differentiation which
can be in functions
ranging from
purchasing, design,
and engineering to
sales and servicing

Strategy used by the electronics manufacturer, Sony, in the 1970s

Competitor
Any difference
between the company
and its competitors
must be related to
one or more of three
elements that jointly
determine profit:
price, volume, and
cost

Create a superior image

Had a superior image to Panasonic in


the US and sold its products at a much
higher relative price

Exploit tangible
advantages

Focused on service warranties as a key


advantage over other electronics
manufacturers

Exploit profit and cost


advantages

Exploited, profit advantages via


pricing strategies

Source: A.T. Kearney

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

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Industry analysis frameworks

The strategic triangle

Methodology

Methodology for using the strategic triangle framework

Input
Client data/
interviews
Annual reports
Analyst reports
Customer surveys
Value chain analysis
Product/market
segmentation
Cost and margin
drivers
Players analysis
Benchmarking

Output

Define
customer-based
strategy

Segment by
customer
objectives
Segment by market
(customer
coverage)
Identify target
segments, those
group(s) whose
needs are catered
to and are also
served by the
company

Define
company-based
strategy

Identify key functional


areas
Improve via
selectivity and
sequencing
Optimize functional
performance of
product
Improve cost
effectiveness

Understanding of
competitive
position and
opportunities
Understanding of
industry dynamics

Define competitorbased strategy

Create a superior
public image
Exploit tangible
advantages
Exploit profit and cost
advantages
Identify sources of
differentiation

Tie-together

Create a coherent
strategy, tying in all three
considerations. This
should be a logical
outgrowth of any one of
the 3Cs due to their
interdependence

Source: A.T. Kearney; Ohmae, K. (1976); The Mind of the Strategist


A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

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Industry analysis frameworks

The strategic triangle

Conclusion

Conclusion

Key points

Focus on the three individual strategic viewpoints must eventually lead back to its strategic tie-in
with the others

Strengths

Strategies that evolve from this framework are based on gaining competitive advantage ensuring a better or stronger matching of corporate strengths to customer needs than is provided
by competitors

Weaknesses

Easily mistaken as recipes for developing strategies, rather than as simply strategic vantage
points helpful to stimulate thinking about strategy

References

Ohmae, K. (1976); The Mind of the Strategist

Source: A.T. Kearney

A.T. KEARNEY BUSINESS UNIT STRATEGY TRAINING

Module II

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