industry analysis
DESCRIPTION
Industry Analysis. Key Issue: Analyzing a Market’s Trends and Attractiveness Key Assumption: Level of Competition has been set*. Beer. Ice cream. Tea. Regular colas. Diet lemon limes. Diet-Rite cola. Wine. Product form competition: Diet colas. Diet Pepsi. Diet Coke. - PowerPoint PPT PresentationTRANSCRIPT
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Industry Analysis
Key Issue: Analyzing a Market’s Trends andAttractiveness
Key Assumption: Level of Competition has been set*
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
LevelsLevels of Competition*of Competition*
Diet lemon limes
Baseball cards
Fruit flavored colas
Coffee
DietCoke
DietPepsi
Diet-Rite cola
Bottled water
Lemon limes
Regularcolas
Beer
Juices
Wine
Fast food
Tea
Video rentals
Icecream
Product form competition: Diet colas
Product category competition: Soft drinks
Generic competition: Beverages
Budget competition: Food and entertainment
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
What You Need to Do/Know FirstWhat You Need to Do/Know First
• Choose the “Right” Level of CompetitionEx) Product Category Level Soft Drinks; Snack/Health Bar
• Industry Analysis = (Product) Category Analysis
• Level of Discussion for Industry Analysis: An industry! (not an individual firm)
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Key Elements of IndustryKey Elements of Industry Analysis**Analysis**
1. Market Factors (at the Aggregate Level)*
2. Competitive Factors*
Michael Porter’s Framework*
3. Environmental Factors
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
I. Market FactorsI. Market Factors for Industry Analysis* for Industry Analysis*
• Category Size: Sales Volume or $$ two sources of info• http://www.beerinsights.com• http://www.npd.com• http://www.autonews.com• http://www.beverage-digest.com/
• Growth Rate• Stage in Product Life Cycle* • Cyclicity & Seasonality• Marketing Mix (General Trends)
• Product differentiation: Macro (http://www.census.gov) and Micro
(advertising $$ or number of product lines or skus)• Profits & Financial Ratios (http://www.sec.gov) SIC: 5600
http://www.hbsp.harvard.edu
• Library source of information:•
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
II. II. Competitive FactorsCompetitive Factors for Industry Analysis for Industry Analysis
Industry Concentration*1. Intensity of Rivalry*2. Power of Buyers (Two Types) 3. Power of Suppliers4. Pressure from Substitutes5. Threat of Entries and ExitsCapacity Utilization
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Industry Concentration MeasuresIndustry Concentration Measures
1. The share of the largest firm
2. The combined shares of the three largest firms
3. The number of firms with at least x percent of the market (e.g., 1 percent)
4. The share of the largest firm divided by the share of the next three largest competitors
5. Herfindahl-Hirschman Index (HHI):-The Sum of Squared Shares of the Firms in the Industry- Use- Thresholds: below 1000; 1,000 to 1,800; above 1,800
http://www.census.gov/epcd/www/econ97.html
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Characteristics of Characteristics of Intensive RivalryIntensive Rivalry
Many or Balanced Competitors Slow Growth High Fixed Costs Lack of Product DifferentiationAny Example?
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Buyer PowerBuyer Power Is Is HigherHigher When When Buyer accounts for a large percentage of the
industry’s output. Product is undifferentiated. Threat of backward integration. Buyer has full information. Example:
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Supplier PowerSupplier Power Is Is HigherHigher When When Suppliers are concentrated. No or few Substitute for the product. Differentiated product/high switching cost. Limited Supply.Example: LCD in the past
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Industry Attractiveness based on Industry Attractiveness based on Market FactorsMarket Factors
High LowSize Large Small
Growth High Slow
Stage in life cycle Early Late
Cyclicity Low High
Seasonality Low High
Marketing spending Low High
Profits High Low
Financial ratios High Low
Attractiveness
Market Factors
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Industry Attractiveness based on Industry Attractiveness based on Competitive FactorsCompetitive Factors
High LowConcentration Low High
Power of buyers Low High
Power of suppliers Low High
Rivalry Low High
Pressure from substitutes Low High
Capacity utilization High Low
Threat of entry Low High
Attractiveness
Competitive Factors
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
III. (Macro) III. (Macro) Environmental Environmental FactorsFactors
Technological* Economic* Social Political Regulatory*
For your project, choose 1 or 2 only the most relevant factors from above
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
Major Topics for Consumer BehaviorMajor Topics for Consumer Behavior
1. Consumer Decision Process
2. Types of Buying Decisions
3. Influences on the Rate of
New Product Adoption (RCCDC)
McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
What We Need to Know about Current and What We Need to Know about Current and Potential Customers*Potential Customers*
• Who buys and uses the product?• What customers buy and how they use it?• Where customers buy?• When customers buy?• How customers choose?• Why they prefer a product over others?• How do they respond to marketing programs?• Will they buy it (again)?
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For competitor analysis, you need to knowFor competitor analysis, you need to knowWho are Your Major Competitors?
Analyzing Product Features*
Major Competitors’ Objectives
Major Competitors’ Strategies* = behaviorSegmentationTarget MarketCore Strategy (Positioning)
Marketing Mix of Each Firm
Major Competitors’ Capabilities/Resources
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Example) Energy Bars: Example) Energy Bars: Competitor Feature/Strategy Matrix*Competitor Feature/Strategy Matrix*