What is an Industry?

INDUSTRYGROUPS
• AGRICULTURE • TELECOM
• STEEL • UTILITIES
• HEALTH CARE • PAPER& PRINTING
• RETAIL • BANKING
• AUTOMOBILES • FMCG
• PHARMACEUTICAL • INFRASTRUCTURE
• FINANCIALSERVICES • TEXTILE
• HOTEL& TOURISM • OILAND GAS
• IT EXPLORATION
SIC Code
(Standard industrial classification using 4-digit code)

• ECONOMIC SECTOR
– Manufacturing
– Distribution
– Services
• PRODUCTANDSERVICES
– List of what is offered by theindustry
• GEOGRAPHIC SCOPE
– Local ,Regional, National, International
 Computer industry
• Different Market
Segments
– Personal Computer
– Micro Computer
– Mini Computer
– Mainframe Computer
 Furniture industry

Home Furniture Office Furniture

Wooden Metal
Hosehold Household
 Industry Analysis tries to findout
following answer

Difference between return for alternateindustries

Future performance of currently performing companyin

one period

Consistent performance over time

Risk difference between different industries

Risk variability over period of time

 ECONOMYAND INDUSTRIALSECTORS

The economic performance of a country,to a large extent,determine

Favourable and unfavourablable climate for its industrial participation

IIP – index of industrial production

 Reasons of industrial analysis

• Provide an awareness of
market performance

• Identify investment
opportunities

• Important part of
company’s business plan
– Financial institutions
 Data Requirement
 Product Line  Buyer and their
 Complementry Product Behaviour
 Product Growth  Substitute Product
 Product Pattern  Prices
(Seasonal,Cyclical)  Marketing and Selling
 Econimies of Scales  Cost Structure
 Suppliers  Logistic
 Labour Market

 Department of Economic Analysis , Business Publication

 Industrial Life Cycle
It is Rise and Fall in CustomerInterest
 Industrial Life Cycle
• Rise and Fall of Customer Interest
• Depend on extent of technologyand
innovation
• Each phase passes from four stages
– Introduction Stage
– Growth Stage
– Maturity Stage
– Stability/Decline Stage
 Feature of Industrial LifeCycle

Introduction Growth Maturity Decline

 Marketing High Advertising HighAdvertising Market Low

Skimming Pricing Segmentation Advertising
Services

 Manufacturing Under Capacity Under Capacity Optimum Overcapacity,

High Production Shift to High Capacity Mass
Cost Production Production

 Competion Low Many Competitor Price Exit,Fewer

Competition

 Risk High Groth VsRisk Low Very High Risk

 Margin High but low High and High Profit Low due to
profit High Prices price war Low Profit

Increase Market Change Quality Marketing

 Strategy Share &Price Image Effectiveness Cost Control
 TOOLSFORINDUSTRYANALYSIS
Qualitative
• Cross sectional industry
performance
• Industry performnce
overtime
• Difference in industry risk
• SWOTanalysis
• Competition over industry
life cycle
Quantitative
• Analysing employment data
• Analysis of employee
salary data
• Input output analysis
• Earning data analysis
Cross sectional industry performance
• Aimed at finding out variability in Rate of return
among various industries in given time period
• compare performance
in term of
– Sale
– profit
– market capitalisation
– dividend
 Industry performance over time
• To identify stage of product life cycle
• Time duration 3 to 5 year
• Difficult to forecast future performance due to
 compositional change
in industry
 technological change
 innovation
 Differences in industry risk
• Besides focussing on return also consider risk
• Specifically investigate two question
– Does risk differ across industries in given time period
– Are industry risk stable over time
• Measured in term of variabilityin
return/productive value
• Risk pattern also depend on economic
situation
 SWOTANALYSIS
Strenth & weakness
• Assess strenth and
weakness
• Internal capability of
industry
• Competitive advantage or
defensive against weakness
Opportunity & threat
• Evaluate opportunity and
threat
• Environmental trend
• External situation
– Competitive forces
– Technology
– Government regulation
 SWOTanalysis
STRENTH WEAKNESS
• Capicity • Limitation default defect
• Competitive advantage • Competitor has exploitable
• Good custermor service advantage
• High quality product • Example:
– Small scale industry hs poor
• Customer loyality
financial resources
• Financial resources – Industry that caterdomestic
market, would have
weakness of catering to
global market
 SWOTanalysis
Opportunity Threat
• Favourable condition in • Unfavourable situation
environment • May be barrior or constraint
• May be trend or need • Slowing domestic economy
• Growing market of industry • Competition
product
• New entrant
• Shrinking competition
• New technology
• Identification of new
market
 SWOTanalysis

Threat Confront Avoid

External
environment

Opprtunity Exploit Search

Strenth Weakness

Internal environment
 Analysing Employment data
• Life cycle can be predicted by Product life
cycle
• Help in identify keyindustries
• Identify growth anddecline
• Evaluate importance of industry to economy
• DetermineCompetitiveness among industries