Analyzing Industry and competition

It is an important variable in ETOP Helps the firm to know industry attractiveness firms competitive position within the industry . Help the firm to identify & build its competitive advantage

Frame work for analyzing industry

General features /basic condition of industry. Industry environment Industry structure Industry attractiveness Industry performance Industry practices Emerging trends / future of industry.

General features
Size of the industry Product categories Sub categories

Industry environment
Fragment emerging Mature Decline Global

INDUSTRY STRUCTURE
Number of players Market share of the players Nature of competition Differentiation practiced by various players Barriers in the industry.

Industry attractiveness
Industry potential Growth Profitability Future pattern of industry.

Industry performance
Production Sales Technological advancement.

Industry practice
Pricing policy Promotion policy Product policy Distribution policy R&D.

Forces shaping competition

According to Michael Porter

five forces that shapes competition in an industry.

The Five Forces Model

New entrants Potential Competitors

New entrants into an industry threaten incumbent companies. Barriers to entry:
Brand loyalty Absolute cost advantages Economies of scale Government regulation

Entry barriers reduce the threat of new and additional competition.

Rivalry Among Established Companies

The intensity of competitive rivalry in an industry arises from:

Industrys competitive structure. Demand conditions in industry. Height of industry exit barriers.

Competitive Structure
Continuum of Industry Structures
Fragmented Many firms, no dominant firm Few firms, shared dominance (oligopoly) Consolidated One firm or one dominant firm (monopoly)

The Bargaining Power of Buyers

Buyers are most powerful when:
There are many small sellers and few large buyers. Buyers purchase in large quantities. A single buyer is a large customer to a firm. Their products have few substitutes and are important to buyers

The Bargaining Power of Suppliers

Suppliers have bargaining power when:
The buyers industry is not an important customer to the supplier. Differentiation makes it costly for buyers to switch suppliers. Suppliers can vertically integrate forward to compete with buyers and buyers cant integrate backward to supply their own needs.

Substitute Products
The competitive threat of substitute products increases as they come closer to serving similar customer needs.
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