ector, Industry and Segments

Sector : Group of closely

related industries

Industry : Group of
companies offering
products/services that are
close substitutes for each
other

Segment : Distinct group of

customers within a market
that can be differentiated
from each other on the basis
of their specific demands

Krishna Koppa
ector, Industry and Segments

Computer Sector
Computer
Computer Computer
Component
Hardware Industry Software Industry
Industry

Disk Drive Mainframe Desktop PC

Industry Industry segment

Semiconductor Notebook PC
PC Industry Segment
Industry

Handheld
Modem Industry Computer Server Segment
Industry

Krishna Koppa
dustry competitive analysis and tools used

Tools used for Industry Analysis

Porters 5 forces Model

Strategic Group Analysis

Industry Life Cycle Analysis

Krishna Koppa
Porters 5 forces model

Five Forces Model

focuses on forces
that shape
competition within
industry

Michael E. Porter
Krishna Koppa
Porters 5 forces model

1
Risk of entry
by potential
competitors

Intensity of 2
Bargaining Rivalry Bargaining
4 power of among power of 3
suppliers existing buyers
firms

Threat of
substitutes

5
Strong competitive force=threat ; weak competitive force
Krishna Koppa
ers 5 forces model > Risk of entry of potential competito
1
Risk of entry
by potential = Barriers to entry ?
competitors

Absolute
Absolute Economi Custome
Custome Governm
Governm
Brand Cost Economi
Brand Cost es rr ent
ent
Loyalty Advantag es of
of
Loyalty Advantag Scale Switchin
Switchin regulation
regulation
es Scale
es g
g Costs
Costs s
s
mass
superior mass
superior production time,
production production time,
significant production bulk buying energy,
significant bulk buying energy,
brand // processes
processes of raw
brand of raw money
money to to
loyalty control materials
loyalty // control
over
materials
spread of switch to
switch to regulatory
regulatory
preference over inputs
inputs spread of new
preference access to fixed cost
fixed cost new firms
firms barriers
barriers
== big
big access to
cheaper spread of
spread of
is very
is very
barrier cheaper marketing high
barrier funds marketing high
funds costs
costs
Economist, Joe Bain
Krishna Koppa
ters 5 forces model > Rivalry among existing firms
2 of
Intensity
Rivalry = Competitive struggle between
among
existing
companies to gain market share from
firms each other

Industry
Industry
Competiti
Competiti Industry
Industry Exit
Exit
ve
ve Demand
Demand Barriers
Barriers
Structure
Structure

more the
more the
fragmente demand,
fragmente demand, economic
d more
more isis the
d economic
the

strategic
rivalry, strategic
rivalry, emotional
consolidate more emotional
consolidate more isis the
the
d profits
d profits

Krishna Koppa
ters 5 forces model > Rivalry among existing firms

Fragmented industry
low entry barriers
commodity-type, hard to
differentiate products
boom-and-bust cycles
profits rise and fall
more threat than an
opportunity

Consolidated Industry

one companys actions

impact others profits &
sales
follow the leader
approach

Krishna Koppa
ters 5 forces model > Bargaining power of buyers
3
Bargaining = ability of buyers to bargain down
power of prices or to raise costs of company
buyers by demanding better quality products

1 2 3 4 5
many
many
small
small buyer
companies buyer
companies buyers switching purchases
as buyers dependence switching purchases
as purchase
purchase in costs
costs are
dependence raw
suppliers, in on buyers are raw
suppliers, large on buyers too
large
large and
and large for large %
for large % too low for
low for material
material
quantities buyers from
few
few quantities of total sales
of total sales buyers from many
many
companies companies
companies
companies
as
as buyers
buyers
+ Buyers can threaten to enter industry
Krishna Koppa
ters 5 forces model > Bargaining power of suppliers
4
Bargaining = ability of suppliers to raise input
power of prices or to raise costs of the industry,
suppliers provide low quality products /services

1 2 3 4 5

buyers
few profitability suppliers buyers
profitability higher suppliers can
few of higher can not
not
substitutes of suppliers
suppliers switching
threatening
threatening threaten
substitutes is not switching to threaten to
to
for
for existing is not costs to enter
enter
existing depending costs for
for buyers
enter
enter
products depending buyers buyers suppliers
products on buyers suppliers
on aa industries
industries industries
industry industries
industry

Krishna Koppa
rters 5 forces model > Threats of Substitution
5
= the products of different businesses
Threat of
substitutes
or industries that can satisfy similar
customer needs

Coffee
Tea

Water Juice

Soft drinks
For industrial
Consumer goods products, threat of
Krishna Koppa substitution is low
orters 5 forces model > Summary

One force affects the other. Thus all the forces

need to be considered for Industry Analysis
Krishna Koppa
Balanced Score Card

Krishna Koppa
Balanced Score Card

Krishna Koppa