Industry and Competitive Analysis

• Industry Analysis
  • Industry: A group of firms producing similar goods or services
  • Purpose: Assess the market where a new product/service will be launched
  • Key Considerations
    • Is the industry feasible for a new venture?
    • What are the industry trends?
    • How competitive is the industry?
• Three Key Questions in Industry Analysis
  1. Is the industry accessible for a new entrant?
  2. Does the industry have markets that are open for innovation or underserved?
  3. Are there favorable positions in the industry to avoid negative impacts?
• Techniques to Assess Industry Attractiveness
  • Study Environmental & Business Trends
    • Economic, social, technological, political, and regulatory changes
  • Porter’s Five Forces Model
  • Competitor Analysis
• Studying Industry Trends
  • Environmental Trends: Affect industry strength (e.g., aging population benefiting hearing aid businesses).
  • Business Trends: Influence industry operations (e.g., outsourcing manufacturing to reduce costs).
• PESTEL Analysis
  • A tool that helps you analyze the political, economic, social, technological, environmental, and legal factors that may influence your market and industry
  • Helps you understand the macro-environmental forces that may create opportunities or challenges for your business, as well as the implications for your strategy and operations
  • Used for: Understanding industry structure, competitive strategy, and market positioning
  • Focus: External factors that influence the industry but are beyond company control
  • Factors:
    • Political: Government regulations, trade policies
    • Economic: Inflation, GDP growth, employment rates
    • Social: Demographics, lifestyle changes
    • Technological: Innovation, automation
    • Environmental: Sustainability, climate change effects
    • Legal: Consumer protection laws, labor laws
• Porter’s Five Forces Model
  • Determines industry profitability and competitive structure
  • Used for: Understanding industry structure, competitive strategy, and market positioning
  • Focus: Internal industry structure and competitive dynamics.
  • Forces:
    1. Threat of Substitutes
       • Fewer substitutes = Higher profitability
       • More substitutes = Lower profitability (e.g., generic drugs vs. branded pharmaceuticals)
    2. Threat of New Entrants
       • High profitability attracts new firms
       • Barriers to Entry
         • Economies of scale
         • Strong brand identity (e.g., Coca-Cola)
         • Capital requirements
         • Exclusive distribution channels
         • Government regulations (e.g., banking, broadcasting licenses)
         • Unique business models and innovations
    3. Rivalry Among Existing Firms
       • More competition leads to price cuts and reduced profitability
       • Factors Influencing Rivalry
         • Number of competitors
         • Product differentiation
         • Industry growth rate
         • High fixed costs
    4. Bargaining Power of Suppliers
       • Powerful suppliers can raise prices or reduce quality, affecting profitability
       • Factors that increase supplier power
         • Limited suppliers for a critical product
         • High switching costs for buyers
         • Few substitutes
         • Threat of forward integration (suppliers entering the buyer’s industry)
    5. Bargaining Power of Buyers
       • Buyers can demand price reductions or quality improvements
       • Factors that increase buyer power
         • Few large buyers vs. many suppliers
         • Importance of the product to the buyer
         • Standardization of supplier’s products
         • Threat of backward integration (buyers entering supplier’s industry)
• Industry Types & Opportunities
  • Emerging Industries: No established procedures → First-mover advantage
  • Fragmented Industries: Many small firms → Consolidation opportunities
  • Mature Industries: Slow growth → Process & after-sale service innovation
  • Declining Industries: Falling demand → Niche markets, cost reduction, leadership
  • Global Industries: High international sales → Multi-domestic or global strategies
• Market Analysis
  • Market Definition: Set of actual & potential customers
  • Types of Markets
    • B2B: Business selling to another business
    • B2C: Business selling to end consumers
  • Key Customer Insights
    • Who are the customers?
    • Why will they buy the product?
    • What needs does it fulfill?
    • How big is the market?
    • What are the competitors’ advantages/disadvantages?
• Competitor Analysis
  • To understand competition positioning
  • Identify competitive advantages
  • Competitive Analysis Grid: Organizes competitor information
  • Sources of Competitive Intelligence
    • Attend trade shows
    • Buy competitors’ products
    • Study websites & social media
    • Set up Google alerts
    • Read industry reports
    • Conduct customer surveys
• SWOT Analysis
  • Strengths-Opportunities (SO): Leverage strengths for opportunities
  • Weaknesses-Opportunities (WO): Improve weaknesses using opportunities
  • Strengths-Threats (ST): Use strengths to counter threats
  • Weaknesses-Threats (WT): Reduce weaknesses and avoid threats
  • Steps in SWOT Analysis
    1. List external opportunities
    2. List external threats
    3. List internal strengths
    4. List internal weaknesses
    5. Match strengths with opportunities (SO Strategies)
    6. Match weaknesses with opportunities (WO Strategies)
    7. Match strengths with threats (ST Strategies)
    8. Match weaknesses with threats (WT Strategies)
• Marketing Mix (4Ps)
  1. Product:
     • Features, quality, branding, packaging
  2. Price:
     • List price, discounts, payment terms
  3. Place:
     • Distribution channels, market reach
  4. Promotion:
     • Advertising, public relations, sales efforts