analyzing an industry
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Analyzing an Industry
• Segmentation (BO path 4) Customer Characteristics: • Age, gender, income, level of use• Employee characteristics, (Pop Copy)
• Competitors: 1. leader 2. Challenger 3. Follower 4. Nichers • http://www.youtube.com/watch?v=ioVHaAUhgEk
• Pop Copy = Leader, ‘Bad Service’ segment
StrategyA View from the Top
Chapter 4: Analyzing an Industry
John ShonkBob Odgers
Donald Ewalt
What is Industry?Products
> function> technology
CustomersGeographyStages in production-distribution
pipelineMarkets served
Porter’s Five Forces Model1. Threat of new entrants2. Bargaining power of customers3. Bargaining power of suppliers4. Threat of substitute products or
services5. Jockeying among current rivals
Threat of EntryEconomies of scaleProduct differentiationCapital requirementsCost disadvantages that are
independent of sizeAccess to distribution channelsGovernment regulations
Bargaining Power of Customers
Few customers and/or buy in large volume
Product is relatively undifferentiated, making it easy to switch other suppliers
Buyers’ purchases represent a sizable portion of the sellers’ total revenues
Buyers can integrate backward
Bargaining Power of Suppliers
Only a few dominant and are more concentrated than the industry they serve
Component supplied is differentiated, making switching among suppliers difficult
Few substitutesSuppliers can integrate forwardIndustry generates a small
portion of the suppliers’ revenue base
Threat of Substitute Products or Services
Show improvements in price performance relative to the industry average
Produced by companies with deep pockets
Jockeying among Current Rivals
Competitors are numerous and relatively equal in size and power
Industry growth is slow and the competitive battle is more about existing customers than creating new customers
Fixed costs are high or the product or service is perishable
Capacity increases are secured in large increments
Exit barriers are high
*Influence of Complementary Products
Alignment with complementorsNew technologies or approaches
can upset the existing order
Analyzing an Industry
• Segmentation (BO path 4) Customer Characteristics: • Age, gender, income, level of use• Employee characteristics, (Pop Copy)
• Competitors: 1. leader 2. Challenger 3. Follower 4. Nichers • http://www.youtube.com/watch?v=ioVHaAUhgEk
• Pop Copy = Leader, ‘Bad Service’ segment
Analyzing Products/Market
• “Research used to assist in predicting the direction of the markets based on technical data” 1. Market size (current and future)
2. Market growth rate3. Market profitability4. Industry cost structure5. Distribution channels7. Market trends8. Technology changes
Analyzing Products/Market
• Example: Venezuela, oil Market. Avoidable?http://www.washingtontimes.com/news/2009/may/12/nationalization-continuing/
Four Trajectories of Change
•Radical- threatened with both obsolescence at the same time…. Ex. Airline industries•Progressive- not threatened with either obsolescence… Ex. Long-haul trucking •Creative- core assets are threatened, but core activities retain value… Ex. Movie studios•Intermediating- core assets retain value, but core activities are threatened… Ex. Museums
Structure, Concentration, and
Product DifferentiationStructure- Vertical integration,
horizontal integration, or both?Concentration- Market share and unit
costs are inversely related, and the “Rule of Three and Four.”
Differentiation- Mature markets sometimes become less concentrated.
Product Life CycleIntroductory Growth Maturity Decline
Competition is unsure of targets
Less uncertain No sales growth
Unattractive
Potential customers are unfamiliar
More intense competition
Most competitively stable
Good strategies can produce
Large amount of experimentation
Usually most rivals
Product development and give a spark
New PatternsFighting for the right
convergence… HD TV's and Cell Phones
Industry evolution… Three phases
The lines are getting blurredChanging with experience
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