INDUSTRY ANALYSIS

Dr.M. Thenmozhi

Professor
Department of Management Studies
Indian Institute of Technology Madras
Chennai 600 036
E-mail: mtm@iitm.ac.in
INDUSTRY ANALYSIS AND
COMPETITOR ANALYSIS

Scanning of Environment is complete only with

Industry Analysis and Competition Analysis
FRAMEWORK FOR ANALYSIS

INDUSTRY ANALYSIS

General features / basic conditions of the industry

Industry Environment
Industry structure
Industry attractiveness
Industry performance
Industry Practices
Industry trends / the future of the industry
FRAMEWORK FOR ANALYSIS
COMPETITION ANALYSIS

Five force shaping competition in the

industry
Profiling of competitors
Firm’s competitive position in the industry
 INDUSTRY ANALYSIS
INDUSTRY STRUCTURE
No. of players
Total market size
Relative share of the players
Nature of competition : Monopoly, oligopoly, Perfect
competition
Differentiation practiced by various players
Barriers in the industry - Entry Barriers - Mobility
Barriers - Exit Barriers
 EDUCATION IN INDIA
•Long history of organized education. The Gurukul system of
education is among the oldest educational systems. Gurukuls
were traditional residential schools of learning.
•Nalanda which at its peak housed 10000 students is
considered the oldest established university.
•The current system of education with its western style and
content was introduced and founded by the British in the 20th
century.
•India is faced with challenges in primary education in order
to achieve 100% literacy rate.
•Universal Compulsory Primary Education has been a
challenge with its goal of keeping poor children in schools and
also maintaining quality of education.
•Children from poor and economically disadvantaged
backgrounds are forced to drop-out of the school system due
to economic reasons.
•All levels of education from primary to higher education are
overseen by the Department of School Education and Literacy
and the Department of Higher Education.
•India has a large formal education system with a target group
(6-24 years of age) of 411 million in 2003 (40% of Indian
population) that is ever growing. The total number of
enrolment in educational institutions was 224 million, with
about 6.2 million teachers. The formal system is augmented by
the private educational institutes and non-formal education
system that includes adult and distance education.
•The Department of Higher Education has established various
Colleges and Universities. Some of the institutes of higher
learning have worldwide reputation like the Indian Institutes
of Technology (IITs), Indian Institutes of Management (IIMs)
etc.
•In India over 130000 students graduate in Engineering and
another 65000 with MBAs every year. The global software
industry depends heavily on software outsourcing to India
with huge percentage of large and medium sized corporations
having operations in India.
 FRAMEWORK OF
EDUCATIONAL SYSTEM
•Constitution of India has various provisions for education
-Fundamental Rights
Right to education for all
Prohibition of discrimination based on religion, race, caste, sex
and place of birth.
Right of minorities to establish and administer educational
institutions.
-Directive Principles of state policy
Provisions for free and compulsory education for children for all
children up to age 14 year.
Provision for early childhood care and education for children
below the age of six years.
Promotion of educational and economic interests of scheduled
castes, scheduled tribes and other weaker sections.
•Federal funded institutions have reservations
Scheduled Castes (15%)
Scheduled Tribes (7.5%)
Disabled (3%)
•Jawahar Navodaya Vidyalayas established in over 500
districts to provide education for rural children and especially
girls.
•Decision regarding the organization and structure of
education are largely the concern of the states and the union
territories.
•Stages of education in India
•Schooling - Primary, Middle/Secondary and Higher
Secondary (6-18 years of age)
•College and University - Professional/Non-Professional
degree and diploma (18-24+ years of age)
•National Policy on Education (NPE), 1968 and 1986
formulated uniform pattern of school education with the 10+2
system.
•Member of the World EFA (Education for All) Forum, South
Asian Regional EFA Forum and the E-9 initiatives of the
UNESCO.
 INTRODUCTION TO
EDUCATIONAL POLICIES
•Early Childhood Care and Education (ECCE)
-Holistic and integrated approach that focuses on health,
psychological and nutritional development in addition to the three
R’s (Reading, Writing and Arithmetic).
-Implementation of the Integrated Child Development Scheme
(ICDS) program.
•Universalization of Elementary Education (UEE)
-Universal Access
Universal enrolment of all children including girls
Provision for school drop-outs, working children and girls who
cannot attend formal schools.
-Universal Retention
Reduction of drop-out rates between classes I-V and I-VIII from
existing 36.3% and 56.5% in 1994 to 20% and 40% respectively
(goal of the ninth 5-year plan)
-Improvement in quality
Additional schooling facilities for primary children
Minimum Levels of Learning standards set for the primary
school children.
Teacher capacity building
•National Literacy Mission (NLM)
-Targets literacy of non-literates in the 15-35 age group.
-Facilities for skill development to improve economic
status and well-being.
-Establishment of Continuing Education Centers
•Language Policy in Indian Education
-Medium of instruction is English, Hindi or a regional
language. The examinations can be taken in the medium of
instruction followed.
-Study of one or two additional languages in addition to the
medium of instruction.
-Science and Social Sciences instructions and books are
usually in English so many students prefer to select English
as medium of instruction in urban and semi-urban areas.
 INTRODUCTION TO
EDUCATIONAL POLICIES
• Early Childhood Care and Education (ECCE)
– Holistic and integrated approach that focuses on health, psychological and nutritional
development in addition to the three R’s (Reading, Writing and Arithmetic).
– Implementation of the Integrated Child Development Scheme (ICDS) program.
• Universalization of Elementary Education (UEE)
– Universal Access
• Universal enrolment of all children including girls
• Provision for school drop-outs, working children and girls who cannot attend formal
schools.
– Universal Retention
• Reduction of drop-out rates between classes I-V and I-VIII from existing 36.3% and 56.5%
in 1994 to 20% and 40% respectively (goal of the ninth 5-year plan)
– Improvement in quality
• Additional schooling facilities for primary children
• Minimum Levels of Learning standards set for the primary school children.
• Teacher capacity building
• National Literacy Mission (NLM)
– Targets literacy of non-literates in the 15-35 age group.
– Facilities for skill development to improve economic status and well-being.
– Establishment of Continuing Education Centers
• Language Policy in Indian Education
– Medium of instruction is English, Hindi or a regional language. The examinations can be taken
in the medium of instruction followed.
– Study of one or two additional languages in addition to the medium of instruction.
– Science and Social Sciences instructions and books are usually in English so many students
prefer to select English as medium of instruction in urban and semi-urban areas.
 Reform:
The National Policy on Education
• To ensure UEE, the National Policy of Education was written in 1986.

• In need of fresh ideas and initiatives, the policy was revised in 1992 to
supplement the states efforts with additional government programs.

• Global influence and support for universalization was strengthened by

the 1990 International Conference on Education for All EFA in Jomtien,
Thailand.

• The 73rd and 74th Amendments to the Constitution in 1992 mandated

decentralized management in elementary education through local self-
government.

• The Supreme Court in 1993 came forth with a landmark judgement that
education was a fundamental right of every child up to 14 years of age.
Initiatives addressing the objectives and strategies
of the NPE 1986
• Operation Blackboard
• Decentralization
• National Programme of Nutritional Support to Primary
Education
• District Primary Education Programme
• Bihar Education Project
• Uttan Pradesh Basic Education Programme
• Community Mobilization and Participation
• Andhra Pradesh Primary Education Project
• Shiksha Karmi Project
• Lok Jumbish Project
Core Principles of the District Primary Education Programme DPEP
• Holistic planning
• Equity focus
• Decentralized design and management with community
participation
• Quality focus
• Flexibility
• Capacity building
 District Primary Education Programme
Launched in 1994, the DPEP is an ambitious programme for overhauling the
primary education system in India.

Basic objectives to run in three phases of implementation:

1. Reduce differences in enrollment, dropouts and learning achievement
between genders and across different social classes to less than 5 percent;
2. Reduce overall primary dropout rates for all students to less than 10
percent;
3. Raise average learning achievement levels by at least 2 percent over
measured baseline levels; and
4. Provide access to all children for primary schooling or its equivalent
non-formal education.

Making it happen…
• Academics, teachers, NGOs, managers and state reps were consulted; they
wanted to ensure that they took full advantage of previous efforts in basic
education
• 85% of the program cost was covered by the government of India, along
with financial support from the EU, the Government of the Netherlands,
DFID, UNICEF and the World Bank
• Responsibility was given and held by all levels of government
 Challenges and Successes of DPEP
Opposition to DPEP and points of criticism of the programme were parallel
structure, reliance on foreign aid, elitist program, too much “play” in schools,
all planning—no action, project mode “inappropriate for education sector”,
incomplete focus and a teacher resistance to a decentralized approach.

The upswing:
• While there was much criticism, the positive and enthusiastic support from
various sectors was very strong
• Teachers involvement generated a fresh wave of energy and enthusiasm
• Parents and community members were involved from the beginning and this
created a sense of ownership and pride

DPEP is meeting its goals and is bringing success to those students who need it
most.
• The target of universal primary enrollment is close to being met in the phase I
districts
• Enrollment of phase II districts is above the national average and schools are
continuously being added to the program
• Enrollment of girls has been achieved by most of the districts
• Social equity has improved and DPEP continues to reach out to tribal areas
 Future educational reform

Countries that are seeking to reform their own

policies can learn from India and DPEP
• Strong focus on student learning
• Decentralization and local empowerment
• Emphasis on continuous learning and innovation
• Use of outside change agents and consultants
• Flexible design and implementation across states and
districts
• Sufficient preparation time before launch
• Constant concern with building capacity
 Department of Education
in each State
(State Governments) -

Schools Higher Education

State
Sarva Shikshana
Universities
Abhiyan(SSA)

Department
DSERT / State Board Private
of Public
SCERT of Education Sector
Instruction

Research, Training,
District Institutes of Examining Body
Curriculum and
Textbooks Educational Training
Number of Educational Institutions in India -
Schools

(Educational Statistics at a Glance 2005-06, Ministry of Human Resource

Development, Department of Higher Education, Govt. of India 2008)
Number & Type of Higher Education Institutions in
India

13 20
Central Universities
101
State Universities

Deemed Universities

Institutions of National
216 Importance

(Educational Statistics at a Glance 2005-06, Ministry of Human Resource

Development, Department of Higher Education, Govt. of India 2008)
 What India spends on School
Education…
3,500
Millions

2,906
3,000
2,369
2,500

2,000 Ele m e ntar y Education

1,500 Se condary Education

1,000
607
500
205
0
2007-08 in UK £ 2008 –09 in UK £

(Educational Statistics at a Glance 2005-06, Ministry of Human Resource

Development, Department of Higher Education, Govt. of India 2008)
 What India spends on Post School
Education…
500 465
427
Millions

400
300 251
Un ive r s ity an d Hig h e r
200 142
90 Ed u catio n
100 L an g u ag e De ve lo p m e n t
14 9 27
0 Dis tan ce L e ar n in g , IC T
2007-08 in 2008 –09 in
T e ch n ical Ed u catio n
UK £ UK £

(Educational Statistics at a Glance 2005-06, Ministry of Human Resource

Development, Department of Higher Education, Govt. of India 2008)
 India’s dismal Education Development Index
(EDI)
Countries EDI in 2005 Rank out of 129 EDI in 2006 Rank out of 129
(0-1) countries ( 0-1) countries

Japan not available .994 2

Norway .995 1 .994 4
UK .995 2 .993 5
France .991 9 .991 8
Mexico .953 48 .956 53
China .938 61 .947 59
Brazil .901 76 .901 80
India .797 105 .794 102
Bangla Desh .795 107 .753 109
Pakistan .640 120 .652 118
 INDUSTRY ANALYSIS

INDUSTRY PRACTICES

Distribution, pricing, promotion, methods of

selling, service/field support, R&D, legal tactics
FMCG - reliance on carrying & forwarding
agent (C&A) - Industry practice
Textiles - Wholesalers - Semi wholesalers-
retailers + retail showrooms (few players)
 INDUSTRY ANALYSIS

EMERGING TRENDS

Product life cycle, rate of growth, changes in

buyer needs, innovations in products/ processes,
entry & exit of firms, changes in regulatory
environment governing the industry
COMPETITION ANALYSIS

Porter’s Five Forces Model

Value Chain Analysis
 PORTER’S FIVE FORCES MODEL
Potential
entrants
Threat of new entrants
Bargaining power Bargaining
Industry competitors
Rivalry among existing Buyers
Suppliers players

buyers power of
of suppliers Threat of substitutes
substitutes
Five forces shaping competition & determining profitability in
industry
 PORTER’S FIVE FORCES MODEL

1. THREAT OF NEW ENTRANTS

Powerful source of competition (New capacity &
product range)
Bigger the entrant - more severe
Limit prices, affect profitability

2. BARGAINING POWER OF CUSTOMERS

Groups/ cartels (Industrial products),
formal/informal groups,
Pressure on price, quality, delivery
Affect cost & investment (demand by customers)
 PORTER’S FIVE FORCES MODEL

3. BARGAINING POWER OF SUPPLIERS

Specialized product
Limited supply
Affects cost of raw materials Industry attractiveness &
profitability
4. RIVALRY AMONG EXISTING PLAYERS
Influence price
Cost of competing in industry
Production facilities - product development
Advertising, sales force etc.
 PORTER’S FIVE FORCES
MODEL
5. THREAT FROM THE SUBSTITUTES

 Price advantage
 Performance improvement
 Coir decreased demand synthetic fiber
 Substantial invest - R&D
 Limit price & profitability
 VALUE CHAIN

Tool for identifying ways in which value could be

created/enhanced by a firm
Used for competitor analysis - to analyze competitive
position within the industry
( compare value chain - own vs. Competitors)
 VALUE CHAIN
Generic Value
Chain
Firm Infrastructure M
Human Resource Management A
Support Activities

Technology Development R
Procurement G
Inbound Operations Outbound Marketing I
Services
N
Logistics Logistics & Sales

MATRIX OF VALUE CREATING ACTIVITIES

 VALUE CHAIN
SUPPORT ACTIVITIES

Firm Infrastructure - General management,

accounting, finance, strategic planning
HRM - recruiting, training, development
Technology development - R&D, Product &
process improvement
Procurement - Purchasing of raw materials,
machines, supplies
4 support activities occur through all primary
activities
 VALUE CHAIN

PRIMARY ACTIVITIES

Inbound logistics - raw material handling &

warehousing
Operations - Machining, assembling, testing
Outbound logistics - Warehousing &
distribution of finished product
Marketing & Sales - Advertising, promotion,
pricing, channel relations
Services - Installation, repair, parts
 VALUE CHAIN
VALUE CREATION - FUNCTION
 Performance of each department
 Coordination of activities within a
department
BUSINESS PROCESS
 Value creating & value delivering process
 Locate activities which would add value
 Customers patronage - organizations -
highest delivered value
 Examine cost & performance
 Value chain - own vs. competitors
 INDUSTRY ANALYSIS – STRATEGIC
GROUP ANALYSIS

STRATEGIC GROUPS - To understand competitive

environment
A Strategic Group is a set of business units or firms that
pursue similar strategies with similar resources
Units in the same strategic group - strong rivals and are
similar to each other
 STRATEGIC GROUPS IN PHARMACEUTICALS
INDUSTRY (1995 - 1999)
S.Group I S.Group II S.Group III S.Group IV
Formulations R&D Oriented Marketing Bulk Drug
medium Size Formulation & Intense MNC Indian
Bulk Large Form

MNC: MNC: MNC: Indian

Abbot Labs Glaxo (India) Infar (India) Aurobindo
Astra –IDL Hoechet SmithKline Cheminor
Burroughs Marion Int. Beecham Drugs
Wellcome Indian: Kopran Ltd.
E-Merck India Cipla Ltd Morpen Labs
Fulfold (India) Dr.Reddy Lab