Industry, Sector and Segments

Industry is a group of firms producing: similar principal product Products that are close substitutes for each other The concept of industry can be extended into the public services, like healthcare, education etc through the idea of a 'Sector'

Industry, Sector and Segments

Segments refer to Market Segmentation Market segmentation identifies similarities and differences between groups of customers or users Consumer/Industrial or business Segmentation variables covered in marketing module Strategic implication of segmentation is to understand what and how customers value their needs and wants

Porters Five Forces Model of Competition

Rivalry among competing sellers Potential new entrants Substitute products Competitive pressures from supplier seller relations : Bargaining power Competitive pressures from seller buyer relations : Bargaining power

Rivalry

No of players Market growth rate Standardised product Brand switching Higher exit barriers Cross-border multi-technology competition Strong new entrants acquiring weak companies and following aggressive moves Hypercompetition Constant disequalibrium and change

Potential New Entrants

Economies of scale/capital investment Cost & resource disadvantage (patents, locked-in partnerships with suppliers/customers) Learning & experience curves Brand preferences & loyalty Access to distribution channels Regulatory prices Tariffs & international trade restrictions Industry attractiveness (growth/profitability)

Substitute Products

Availability of attractively priced substitutes Substitutes meeting attributes like quality & performance Ease with which buyers can switch to substitutes

Supplier Seller Relations

No of suppliers of same item Good supply of substitute raw material and components If sellers are large and they form a major % of supplier business Motivation required for supplier to provide quality & sophisticated items When suppliers can provide subassemblies at competitive prices Strategic alliance between supplier-seller can become disadvantage to other industry members

Seller - Buyer Relations

Ease with which one can switch suppliers/brands If buyers large and they form major % of sellers business Buyers are fully aware of sellers costs and products Possibility of buyers backward integrating an item/component Buyers purchasing at their will B to B strategic relationship

Collective Impact

Stronger the collective impact, lower is the combined profitability of the industry

Industry Attractiveness

Growth potential Adequate profitability Degree of risk in industrys future Companys strategic importance of industry in relation to companys other business Likely positive influence of the industry on companys other businesses

Evaluating Industry & Competitors

Competitive position of major companies/Strategic Groups: Companies in industry having similar business characteristics ascertain relative favourable position Product diversity Market segments served Extent of service quality Technological leadership Extent of vertical integration Size of organization

Evaluating Industry & Competitors

Competitor analysis: Ascertaining strategic approaches of key competitors (Annual Reports, Speeches) Industry Key Success factors: Product attributes, competencies (tech, process, skill), organisational capabilities